Japan And UK Sign New Tax Treaty

by Amanda Banks, Tax-News.com, London

08 February 2006

A new comprehensive double taxation convention between the United Kingdom and Japan was signed in London on 2 February 2006 by Japan's Ambassador to the UK, Mr Yoshiji Nogami, and the UK's Paymaster General, Dawn Primarolo.

The new Convention will replace the existing Convention that dates from 10 February 1969 (as amended on 14 February 1980), and goes for ratification by the two countries' legislatures

Welcoming the signature of the Convention, Dawn Primarolo, the Paymaster General said:

"As two of the world's largest economies, the relationship between Japan and the United Kingdom is one of great importance. This new treaty represents a significant step forward in that relationship.

"Since the current UK/Japan double taxation convention was signed, nearly 40 years ago, the economic relationship between the UK and Japan has developed greatly. By continuing to dismantle tax-related barriers to cross-border economic activity, the new treaty strengthens the framework within which UK and Japanese businesses can trade and invest, promoting open markets, enterprise and business flexibility." Details

Important features of the new treaty include complete elimination of source-country withholding taxes on: all royalty income; certain interest income, including interest income earned by financial institutions; and dividend income paid to parent companies with a controlling interest in the paying company.

The text of the Convention is available today on HM Revenue & Customs' website, at http://www.hmrc.gov.uk/international/japan.pdf

The Convention will enter into force once both countries have completed their constitutional procedures. In the United Kingdom the provisions of the Convention will take effect from 1st January with respect to taxes withheld at source; 1 April (for corporation tax purposes), and from 6 April (for income tax and capital gains tax purposes) following the date of entry into force. In Japan, the provisions will take effect (in respect of taxes withheld at source and taxes chargeable) from 1 January following the date of entry into force.

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