WASHINGTON — In a
ceremony held at the U.S. Department of the Treasury today, Treasury Deputy
Secretary Neal S. Wolin and Japan’s Ambassador to the United States Kenichiro
Sasae signed a new Protocol to the income tax treaty between the United States
and Japan. 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
Key aspects of the protocol
- 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
“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
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.
Consistent with a number of recent
U.S. tax treaties, the new Protocol provides for resolution through mandatory
binding arbitration of certain cases that the revenue authorities of the United
States and Japan have been unable to resolve after a reasonable period of time.
In addition, the new Protocol
adopts provisions that enable the competent authorities to assist each other in
the collection of taxes. The new Protocol also provides for the full exchange of
information between the competent authorities to facilitate the administration
of each country’s tax laws.
The existing tax treaty, originally
signed on *November 6, 2003, is intended to avoid double taxation and prevent
income tax evasion.
The text of the treaty document can
be found at:
The text of the exchange of notes
can be found at:
*The date noted in regards to the original signing of the existing tax treaty has been corrected since this press release was first published.