Press Releases
Signing of the Tax Convention between Japan and Turkmenistan
December 19, 2024
On December 16, “Convention between Japan and Turkmenistan for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (PDF) 
(hereinafter referred to as “this Convention”) ) was signed in Ashgabat, the capital of Turkmenistan by H.E. Mr. SASAKI Hiroshi, Ambassador of Japan to Turkmenistan and H.E. Mr. Serdar Jorayev, Minister of Finance and Economy of Turkmenistan.
- This 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, by revising the taxation on business profits, and investment income introducing measures for prevention of abuse of this Convention, arbitration proceedings in mutual agreement procedures 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, this Convention promotes further mutual investments and economic exchanges between the two countries.
- The following are the key points of this Convention.
- 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. The profits attributable to a permanent establishment will be calculated by comprehensively recognising internal dealings between its head office and branches and by strictly applying the arm’s length principle. - 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 This Convention Dividends 15% Exempted (holding for 6 months at least 25% of:
where paid by a company of Japan, voting power;
where paid by a company of Turkmenistan, capital)
10% (others)Interest Exempted (received by the Governments, etc.)
10% (others)Exempted (received by the Governments, financial institutions and recognised pension funds, etc.)
10% (others)Royalties Exempted (copyright)
10% (others)10% (Note) voting power (where paid by a company of Japan), or capital (where paid by a company of Turkmenistan)
- Mutual Agreement Procedure and Arbitration Proceedings
This Convention provides for a resolution by mutual agreement between the tax authorities of the two countries with regard to taxation not in accordance with the provisions of this Convention. In addition, where such taxation has not been resolved through the consultation between the tax authorities of the two countries within two years, the unresolved issue will be submitted to arbitration . - 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. - Prevention of Abuse of this Convention
In order to prevent abuse of benefits under the Convention, residents who satisfy specified conditions, such as qualified persons, may exclusively be entitled to the exemption from tax on dividends paid by a subsidiary company to its parent company. In addition, any benefit under the 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, or if the income is attributable to a permanent establishment in a third country and does not satisfy specified conditions.
- Taxation on Business Profits
- After the approval in accordance with the domestic procedures of the two countries (in Japan, approval by the Diet is necessary), this Convention will enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval and will have effect:
- 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 this Convention enters into force;
- 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 this Convention enters into force.
- The provisions concerning the exchange of information and the assistance in the collection of taxes will have effect from the date of entry into force of this Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.
(Note) This 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) applicable between Japan and some of the former Soviet Union countries other than Turkmenistan.