TAX TREATY BETWEEN THE PHILIPPINES AND BRUNEI
DATE OF EFFECTIVITY: January 01, 2025
DATE AND VENUE OF SIGNATURE: July 16, 2021| Bandar Seri Begawan, Brunei
CONDITIONS
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Persons Covered (Art. 1): The treaty shall apply to persons who are residents of one or both of the
Contracting States, Philippines and Brunei Darussalam.
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Taxes Covered (Art. 2): The existing taxes to which the Convention shall apply are, in particular:
a)
in the Philippines: individual tax, corporate tax, tax on estates and trusts, withholding income tax,
and stock transaction tax.
b) in the case of Brunei Darussalam: income tax imposed under the Income Tax Act, and petroleum
profits tax imposed under the Income Tax (Petroleum) Act.
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Resident (Art. 4): A resident of Brunei Darussalam includes individuals and entities liable to tax
under Bangladesh law due to domicile, residence, place of management, or similar criteria. Similarly,
a resident of the Philippines includes individuals and entities liable to tax under Philippine law. A
permanent establishment is also acknowledged.
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Permanent Establishment (Art. 5): For the purposes of this Agreement, the term “permanent
establishment” means a fixed place of business through which the business of an enterprise is wholly
or partly carried on.
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Income from Immovable Property (Art. 6): Income from immovable property including income
from agriculture or forestry may be taxed in the Contracting State in which such property is situated.
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Business Profits (Art. 7): Profits of an enterprise of a Contracting State are taxable only in that State
unless the enterprise operates in the other Contracting State through a permanent establishment. If
so, the profits may be taxed in the other State but only to the extent attributable to:
a) that permanent establishment; or
b) sales of similar goods or merchandise, or other similar business activities, through that permanent
establishment.
c) other business activities carried on in that other Contracting State of the same or similar kind as
those affected through that permanent establishment.
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Shipping and Air Transport (Art. 8): Profits from the operation of ships or aircraft by an enterprise
of a Contracting State are taxable only in that State.
However, profits from sources within a Contracting State derived by an enterprise of the other
Contracting State from international traffic may be taxed in the first-mentioned State, but the tax
shall not exceed the lesser of 1.5% of the gross revenue from sources in that State or the lowest rate
of Philippine tax imposed on such revenues derived by an enterprise of a third State.
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Associated Enterprises (Art. 9): If a business in one Contracting State is linked to a business in the
other Contracting State through management, control, or ownership, and they have arrangements
that differ from those between independent businesses, any profits that one business should have
earned but didn't due to these arrangements can be added to that business's profits and taxed.
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Dividends (Art. 10): Dividends paid by a company from one Contracting State to a resident of the
other Contracting State to be taxed in the recipient's state; however, the state of the paying company
may also tax the dividends, limited to 10% if the recipient is a company owning at least 10% of the
paying company's capital, and 15% otherwise.
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Interest (Art. 11): Interest arising in one Contracting State and paid to a resident of the other to be
taxed in the recipient's state; however, the state where the interest arises may also tax it, limited to
15% if the recipient is the beneficial owner.
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Royalties (Art. 12): Royalties arising in one Contracting State and paid to a resident of the other to be
taxed in the recipient's state; however, the state where the royalties arise may also tax them, limited
to 15% or 25% of the gross amount, depending on the nature of the royalties and the status of the
recipient.
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Capital Gains (Art. 13): Gains derived by a resident of a Contracting State from the alienation of
immovable property referred to in Article 6 (Income from Immovable Property) and situated in the
other Contracting State may be taxed in that other Contracting State.
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Independent Personal Services (Art. 14): Income from independent personal services of a resident
of one Contracting State is taxable only in that state, unless the individual has a fixed base or stays in
the other state for more than 183 days within any twelve-month period, in which case, income
attributable to that fixed base or derived in the other state during the period of stay may be taxed
there.
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Dependent Personal Services (Art. 15): ​Salaries, wages, and similar income for personal services are
taxable only in the Contracting State of origin unless the services are performed in the other
Contracting State, in which case they may be taxed there.
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Director’s Fees (Art. 16): Directors' fees and similar payments derived by a resident of a Contracting
State in his capacity as a member of the board of directors of a company which is a resident of the
other Contracting State may be taxed in that other Contracting State.
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Artistes and Sportsmen (Art. 17): Despite the rules in Articles 14 and 15, income earned by a
resident of one Contracting State from personal activities as an entertainer or sportsman in the other
Contracting State may be taxed by that other State.
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Pensions and Social Security Benefits (Art. 18): Pensions and similar remuneration paid to a
resident of a Contracting State for past employment are taxable only in that State. Benefits received
under the social security legislation of the other Contracting State are taxable only in that other State.
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Government Service (Art. 19): Remuneration, including benefits other than a pension, paid by a
Contracting State, a local authority, or the Government thereof to an individual in respect of services
rendered to that Contracting State, authority, or the Government shall be taxable only in that
Contracting State.
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Students and Trainees (Art. 20): An individual who is a resident of a Contracting State immediately
before visiting the other Contracting State and is temporarily present there as a student at a
recognized institution, as a recipient of a grant for study or research from certain organizations, or as
a business or technical apprentice, shall be exempt from tax in the other Contracting State on all
remittances from abroad for maintenance, education, study, research, or training, and on the grant,
allowance, or award.
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Professors, Teachers and Researchers (Art. 21): An individual who is a resident of a Contracting
State and visits the other Contracting State for up to four years at the invitation of a recognized
educational institution for the purpose of teaching or research will be exempt from tax in the other
Contracting State on their remuneration for such activities.
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Other Income (Art. 22): Items of income of a resident of a Contracting State, wherever arising, not
dealt with in the foregoing Articles of this Agreement shall be taxed only in that Contracting State.
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Elimination of Double Taxation (Art. 23):
a) For the Republic of the Philippines: Taxes paid in Brunei Darussalam on income or profits derived
there shall be credited against taxes payable in the Philippines on the same income or profits, subject
to Philippine laws regarding foreign tax credits, without exceeding the portion of Philippine tax
attributable to such income or profits.
b) For Brunei Darussalam: Philippine tax paid on income or profits from the Philippines shall be
credited against Brunei Darussalam tax computed on the same income or profits, in accordance with
Brunei Darussalam's laws regarding foreign tax credits, without contradicting the principles outlined
in this Article.
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Non-Discrimination (Art. 24): Nationals and enterprises of one state will not face more burdensome
taxation in the other state than local nationals and enterprises. This includes non-discriminatory
treatment regarding deductibility of expenses and tax rates, with certain exceptions for domestic
incentives​.
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Mutual Agreement Procedure (Art. 25): Individuals who believe they are taxed contrary to the
treaty can present their case to the competent authority of their resident state. Authorities from both
states will work together to resolve these issues, including double taxation, through mutual
agreement​.
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Exchange of Information (Art. 26): Both Contracting States will exchange tax-related information
necessary for enforcing the treaty or domestic laws, treating it as confidential and using it only for tax
purposes. This exchange is limited to what is permissible under each state’s laws​.
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Members of Diplomatic Missions and Consular Posts (Art. 27): Diplomatic and consular staff will
be taxed only by their home state on official earnings, ensuring their immunities and privileges under
international law remain unaffected by the treaty.
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Entry into Force (Art. 28): This Agreement shall enter into force on the day of the later notification by
either Contracting State, applying to taxes withheld at source on income paid to non-residents and
other taxes on income from January 1 of the following calendar year.
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Termination (Art. 29): The agreement remains in force until terminated by either contracting state. A
state can terminate the agreement by providing written notice through diplomatic channels at least
six months before the end of any calendar year after five years from the agreement's entry into force.
Upon termination, the agreement ceases to apply:
a)
to income taxes withheld at source starting January 1 of the following calendar year.
b) to other income taxes for taxable years beginning on or after January 1 of the following calendar
year​.
DECLARATION PROCESS
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The treaty does not specify detailed reporting requirements. However, it is common for such treaties
to require that entities benefiting from the treaty's provisions must provide sufficient documentation
to establish their entitlement to treaty benefits.
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Entities would need to file forms as prescribed by the tax authorities of the respective countries to
claim benefits under the treaty.
RECOGNITION PROCESS
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For the purpose of applying the treaty benefits, an individual or entity must be a resident of one of
the contracting states according to their domestic laws.
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The mutual agreement procedure (MAP) is outlined in Article 25. If a person believes they are being
taxed contrary to the provisions of the treaty, they can present their case to the competent authority
of their resident state within three years of the first notification of the action. The competent
authorities will then endeavor to resolve the issue by mutual agreement to avoid double taxation or
taxation not in accordance with the treaty​.
SETTLEMENT PROCESS
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Double taxation shall be avoided by allowing a credit against the tax payable in one state for the tax
paid in the other state. This is subject to the domestic laws of each state concerning the credit of
taxes paid outside their jurisdiction​.
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Disputes arising from the application or interpretation of the treaty can be resolved through the
mutual agreement procedure. Competent authorities from both states will work together to resolve
any difficulties or doubts that arise​.
REIMBURSEMENT PROCESS
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Taxpayers would apply for a refund through the tax authority of the country that withheld the tax.
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Adjustments and corrections related to taxation under the treaty would be handled by the competent
authorities of the contracting states, likely through the mutual agreement procedure. This would
involve correcting any instances of tax not in accordance with the treaty​.
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