Press Releases

Signing of the Tax Convention between Japan and Georgia

January 29, 2021

On January 29 (same day local time), “Convention between Japan and Georgia for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” (hereinafter referred to as the New Convention) (English (PDF) Signing of the Tax Convention between Japan and Georgia (English)/ Japanese (PDF)Signing of the Tax Convention between Japan and Georgia (Japanese)) was signed in Tbilisi, the capital of Georgia by H.E. Mr. IMAMURA Akira, Ambassador Extraordinary and Plenipotentiary of Japan of Japan to Georgia and H.E. Mr. Ivane Matchavariani, Minister of Finance of Georgia.

  1. The New Convention wholly amends the existing Convention (Convention between the Government of Japan and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income), which entered into force in 1986, between Japan and the Georgia by expanding the extent of reduction of taxation on investment income, introducing measures for prevention of abuse of the New Convention and assistance in the collection of tax claims, and reinforcing the exchange of information concerning tax matters. It is expected that, while eliminating double taxation and preventing international tax evasion and tax avoidance, the New Convention promotes further mutual investments and economic exchanges between the two countries.

  2. The following are the key points of the New Convention.
  • (1)Taxation on Business Profits
    Where an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country.

  • (2)Taxation on Investment Income
    Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
     
         Existing Convention   New Convention
        Dividends 15% 5%
      Interest
      Exempted (received by the Governments, etc.)
     10% (others)
      Exempted (beneficially owned by the Governments, etc.)
     5% (others)
       Royalties   Exempted (copyright)
     10% (others)
     Exempted
     
  • (3)Prevention of Abuse of the New Convention
    In order to prevent abuse of benefits under the New Convention, it is provided that only residents who satisfy specified conditions, such as qualified persons, may be entitled to the exemption from tax on royalties. In addition, any benefit under the New Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.

  • (4)Mutual Agreement Procedure
    Taxation not in accordance with the provisions of the New Convention may be resolved by mutual agreement between the tax authorities of the two countries.

  • (5)Exchange of Information and Assistance in Collection of Tax Claims
    In order to effectively prevent international tax evasion and tax avoidance, the scope of taxes and cases 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 are introduced.
  • 3. After the completion of the necessary domestic procedures in each of the two countries (in the case of Japan, approval by the Diet is necessary), the New Convention will enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval and will have effect:

    • (a) in Japan:
      • (i) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
      • (ii) with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
    • (b) in Georgia:
      • (i) with respect to taxes withheld at source, for income derived on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
      • (ii) with respect to other taxes, for taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
    • (c) The provisions concerning the exchange of information and the assistance in the collection of taxes have effect from the date of entry into force of the New Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.

The New Convention will not affect the application of the current Tax Convention (Convention between the Government of Japan and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income) between Japan and some of the former Soviet Union countries other than Georgia.


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