Japan and Russia today signed a new tax treaty that would wholly replace the countries’ existing 1986 tax treaty.
The new treaty reduces withholding tax on on investment income earned by residents of the two countries. It also modernizes the arrangement between the nations, adding provisions on tax treaty shopping and exchange of information.
Under the new convention, withholding tax on interest and royalties is set to zero.
Also, while the countries’ existing tax treaty sets the maximum withholding tax rate on dividends at 15 percent, the new treaty retains that rate only for dividends on shares that derive at least 50 percent of their value from immovable property.
In other cases, the rate would be a maximum of 10 percent, except that the rate is reduced further to 5 percent in cases where the payee holds at least 15 percent of the voting power of the payor for at least 365 days, and is reduced to zero in the case of dividends paid to pension funds.
Japan had announced that it had reached an agreement in principle with Russia on the new treaty last May.
The treaty must undergo further approvals in both countries before it enters into force,
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