Government officials from Japan and India have been engaged in the first round of discussions this week to revise the tax treaty currently in place between the two countries in an attempt to stimulate bilateral trade and investment.
Of particular interest to companies in both India and Japan is the 20% cap on withholding tax on income derived from technical assistance, which includes computer software sold to Japanese firms by Indian developers and Japanese consulting services sold to Indian companies.
Firms in both countries are expected to call for the elimination of this tax which would bring the Indo-Japanese tax treaty, first signed in 1989, into line with the recently re-negotiated US-Japan treaty agreed last year.
The meetings, attended by senior finance and foreign ministry officials from both governments, are currently taking place in Tokyo and will end on Thursday. However, it is unclear when the revised treaty, will be concluded.
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