The governments of Japan and Denmark on October 11 signed new tax treaty, Japan’s Ministry of Finance has announced.
The new treaty, signed in Tokyo, would amend the countries’ 1968 tax treaty, revising the taxation of business profits, and reducing the taxation of investment income.
Under the treaty, dividends paid by subsidiaries are exempt from withholding tax in some cases, and the tax rate is 15 percent in other cases. Cross-border payments of interest and royalties are exempt from tax.
The treaty also introduces a “principal purposes” test to prevent tax treaty abuse, and provides for arbitration of tax treaty disputes. The agreement also provides for assistance in the collection of tax claims.
Further steps must be taken by each country before the new agreement enters into force,