Japan And Netherlands To Begin Tax Treaty Renegotiations

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

02 June 2004

Japan and the Netherlands are due next week to commence negotiations that will update the present double taxation avoidance treaty between the two nations, as Japan seeks to boost trade and investment.

According to the Japanese Ministry of Finance, the talks are due to commence on June 7, and will examine the updating of the treaty originally signed in 1970 and amended in 1992.

The new treaty will follow hot on the heels of a fresh double tax agreement between Japan and the United States, updating the original 33 year old pact.

This saw reciprocal reductions in source-country withholding taxes on income from cross-border investments, and provided for the complete elimination of withholding taxes on all royalty income, in addition to the complete elimination of withholding taxes on certain interest income and on dividend income paid to parent companies with a controlling interest in the paying company.

These moves are part of a wider Japanese strategy unveiled recently to boost investment by developing a network of double taxation treaties with neighbouring Asian economies as well as other European states.

"By revising the tax pacts, we hope to ease the tax burden on Japanese firms. Although lower tax rates will mean a fall in revenues for host Asian countries, we hope to persuade them it will spur trade and investment in the long run," a Finance Ministry official told the media last month.

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