The Department of Finance (DoF) and Cambodia are set to sign an agreement about rationalizing double taxation to increase trade and investments between both countries.

In a statement on Friday, the DoF said the agreement will be signed in October.

Double taxation occurs when a country imposes tax on dividend income gained by stockholders in a company based in another country, and on the income of corporations also operating in another country.

Double taxation also happens when countries impose different rates on income gained from the same source.

Finance Secretary Ralph Recto said talks for the drafting of the double taxation agreement or DTA was already concluded last 19 April, bringing the implementation of its terms closer to all stakeholders and increasing trade and investments in Southeast Asia soon.

“The conclusion of this DTA marks a significant milestone in strengthening the Philippines and Cambodia’s economic ties. Through this effort, we have not only complied with our commitment to completing the ASEAN DTA network but the DoF and the Bureau of Internal Revenue have also ensured that the taxing rights of Filipinos here and abroad are equitably preserved and protected,” Recto said.

To create a sound integrated tax system, the DoF said its officials have been negotiating about the provision of tax credits since 2018.

Businesses prefer tax credits as they reduce both the tax required by the government and the taxable income.

Tax credits compliant to rules

However, the DoF said the tax credits to be applied will comply with the rules in both countries.

According to the Asian Development Bank (ADB), Cambodia’s economy could grow by 6 percent in 2025 while the Philippines is set to expand by 6.2 percent.