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NZ, Japan Ink New Double Tax Agreement

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

12 December 2012

New Zealand and Japan have signed a new double tax agreement (DTA) to replace their existing 1963 treaty, which will lower withholding tax rates on a variety of cross-border payments.

The updated agreement was inked on December 10 by Japan’s Parliamentary Senior Vice Minister of Foreign Affairs, Kazuya Shimba, and the New Zealand Ambassador to Japan, Mark Sinclair.

The aim of reducing the key withholding tax rates is to make it less costly for businesses to invest in each country and to bring profits home for reinvestment or distribution to shareholders. The headline dividend rate will stand at 15%, but with a number of exemptions, while interest will be taxed at 10%, also with exemptions. Royalties will be subject to a 5% withholding tax rate, although exemptions will also apply.

Announcing the deal, New Zealand's Revenue Minister Peter Dunne said: "Japan is one of New Zealand’s largest trading partners and the existing treaty is our oldest tax information exchange agreement. Updating the agreement recognizes the volume of trade between our two nations and the significance of our relationship with Japan."

"This agreement will help New Zealand-based businesses compete in Japan and help make New Zealand a more attractive place to invest in, and it will modernize our tax treaty arrangements with Japan bringing them more into line with best international practice."

The DTA will enter into force once both countries have given legal effect to it.

TAGS: tax | investment | business | double tax agreement (DTA) | interest | royalties | tax rates | withholding tax | New Zealand | dividends | Japan

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