On 25 August 2010, the governments of Japan and the Netherlands signed the new tax treaty in Tokyo, Japan. The new tax treaty will replace the existing tax treaty, which was concluded in 1970.

The new tax treaty will significantly reduce maximum withholding tax rates on investment income (dividends, interest and royalties), which is expected to further promote trade and investment between Japan and the Netherlands.

Upon ratification by both countries, the new tax treaty is due to enter into force from 2011.

The key points of the new tax treaty are as follows:

1. Reduction or exemption of the rates of withholding taxes on dividends, interest and royalties as shown below:

  1. Dividends
    – Between parent company and subsidiaries (shareholding requirements)
    – Exempt (50% or more of the shares)
    – 5% (10% or more of the shares)
    – Other cases: 10%
  2. Interest
    – Certain banks, etc.: Exempt
    – Other cases: 10%
  3. Royalties
    – Exempt

2. Introduction of provisions to limit the period to seven years for tax authorities to change the profits of associated companies in connection with transfer pricing taxation regime

3. Introduction of provisions for arbitration procedure regarding long-standing unresolved tax issues

4. Introduction of limitation on benefit (LOB) provisions to prevent abuse of the tax treaty for the purpose of prevention of tax avoidance

5. Introduction of provisions for taxation on hybrid entities

6. Japan to reserve the taxation rights on Japanese source income arising from “Tokumei Kumiai (TK)” (sleeping partnership) contract

You can download the official text of the new tax treaty from the link at:


Through the “Report of JBCE”, JBCE has called for the review of bilateral tax treaties between the Member States of the EU and Japan, in terms of the creation of a better business environment and the optimisation of the returns on investment.

Koki Nagaoka, JBCE Secretariat