Am updated tax treaty signed by the governments of Japan and Russia last year has been ratified by the two countries and will enter into force on October 10, the Japanese Ministry of Finance today announced.
The treaty, signed by the two governments on September 7, 2017, replaces a 1986 tax treaty between Japan and Soviet Union.
The 1986 treaty will continue to apply to Japan’s arrangements with other members of the former Soviet bloc.
The updated Japan-Russia tax treaty reduces withholding tax 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, a tie-breaker rule for treaty residency, and expanded permanent establishment rules.
Under the new convention, withholding tax on interest and royalties is set to zero.
Withholding tax on dividends is set at a 10 percent rate, except that withholding tax on dividends is zero if the dividend is beneficially owned by a pension fund and is five percent if the shareholder is a corporation that owns at least 15 percent of the voting power of the company paying the dividends.
Special rules increase the withholding tax rate to 15 percent when the underlying corporate property of the dividend consists of immovable property.