India And Japan Agree To Update Tax Treaty

by Mary Swire, Tax-News.com, Hong Kong

14 January 2005

Japanese Finance Minister Sadakazu Tanigaki and his Indian counterpart P. Chidambaram have agreed to begin negotiations on updating the tax treaty that exists between the two countries.

Following talks between the two finance ministers on Wednesday, Japanese officials have revealed that both Tanigaki and Chidambaram felt it necessary to amend the treaty to remove barriers and give more incentives to firms to conduct bilateral trade.

Reports suggest that a focal point of the discussions, due to commence in February, will be the 20% withholding tax on income earned from technical assistance, a rate much higher than in other tax treaties entered into by India and Japan.

Indian software firms selling their products in Japan, and Japanese consulting services selling to India, are said to be particularly keen to see this feature of the tax treaty amended.

Seeking to expand and improve its tax treaty network, Japan concluded an updated deal with the United States in 2004, and is currently engaged in talks with the United Kingdom and the Netherlands with a view to updating existing treaties. Recent talks between Japanese officials and the government of the Philippines could also lead to tax treaty negotiations.

Recommended