Japan and UK exchange notes on new business profits article for tax treaty

Japan and the UK have exchanged notes on a new article on business profits under the Japan-UK tax treaty, the Japanese government announced July 22.

New Article 7 introduces provisions concerning taxation on business profits attributable to a permanent establishment of a foreign enterprise where business profits are calculated by recognizing internal dealings between the enterprise’s head office and branches using the arm’s length principle.

The two countries agreed that new Article 7 will be applicable in Japan with respect to profits for any taxable year beginning on or after April 1, 2016. In the UK, the new article will apply in respect of profits charged to income tax or capital gains tax for any year of assessment beginning on or after April 6, 2016, and in respect of profits charged to corporation tax, for any financial year beginning on or after April 1, 2016.

See:

• Exchanged Notes concerning the Convention between Japan and the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains

• Release