PH, Hong Kong Advance Tax Treaty to Boost Investments

The Philippines and Hong Kong concluded the first round of negotiations on a comprehensive tax treaty aimed at eliminating double taxation and preventing fiscal evasion, signaling a significant step toward stronger economic ties.

The treaty – officially the Comprehensive Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (CDTA) – was negotiated from May 21 to 23, 2025, by teams from the Philippine Department of Finance (DOF) and Bureau of Internal Revenue (BIR), alongside Hong Kong’s Inland Revenue Department.

The CDTA seeks to remove tax barriers for businesses and individuals, enhance information exchange mechanisms, promote trade and investment, and support deeper economic collaboration between the two jurisdictions.

Finance Secretary Ralph G. Recto praised the outcome, stating, “This not only strengthens our bilateral relations, but it is a concrete step towards deepening regional integration and greater investor confidence in the Philippines,” and added, “This means more trade, more jobs, and more wins for every Filipino.”

Inland Revenue Commissioner Sze‑wai Benjamin Chan highlighted the strategic significance of the CDTA and expressed optimism about achieving mutually beneficial treaty provisions.

Philippine negotiators, including BIR Commissioner Romeo D. Lumagui Jr. and DOF officials, conducted thorough article‑by‑article discussions, and successfully agreed on most key provisions during the three‑day talks.

Commissioner Lumagui told BusinessWorld that the talks “went fairly well,” noting the importance of balancing different tax regimes while exchanging views on measures to prevent double taxation and enable mutual cooperation between authorities.

Currently, the Philippines has 44 double‑taxation agreements with jurisdictions including the US, UK, Japan, China, Australia, Germany, Canada, and South Korea, while only recently concluding an agreement with Cambodia in February 2025.

Economic analysts have emphasized that the treaty should strike a careful balance, protecting the Philippines’ tax base while encouraging inbound investment and aligning with international standards on anti‑abuse and information exchange.

Officials from the Department of Foreign Affairs (DFA) and the Philippine Consulate General in Hong Kong joined as observers, underscoring the diplomatic importance of the talks.

The second round of negotiations is planned for October 2025, with both sides committed to timely finalization in anticipation of signature later that year.

Hong Kong’s current corporate tax rate is 16.5 percent on profits, with a lower rate applicable to the first HK$2 million in profits, reflecting the clear benefit of integrating into such preferential tax treaties.

Experts note that enhanced tax transparency and automatic exchange of financial account information, such as under the OECD Common Reporting Standard, have already generated billions in additional revenue across Asia, highlighting the value of such agreements.

For Philippine investors and overseas Filipino workers, the treaty could simplify cross‑border operations and reduce tax liabilities on dividends, royalties and digital services income, fostering inclusive economic growth.

As the second round approaches in October, both governments aim to resolve remaining technical issues, finalize anti‑abuse clauses and dispute mechanisms, and move promptly toward signing and ratification.