US and Japan Protocol Amends Tax Treaty
The US Treasury announced a new Protocol to the income tax treaty between the United States and Japan in late January 2013. The new Protocol amends the existing tax treaty, concluded in 2003, to bring that agreement into closer conformity with the current tax treaty policies of both the United States and Japan.
“This new protocol reinforces the strong economic relationship between the United States and Japan,” said Deputy Secretary Wolin. “These amendments provide important clarity for investors and businesses and will help foster cross-border investment between our two nations.”
Key aspects of the protocol include:
- New rules for the taxation of interest and certain dividends;
- Provisions to help resolve certain cases through mandatory binding arbitration; and
- Provisions to help the revenue authorities of both nations carry out their duties as tax administrators.
“These amendments will further promote investment between Japan and the United States,” said Ambassador Sasae. “And that investment will add new vitality to both economies and deepen our economic relationship.”
The new Protocol provides for exclusive residence-country taxation of interest and of an expanded category of direct dividends. The new Protocol also amends the provisions of the existing tax treaty governing the taxation of capital gains in a manner that permits the United States to fully apply the Foreign Investment in Real Property Tax Act.