Belgium and Japan sign new tax treaty

Belgium and Japan sign new tax treaty

On 12 October 2016, Belgium and Japan have signed a new tax treaty which is to replace the current tax treaty of 1968 (amended in 1988 and 2010).


New treaty contains many interesting features…

According to the new treaty, dividends will be subject to a maximum withholding tax of 10% (now 15%). An exemption is included for dividends paid to

  • companies holding a participation of at least 10% for at least 6 months (now rate of 10% if participation of at least 25% for the same period), or
  • a pension fund

As is the case today, interest will also be subject to a maximum withholding tax of 10%. However, the new treaty introduces an exemption for (a.o.)

  • intercompany interest
  • interest paid to a pension fund

Royalties will no longer be subject to a maximum withholding tax of 10%, but will be exempt.

The new treaty introduces an “entitlement to benefits” article (article 22) detailing which residents qualify for the exemptions of withholding tax.

Regarding income from employment the 183 days rule will have to be evaluated based on any 12 month period starting or ending in the taxable period instead of on a calendar year basis.

Belgium will apply its standard rules for avoiding double taxation. Noteworthy is that Belgium will apply the dividends-received deduction to Japanese dividends, even if the conditions related to the taxation of the company or the income out of which the dividends are paid are not met, if the Japanese company is engaged in the active conduct of a business in Japan.

The scope of the anti-discrimination clause is explicitly extended to payments of interest and royalties

… but ratification can be several years away

Both countries must now ratify the new treaty. For Belgium, this means all parliaments must give their consent. This process could take several years. The new treaty will start to apply as from the year following its entry into force on the thirtieth day following the latest notification of ratification.

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