Double Taxation 1

What is a Double Taxation Agreement (DTA)?

A treaty between two countries aimed at avoiding double taxation and preventing fiscal evasion regarding income taxes.

What are the main purposes of a DTA?

1. Avoidance of double taxation. 2. Prevention of fiscal evasion with respect to taxes on income.

How does a DTA relieve double taxation?

By establishing rules for the state of source (where income is earned) and the state of residence (where the taxpayer lives).

What is the Exemption Method in a DTA?

The income or capital taxed in the state of source is exempted from tax in the state of residence.

What is the Credit Method in a DTA?

The income or capital is taxable in the state of residence, but the tax paid in the state of source is credited against the tax due in the state of residence.

What must a taxpayer do to avail tax treaty benefits?

Secure a ruling from the Bureau of Internal Revenue (BIR) through the International Tax Affairs Division (ITAD) by filing a Tax Treaty Relief Application (TTRA).

What is BIR Form No. 0901-P used for?

For Business Profits.

What is BIR Form No. 0901-T used for?

For Profits from Shipping and Air Transport.

What is BIR Form No. 0901-D used for?

For Dividend Income.

What is BIR Form No. 0901-I used for?

For Interest Income.

What is BIR Form No. 0901-R used for?

For Royalty Income.

What is BIR Form No. 0901-C used for?

For Capital Gains.

What is BIR Form No. 0901-S used for?

For Income from Services.

What is BIR Form No. 0901-O used for?

For Other Income Earnings.

What is the general rule when there is a conflict between tax treaty and domestic law?

The provisions of the Philippine Tax Code apply to any person liable for income tax.

In a conflict, which prevails: tax treaty provisions or domestic law?

The provisions of the tax treaty generally prevail over the provisions of domestic law.

What is the exception regarding tax rates in conflicts between tax treaty and domestic law?

If the tax rate imposed by domestic law is lower than the rate in the tax treaty, the lower domestic law rate will prevail.

How is income taxability determined for Filipino citizens working in foreign embassies?

Taxable unless an exemption is granted under a special law or contract.

What is the taxability of aliens working in a Philippine embassy?

Exempt from tax.

What is the taxability of Filipino citizens working abroad?

Exempt from tax in the foreign country but taxable in the Philippines.

What is the taxability of aliens working abroad?

Exempt from tax in the Philippines.