Save article




Revised Philippines–Thailand Tax Treaty enters into force

Executive summary

The revised Philippines–Thailand Income Tax Treaty (the Treaty) has entered into force1 and will become effective on 1 January 2019.

Significant provisions in the Treaty include:

  • Coverage and threshold period to determine the existence of a PE (Article 5)
  • Expanded coverage of taxable business profits under Article 7
  • Shipping and air transport under Article 8
  • Reduced withholding tax rates for dividends, interest and royalties

This Alert summarizes the key changes of the Treaty.

Detailed discussion

Coverage and threshold period to determine the existence of a PE (Article 5)

The Treaty includes the following activities, among others, in determining the existence of a PE:

a. Any other place of extraction or exploration of natural resources

b. A farm or plantation

c. A building site, a construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities continue for a period of more than three months (previously more than six months for a building site or construction project)

d. The furnishing of services including consultancy services by a resident of one of the Contracting States through employees or other personnel, where activities of that nature continue for the same or a connected project within the other Contracting State for a period or periods aggregating more than 6 months within any 12-month period (previously more than 183 days)

Article 9 (Insurance) was deleted and moved to Article 5 stating that a PE is also created if an insurance enterprise of a Contracting State, except in regard of reinsurance, collects premiums in the territory of the other Contracting State or insures risks situated therein through an employee or through a representative who is not an agent of independent status.

Expanded coverage of taxable business profits (Article 7)

Business profits are taxable in the other Contracting State to the extent that they are attributable to:

a. The PE

b. Sales in the other State of goods or merchandise of the same or similar kind as those sold through the PE

c. Other business activities carried on in the other State of the same or similar kind as those carried out through the PE

Shipping and Air Transport (Article 8)

Income or profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships or aircraft in international traffic may be taxed in the first-mentioned State but the tax so charged should not exceed 1.5% of the gross revenues derived from sources in that State.

Dividends (Article 10)

Dividends are taxed at the following rates depending on the percentage of ownership of the beneficial owner in the capital of the company paying the dividends:

  • 10% of the gross amount of the dividends if the beneficial owner is a company (excluding partnerships) which holds directly at least 25% of the capital
  • 15% in all other cases

Branch profit remittances to its head office are taxed at 10% of the remittance.

Interest (Article 11)

Interest is taxed at the following rates:

  • 10% of the gross amount of the interests if the recipient is the beneficial owner which is a financial institution including an insurance company
  • 15% in all other cases

Royalties (Article 12)

Royalties are taxed at 15% of the gross amount if the recipient is the beneficial owner.

Capital gains (Article 13)

Gains from the sale of shares in a company whose property consists primarily of immovable property is taxable in the Other Contracting State. Gains from the alienation of interest in a partnership or trust whose property principally consists of immovable property situated in a Contracting State may also be taxed in that State.


1. 5 March 2018.

EYG no. 03191-181Gbl

Download this Tax Alert as a PDF file.

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.



Font size

Tax topics >

No filter criteria selected.

Industries >

No filter criteria selected.

Countries >

No filter criteria selected.

 < Close


 < Close


 < Close

Tax topics

 < Close


 < Close


 < Close

0 articles have been saved