Please enter your username and password here:Forgot Password?
Please enter your details here:or Login
Tax treaties exist to protect taxpayers from being taxed twice on certain money flows between two countries. Treaties are particularly important if you have investments outside Japan, and intend bring money earned from them into Japan during your stay. They also apply if you build up some investments in Japan during your stay, and intend to leave them there after you have left Japan. Japan has a network of tax treaties in force with over 60 countries worldwide.
Most tax treaties will conform to the OECD Model Treaty and typically will state how the various forms of income are taxed. It will state whether the specific income is only taxed in Japan; only taxed in your home country, or taxed in both countries. It may also state what rate of tax is applicable in different cases. The treaty will also contain a definition of residence only for the purposes of the treaty; this is not the same as the definition of tax-residence in tax law. The types of income covered by a treaty may include:
It is important to recognise that a tax treaty operates on money flows both into and out of the treaty countries.
The withholding tax rate in Japan on dividends sent to a country without a tax treaty is 15.315% for listed stock dividends, and 20.42% for all others (both rates include surtax); if sent to a country with a tax treaty the rate can generally be reduced to 10% in cases, but only in cases where the foreign receiver is a company owning a significant percentage of the Japanese company’s voting rights or capital.
The withholding tax rate in Japan on interest sent to a country without a tax treaty is 15.315% (including surtax), if sent to a country with a tax treaty the rate is generally reduced to 10%.
The withholding tax rate in Japan on royalties sent to a country without a tax treaty is 20.42% (including surtax), if sent to a country with a tax treaty they are generally reduced to 10%.
Japan’s tax treaties with other countries generally restrict the amount of withholding tax those countries can charge Japanese residents to 15% on dividends and 10% on interest and royalties.
For the complete rules and rates it is necessary to read the treaty itself. A list of Japanese treaties in force can be found here. You may need to search your own country’s government website to access the actual treaty in your own language. The sections dealing with dividends, interest and royalties can usually be found half way through the treaty document.
Prior to arriving in Japan you may be able to arrange your existing investments so that the maximum advantage is gained from the terms of any treaty. This may involve moving investments from one non-Japanese country to one with a more favourable tax treaty, or even to Japan itself, to reduce the tax rate paid.
If your home country has a generally higher rate of tax than Japan, you may benefit by becoming tax-resident in Japan as early as possible. At the end of your stay in Japan you can also rearrange your affairs to ensure that any ongoing income from Japanese employment or investments is also taxed at the lowest rate possible in the future.
Sections in TAXATION IN JAPAN:
» Overview of Tax Issues for Expats in Japan
» Employment Taxation for Expats in Japan
» Business Taxation for Expats in Japan
» Investment Taxation for Expats in Japan
» Tax Treaty Considerations for Expats in Japan
We value input from our readers. If you spot an error on this page or have any suggestions, please let us know.
If you are considering moving to Japan or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated Japanese section including; details of immigration and visas, Japanese forums, Japanese event listings and service providers in Japan.
From your safety to shopping, living in Japan can yield great benefits as well as occasional drawbacks. Find your feet and stay abreast of the latest developments affecting expats in Japan with relevant news and up-to-date information.
Working in Japan can be rewarding as well as stressful, if you don't plan ahead and fulfill any legal requirements. Find out about visas and passports, owning and operating a company in Japan, and general Japanese culture of the labour market.
About | Useful Links | Global Media Partners | Media | Advertising And Sales | Banners And Widgets | Glossary | RSS | Privacy & Cookies | Terms And Conditions | Editorial Policy | Refer To A Friend | Newsletters | Contact | Site Map
Important Notice: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments. © Wolters Kluwer TAA Ltd 2017. All rights reserved.
The Expat Briefing brand is owned and operated by Wolters Kluwer TAA Limited.