Japan's tax treaties
Japan has concluded 71 comprehensive tax treaties in force which are applicable to 79 jurisdictions as of 1 October 2022. In addition, the quasi-tax treaty with Tiwan is effective.
You can find official information on Japan's tax treaties (tax conventions) on the website of Ministry of Finance Japan (please see below).
The current policy is eliminating source taxation on passive investment income as much as possible, and including comprehensive anti-abuse rules as well as new PE definitions advocated by the BEPS initiatives. Under recent treaties, particularly with OECD member states, dividends are exempt at source state provided certain participation requirements are met, and WHT rate on dividends are reduced to 5% / 10% otherwise. Interest and royalties are generally exempt from source taxation, and capital gains from shares are also exempt except those from real estate company shares.
Below is a summary table of treaty provisions of Japan's tax treaties. Please download it for free!
As such, tax treaties can significantly reduce withholding tax in Japan. In this point, non-residents who want to apply for the relief of withholding tax are required to file an application form through the payer (withholding agent) to the relevant tax office before receiving the payment.
Application forms are available on the website of National Tax Agency Japan (please see below).
If the application form is filed properly in time, the agent can apply reduced tax rate or exemption when making the payment. If not, the agent is required to withhold tax at domestic rate. In that case, however, the recipients are entitled to claim for the refund by providing application form afterwards.