Japan

Tax treaty network

As of 1 January 2021, Japan has entered into 78 tax treaties with 142 countries and/or regions. In addition, on 1 January 2019, the MLI entered into force for Japan. As of 1 January 2021, 29 jurisdictions, which are among the Japanese covered convention, deposited the instrument of ratification, acceptance, or approval of the Convention, and the MLI entered into force for 27 jurisdictions (Australia, Canada, Czech Republic, Egypt, Finland, France, India, Indonesia, Ireland, Israel, Kazakhstan, Korea, Luxembourg, Netherlands, New Zealand, Norway, Oman, Poland, Portugal, Qatar, Saudi Arabia, Singapore, Slovakia, Sweden, Ukraine, the United Arab Emirates, and the United Kingdom). The MLI for Germany and Pakistan will enter into force by the end of 2021.

Note that since the Convention on Mutual Administrative Assistance in Tax Matters is a multilateral convention, and the tax conventions with the former Soviet Union and with the former Czechoslovakia were succeeded by more than one jurisdiction, the numbers of jurisdictions do not correspond to those of tax conventions, etc.

Companies making certain payments are required to withhold income taxes using the following rates:

Notes

1. The tax treaty rates apply only to corporate shareholders. The applicable treaty should be checked for conditions required to claim the reduced rate. Note that WHT may be subject to the income surtax of 2.1%, which is levied for the income earned for the period from 1 January 2013 through 31 December 2037.
2. The applicable treaty should be reviewed because certain tax treaties exclude film royalties and/or gain from copyright transfer from taxable income. Note that WHT may be subject to the income surtax of 2.1%, which is levied for the income earned for the period from 1 January 2013 through 31 December 2037.
3. 15% for publicly traded shares (for non-resident individual, only applicable to minority interest [less than 3% ownership]) and investment trusts. Note that WHT may be subject to the income surtax of 2.1%, which is levied for the income earned for the period from 1 January 2013 through 31 December 2037.
4. Interest on bank deposits and/or certain designated financial instruments is subject to a 15% national WHT and 5% local inhabitants WHT (20% combined). Taxation of such interest is fully realised by tax withholding, so resident individuals are not required to aggregate such interest income with other income. Interest on loans made by resident individuals is not subject to WHT; instead, it is taxed in the aggregate with other income. Such WHT is subject to the income surtax of 2.1%, which is levied for the income earned for the period from 1 January 2013 through 31 December 2037.
5. Dividends, interest, and royalties earned by non-resident individuals and/or foreign corporations are subject to a 20% national WHT under Japanese domestic tax laws in principle. An exceptional rate of 15% is applied to interest on bank deposits and certain designated financial instruments. Interest on loans, however, is taxed at a 20% rate. A special exemption from WHT applies to certain long-term corporate bonds issued to non-residents in foreign countries. Note that WHT may be subject to the income surtax of 2.1%, which is levied for the income earned for the period from 1 January 2013 through 31 December 2037.
6. Tax treaties with many countries provide reduced tax rates, as indicated. Some treaties, however, provide higher tax rates (e.g. Brazil, Thailand) or do not provide rates (e.g. Egypt, New Zealand). In these instances, rates specified under Japanese domestic tax laws apply. Each treaty should be consulted to see if a reduced rate for dividends (in the case of substantial holdings) is applicable.
7. The tax treaty was concluded mainly for the purpose of information exchange.
8. The tax treaty with Brazil provides a 25% tax rate for certain royalties (trademark). However, the WHT rate cannot exceed 20.42% (including the income surtax of 2.1%) on any royalties to be received by a non-resident taxpayer of Japan under Japanese income tax law. Film royalties are taxed at 15%. Any other royalties are taxed at 12.5%.
9. The treaty with the former Czechoslovakia is applied to the Czech Republic and the Slovak Republic. It stipulates that cultural royalties are tax exempt.
10. Film royalties are taxed at 20%, and other royalties are taxed at 15%.
11. Cultural royalties are tax exempt.
12. The rate of 10% for royalties includes consideration for technical services.
13. The rate for royalties is reduced from 10% to 5% by Protocol.
14. Dividends received from subsidiaries, by parent companies that have met certain conditions, are exempt from WHT. Exempted for interest received by government and other specific entities; 10% for interest received by banks, financial institutions, or paid as a consequence of sale on credit of any equipment; 15% for others.
15. Dividends received from subsidiaries for which the parent company has over 50% shareholding are tax exempt. Interest received by government and other specific entities, or paid as a consequence of sale on credit of any equipment, merchandise, or service, is tax exempt.
16. A 5% rate is applied to a company that has over 50% shares with direct voting rights, and a rate of 7.5% is applied to a company that has over 25% shares with direct voting rights.
17. Film royalties are taxed at 15%. Any other royalties are taxed at 10%.
18. Cultural royalties are taxed at 10%.
19. Royalties paid for the use of certain equipment are taxed at 5%.
20. Interest paid to financial institutions is tax exempt, as well as film and copyright royalties. Patent royalties are subject to a 10% rate.
21. If certain conditions for beneficial owners are met, dividends are taxable only in the contracting state of which the beneficial owner is a resident.
22. Dividends paid by a corporation that is engaged in industrial undertakings are taxed at 15%. Interest paid to financial institutions is taxed at 10%.
23. Interest paid to financial institutions is taxed at 10%.
24. The treaty with the former USSR is applied to Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Ukraine. It stipulates that cultural royalties are tax exempt.
25. The new treaty was signed but has not yet become effective.
26. The treaty applies with respect to taxes levied on the basis of a taxable year for taxes for any taxable years beginning on or after 1 January 2019 and with respect to taxes not levied on the basis of a taxable year for taxes levied on or after 1 January 2019.
27. Exempted when paid and beneficially owned by enterprises, etc; 10% for others.
28. Exempted when paid by a company of Japan, holding at least 10% of voting power for six months, or beneficially owned by pension funds; 15% for others.
29. Exempted when received by governments, etc.; 10% for others.
30. Exempted when paid by a company of Japan, holding at least 15% (direct or indirect) or 25% (direct) shares for six months; 5% for holding at least 10% (direct or indirect) shares for six months.
31. Exempted when holding at least 25% for 18 months; 5% when holding at least 10% for six months; 15% for others.
32. Exempted when holding at least 25% of voting shares for six months or beneficially owned by pension funds; 5% when holding at least 10% of voting shares for six months; 15% for others.
33. Exempted when received by governments, etc.; 10% for others.
34. Exempted when received by governments, etc.; 5% when received by banks; 10% for others.
35. Exempted when received by governments, financial institutions, etc.; 10% for others.
36. Exempted when received by governments or central bank; 10% for others.
37. Exempted when received by governments, etc.; 5% for others.
38. Exempted when received by governments, etc.; 10% for others.
39. Exempted when received by beneficially owned by pension funds; 5% when holding at least 15% of voting power for 365 days; 15% when shares deriving at least 50% of their value from immovable property; 10% for others.
40. Exempted when holding more than 50% of voting shares for 12 months or beneficially owned by pension funds; 5% when holding at least 10% of voting shares; 10% for others.
41. Exempted when received by governments or financial institutions; 10% for others.
42. The treaty entered into force on 19 January 2019 and will apply with respect to taxes levied on the basis of a taxable year for taxes for any taxable years beginning on or after 1 January 2020 and with respect to taxes not levied on the basis of a taxable year for taxes levied on or after 1 January 2020.
43. Exempted when received by the entity beneficially owned by governments; 12% for others.
44. Royalties on news are taxed at 3%, royalties on copyright are taxed at 5%, and other royalties are taxed at 10%.
45. Received by banks, etc, are taxed at 4% and 10% for others.
46. Royalties on equipment are taxed at 2%, and other royalties are taxed at 10%.
47. Exempted when holding more than 50% of voting shares for six months or beneficially owned by pension funds; 5% when holding at least 10% of voting shares; 10% for others.
48. The treaty entered into force on 16 September 2020 and will apply with respect to taxes levied on the basis of a taxable year for taxes for any taxable years beginning on or after 1 January 2021 and with respect to taxes not levied on the basis of a taxable year for taxes levied on or after 1 January 2021.
49. Royalties paid for the use of certain equipment are taxed at 2%, and other royalties are taxed at 10%.
50. Signed on 8 January 2020 but not yet entered into force.
51. Royalties paid for the use of certain equipment are taxed at 5%, and other royalties are taxed at 10%.
52. Signed on 19 November 2019 but not yet entered into force.
53. Signed on 21 July 2020 but not yet entered into force.
54. Royalties on copyright are taxed at 5%, and other royalties are taxed at 10%.
55. Signed on 13 September 2019 but not yet entered into force.
56. Exempted when received by governments or financial institutions; 10% for others.
57. The treaty entered into force on 17 October 2020 and will apply with respect to taxes levied on the basis of a taxable year for taxes for any taxable years beginning on or after 1 January 2021 and with respect to taxes not levied on the basis of a taxable year for taxes levied on or after 1 January 2021.
58. Royalties on copyright are exempt, and other royalties are taxed at 5%.