The US Internal Revenue Service and the Japanese National Tax Agency on Wednesday issued guidance regarding the commencement of application of the new income tax treaty between the United States and Japan in each country.
The bilateral tax treaty was signed on November 6, 2003, entering into force on March 30, 2004.
However, with respect to withholding taxes, the terms of the accord generally become applicable on July 1, 2004. In the case of both US and Japanese withholding taxes, the treaty is applicable for amounts paid or credited on or after July 1st.
The guidance issued by the IRS provides illustrative examples regarding the application of the new treaty in the case of US withholding taxes on dividends, interest, and royalties. The Japanese National Tax Agency has also issued guidance providing these illustrative examples and incorporating the US illustrative examples.
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