The governments of Japan and Iceland on January 15 signed their first tax treaty, Japan’s Ministry of Finance has announced.
The treaty, which is not yet in force, would reduce withholding taxes on interest and royalties to zero. The treaty reduces withholding taxes on dividends to zero if held by a pension fund or if the beneficial owner is a company which owned at least 25 of the shares for six month. In other cases, withholding on dividends is reduced to 15 percent.
The treaty also includes a principal purposes clause to prevent tax treaty shopping and a mutual agreement procedure to resolve tax treaty disputes. It also provides for exchange of information between tax authorities.