Japan and Chile signed a tax treaty on January 22, the first such agreement between the nations, Japan’s Ministry of Finance has announced.
The agreement lowers the withholding tax rates on dividends to 5 percent for corporate shareholders that hold at least a 25 percent interest, and to 15 percent in other cases. Dividends received by pension funds are exempt from the tax.
Taxation in the source country on interest is set at a 4 percent rate if received by a bank, insurance company, and in other listed instances. Otherwise, withholding on interest is 15 percent for the first two years of entry into force of the agreement and, after that, drops to 10 percent. The rate set for royalties relating to equipment is 2 percent, and is 10 percent in other cases.
The agreement includes antiabuse provisions and also provides for arbitration of tax disputes. Further, the treaty allows for exchange of information relating to taxes between the countries.
The agreement will enter into force once the two nations complete necessary domestic requirements for the entry into force of the agreement and diplomatic notes attesting to that are exchanged.
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