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Japan, Iceland Sign Double Tax Agreement

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

16 January 2018


Japan's Ministry of Finance has reported the signing of a double tax agreement with Iceland in Reykjavik.

The Ministry says the agreement is the first of its kind to be concluded between Japan and Iceland and seeks to eliminate double taxation of income and prevent tax evasion and avoidance.

The agreement waives withholding taxes at source on royalties and interest income. Further, no withholding tax will be levied at source for dividends if the recipient is a pension fund, or if the recipient is the beneficial owner of at least 25 percent of the shares in the paying entity for at least six months.

If the recipient owns at least 10 percent of the shares in the paying entity for at least six months, the dividend withholding tax at source is capped at five percent. In all other cases, dividend withholding tax at source will be capped at 15 percent.

In Japan, the ownership thresholds are determined by the recipient's voting power in the paying entity, while in Iceland it is determined by looking at the recipient's ownership of capital in the paying entity.

In addition to limiting withholding taxes, the agreement enables the tax authorities to exchange information concerning tax matters and provides for mutual assistance in the collection of taxes.

The agreement will enter into force on the 30th day after the date of exchange of diplomatic notes between the two countries, with the agreement taking effect in both states on the first of January thereafter.

TAGS: Finance | tax | double tax agreement (DTA) | Iceland | interest | tax rates | withholding tax | dividends | Japan

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