On 12 October 2016, a new agreement for the avoidance of double taxation was signed by Belgium and Japan. The new treaty is largely based on the OECD Model Convention and replaces the double taxation treaty of 28 March 1968. The new agreement, however, must still be approved by the relevant parliaments.
The new treaty makes provision for more favourable conditions for Belgian investors in Japan and vice versa. For example, withholding tax on dividends and royalties has been reduced.
Under the old treaty, withholding tax on dividends was limited to 10% (in Japan) or 5% (in Belgium) if the parent company during the previous six months held a shareholding of at least 25% in the distributing subsidiary. Otherwise, withholding tax was limited to only 15%. Under the new treaty, the withholding tax on dividends is limited in all cases to a maximum of 10%.
For royalties, withholding tax under the old treaty was 10%. Under the new treaty, royalties are taxed only in the State of residence of the recipient of the income and the country from which the royalty is paid out no longer withholds tax on the royalties that are paid-out.
If you have any questions about the practical consequences that the new tax treaty will mean for your transactions with Japan, please contact us. We will be happy to help you.