New Japan-Denmark DTA To Waive Cross-Border Tax

The Japanese and Danish governments announced on October 11 that they had signed a new agreement for the avoidance of double taxation in Tokyo.

The Japanese Ministry of Finance said: “This Convention wholly amends the existing Convention, which entered into force in 1968, by revising the taxation on business profits, expanding the extent of reduction of taxation on investment income, introducing measures for prevention of abuse of this Convention, arbitration proceedings in mutual agreement procedures and assistance in the collection of tax claims, and reinforcing the exchange of information concerning tax matters.”

Under the existing agreement, dividend payments face a 10 percent withholding tax rate where 25 percent voting power is held by the income recipient in the company distributing the dividend for over a year, and 15 percent for other dividend payments. Under the terms of the new agreement, such payments are exempt where the payee held at least 10 percent voting power in the company distributing the dividend for at least 6 months. All other such payments face a 15 percent rate.

Interest and royalty payments, which has previously been taxed at 10 percent, are generally exempt under the new agreement.