Insights

Tax Treaty Update – Russia, Denmark and Spain

Japan:Inbound Tax Alert May 2017, No. 22

According to a press release of the Japanese Ministry of Finance (MOF), the Governments of Japan and the Russian Federation, as well as Japan and the Kingdoms of both Denmark and Spain, have initiated negotiations to amend their current bilateral tax treaties. (Japan:Inbound Tax Alert May 2017, No. 22)

Explore content

In Brief

According to a press release of the Japanese Ministry of Finance (MOF), the Governments of Japan and the Russian Federation, as well as Japan and the Kingdoms of both Denmark and Spain, have initiated negotiations to amend their current bilateral tax treaties. The first rounds of negotiation were reported to have taken place in Tokyo on 27 March, 11 and 25 April 2017 respectively.

According to the MOF, Japan and Russia have already reached an agreement in principle on the new treaty.

Background

Russia
The existing treaty for the avoidance of double taxation with respect to taxes on income entered into force in November 1986, and was concluded between the Government of the Union of Soviet Socialist Republics (USSR) and the Government of Japan. The result of the current negotiations, however, will only affect Japan and Russia. Hence, the 1986 treaty will continue to be applicable to relations between Japan and the other countries of the former USSR, namely Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan Turkmenistan, Ukraine and Uzbekistan.

Under the existing treaty, Japanese withholding taxes on dividends, interest and royalties are reduced to 15%, 10%, and 0/10% respectively.

Denmark
The current treaty with Denmark came into force in 1968, and reduces Japanese withholding tax rates on dividends, interest and royalties to 15% (10% in case of qualified dividends), 10%, and 10% respectively.

Spain
The existing treaty with Spain entered into force in 1974, and similar to the Denmark treaty above reduces Japanese withholding tax rates on dividends, interest and royalties to 15% (10% in the case of qualified dividends), 10%, and 10%, respectively.

Next steps

Once the Governments of Japan, Russia, Denmark and Spain have agreed (note: already an agreement in principle between Russia and Japan) and signed the amended treaties, the new treaties will need to be ratified, which in the case of Japan requires approval by the Diet, before they can enter into force.

(32KB, PDF)

Related Services

  • Business Tax
  • Did you find this useful?