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Netherlands, Japan Sign Tax Treaty

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

31 August 2010


On August 25, 2010, a new tax treaty between the Netherlands and Japan was signed in Tokyo.

The treaty provides for a further reduction in or exemption from the withholding tax rates on dividends, interest and royalties.

Subject to the conditions of article 10, for a company paying dividends abroad, the maximum tax rate in that company's place of residence will be 5%, where the beneficiary owns at least 10% of the voting power of the company paying the dividends, or a 10% maximum rate in all other cases. The rate is zero in respect of shareholdings of at least 50% of the voting power, or where the beneficiary is a pension fund.

With regard to interest, subject to conditions in article 11, maximum tax rates of 10% apply; or zero if the recipient is a state entity, a financial institution, a pension fund, or in respect of indebtedness guaranteed or insured by the state or in respect of sale on credit of goods or services.

With regard to royalties, tax is only payable in the country of residence of the beneficiary, subject to the conditions of article 12.

The conditions with regard to capital gains tax are outlined in article 13, and the treaty contains various other provisions with regard to employment income, including special provisions for entertainers and sportsmen. The treaty includes exchange of tax information clauses.

Article 8 of the treaty, in respect of shipping and air transport, provides that:

  • Profits from the operation of ships or aircraft in international traffic carried on by an enterprise of a contracting State shall be taxable only in that contracting State; and
  • An enterprise of the Netherlands, carrying on the operation of ships or aircraft in international traffic, shall be exempt from the enterprise tax of Japan, and an enterprise of Japan shall be exempt from any tax similar to the enterprise tax of Japan which may be imposed in the Netherlands.

In December 2009, the negotiations between the Netherlands and Japan were concluded, and it is expected that the ratification process in the Netherlands will be completed in 2011, resulting in the treaty entering into force in 2012.

Jan Kees de Jager, the Netherlands Minister of Finance, expressed his enthusiasm with respect to the new tax treaty: “Japan has always been an important trading partner for the Netherlands. The tax treaty promotes mutual investments which further strengthens the economic relations between the Netherlands and Japan. In addition, both countries have agreed upon an arbitration procedure, in case the competent authorities are not able to reach an agreement to resolve double taxation issues. For Japan, it is the first time to agree on arbitration in a tax treaty.”

A comprehensive report in our Intelligence Report series, examining in depth the situation of offshore transparency and secrecy in a number of the most prominent jurisdictions, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report2.asp
TAGS: tax | investment | marine | Netherlands | interest | royalties | aviation | financial services | entertainers | sportsmen | tax rates | withholding tax | dividends | Japan | services

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