Japan and Belgium today signed a new tax treaty, Japan’s Ministry of Finance has announced.
The treaty provides for arbitration of tax disputes and adds a principal purpose test to counter tax treaty abuse.
The agreement would further reduce the withholding tax rates set by the countries in their existing tax treaty, which entered into force in 1970.
Under the new treaty, withholding tax on dividends would be zero if the owner is a company that holds at least 10 percent of the voting power of the company paying the dividend for 6 months.
Withholding tax on dividends beneficially owned by a pension funds is also zero. In all other cases, withholding on dividends is reduced to 10 percent.
Interest is exempt from withholding under the new treaty if paid and beneficially owned by enterprises; in other cases it is 10 percent.
Royalty payments are completely exempt from withholding tax.
The treaty will enter into force after the countries have notified each other that the necessary domestic procedures to bring the agreement into force been completed.
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