Signing of the New Tax Convention between Japan and the Republic of Austria
January 31, 2017
1 On January 30, the Convention between Japan and the Republic of Austria for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (PDF) was signed in Vienna between H.E.Mr.Kiyoshi Koinuma, Japanese Ambassador to the Republic of Austria and H.E.Mr. Hans Jörg Schelling, Minister of Finance of the Republic of Austria.
2 The new Convention wholly amends the contents of the current Convention, which entered into force in 1963. The new Convention reduces taxes withheld at source on investment income (dividends, interest and royalties) to further promote the investment and economic exchanges between the two countries and introduces the arbitration proceeding to the mutual agreement procedure to ensure the settlement of disputes with respect to the Convention. The new Convention also expands the scope of the cooperation between the tax authorities of the two countries by introducing an Article concerning assistance in the collection of taxes.
3 The following are the key points of the new Convention.
(1) Further Reduction of Taxation on Investment Income
Taxation on investment income (dividends, interest and royalties) in the source country is subject to the reduced maximum rates or exempted as follows:
Existing Convention New Convention Dividends 10% (holding more than 50% of share capital for 12 months or more)
Exempted (holding at least 10% of voting power for 6 months or more)
Exempted (beneficially earned
by pension funds)
Interest 10% Exempted Royalties 10% Exempted
(2) Prevention of Abuse of the Convention
In order to prevent abuse of benefits under this Convention, it is provided that only residents who satisfy specified conditions, such as qualified persons, may be entitled to the exemption from tax on investment income. In addition, any benefit under this Convention shall not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
(3) Arbitration Proceedings in Mutual Agreement Procedure
Where taxation not in accordance with the provisions of this Convention has not been resolved through the consultation between the tax authorities of the two countries within two years, the unresolved issue shall be submitted to arbitration and resolved pursuant to a decision of an arbitration panel composed of third parties.
(4) Exchange of Information and Assistance in the Collection of Tax Claims
In order to prevent international tax evasion and tax avoidance effectively, the scope of cases and taxes subject to the exchange of information concerning tax matters is expanded and the mutual assistance in the collection of tax claims between the two countries is introduced.
4 After the completion of the necessary domestic procedures in each of the two countries (in the case of Japan, approval by the Diet), diplomatic notes indicating such completion are to be exchanged. The new Convention will enter into force on the thirtieth day after the date of receipt of the latter notification.
In Japan, this Convention will be applicable:
(1) with respect to taxes levied on the basis of a taxable period, for taxes for any taxable period beginning on or after January 1 in the calendar year next following that in which the Convention enters into force; and
(2) with respect to taxes levied not on the basis of a taxable period, for taxes levied on or after January 1 in the calendar year next following that in which the Convention enters into force.