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Today’s Top Headlines

UK-Japan Tax Treaty Effective From October

by Mary Swire,, Hong Kong

15 September 2006

A new comprehensive bilateral tax agreement between the United Kingdom and Japan is due to take effect on October 12, the Japanese Finance Ministry announced on Wednesday.

The new double taxation convention, signed in February 2006, will replace the existing Convention that dates from 10 February 1969 (as amended on 14 February 1980).

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.

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.

Describing the new pact as a "significant step forward" in the economic relationship between the UK and Japan, Dawn Primarolo, UK Paymaster General, observed at the time of its signature that: "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."

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