(February 22, 2015) 

On February 20, 2015 the Japanese Ministry of Finance issued a press release announcing that on February 20, 2015 Japan and the State of Qatar signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Hereafter: DTA). Although the DTA has been signed, it has not yet entered into force. The DTA will enter into force once both countries have completed their legislative procedures.

 

The press release furthermore states that with the entry into force of the DTA, taxes on income from the international transportation business will be exempted in the source country under the Agreement. Therefore, on February 20, 2015 in Tokyo, the two governments exchanged notes regarding the termination of the arrangement made by the Exchanged Notes between the Government of Japan and the Government of the State of Qatar concerning Mutual Tax Exemption for Income from the International Transportation Business dated May 21, 2009. Accordingly, the arrangement will terminate and cease to have effect with respect to income or taxes to which the DTA shall have effect.

 

Based on Article 2 of the DTA, the existing taxes to which this Agreement shall apply are in particular: 

(a)  in the case of Japan:

(i)           the income tax;

(ii)          the corporation tax;

(iii)         the special income tax for reconstruction;

(iv)         the local corporation tax;

(v)          the local inhabitant taxes.

(b)  in Qatar:

(i)           Taxes on income;

 

Paragraph 3 of Article 5 of the DTA (Permanent establishment) determines that the term “permanent establishment” also encompasses:

(a)  a building site or construction or installation project, but only if it lasts more than six months; and

(b)  the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 183 days within any twelve month period.

 

Paragraph 6 of Article 5 of the DTA (Permanent establishment) determines that notwithstanding the preceding provisions of the Article, an insurance enterprise of a Contracting State shall, except in regard to reinsurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in that other Contracting State or insures risks situated therein through a person other than an agent of an independent status to whom the provisions of paragraph 7 apply.

 

With respect to dividend withholding taxes to be withheld by the Source State paragraph 2 of Article 10 of the DTA (Dividends) determines the following: 

“However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that Contracting State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

(a)  5 per cent of the gross amount of the dividends if the beneficial owner is a company that has owned directly or indirectly, for the period of six months ending on the date on which entitlement to the dividends is determined, at least 10 per cent of the voting power or of the total issued shares of the company paying the dividends; or

(b) 10 per cent of the gross amount of the dividends in all other cases.”

 

Paragraph 4 of Article 10 (Dividends) furthermore determines that The provisions of subparagraph (a) of paragraph 2 (see above) shall not apply in the case of dividends paid by a company which is entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income in Japan.

 

Under paragraph 2 of Article 11 of the DTA (Interest) interest withholding tax to be withheld by the Source State is maximized at 10 per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.

 

Paragraph 3 of Article 11 (Interest) subsequently determines: 

“Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be taxable only in the other Contracting State if:

(a)  the interest is beneficially owned by the Government of that other Contracting State, a political subdivision or local authority thereof, the central bank thereof or any institution wholly owned by the Government thereof;

(b)  the interest is beneficially owned by a resident of that other Contracting State with respect to debt-claims guaranteed, insured or indirectly financed by the Government of that other Contracting State, a political subdivision or local authority thereof, the central bank thereof or any institution wholly owned by the Government thereof;

(c)  the interest is beneficially owned by a resident of that other Contracting State that is either:

(i)           a bank;

(ii)          an insurance company;

(iii)        a securities dealer; or

(iv)       any other enterprise, provided that in the three taxable years preceding the taxable year in which the interest is paid, the enterprise derives more than 50 per cent of its liabilities from the issuance of bonds in the financial markets or from taking deposits at interest, and more than 50 per cent of the assets of the enterprise consist of debt-claims against persons that do not have with the enterprise a relationship described in subparagraph (a) or (b) of paragraph 1 of Article 9;

which is established and regulated as such under the laws of that other Contracting State; or

(d)  the interest is beneficially owned by a pension fund that is a resident of that other Contracting State, provided that such interest is derived from the activities described in clause (ii) of subparagraph (k) of paragraph 1 of Article 3 and that as of the end of the prior taxable year more than 50 per cent of its beneficiaries, members or participants are individuals who are residents of either Contracting State.” 

 

Under Article 12 of the DTA (Royalties) Royalty withholding taxes are maximized at 5 per cent of the gross amount of the royalties received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films, tapes or discs for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

 

The agreement a.o. also provides for: a Mutual Agreement Procedure (Article 24) and the Exchange of Information (Article 25).

 

For further information click here to be forwarded to the full text of the DTA as published on the website of the Japanese Ministry of Finance, which will open in a new window. Click here to be forwarded to the DTA in Japanese.

 

Click here to be forwarded to the Exchanged Notes concerning the Agreement between the Government of Japan and the Government of the State of Qatar for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. Click here to be forwarded to the Japanese version.

 

If you are interested in efficiently locating texts of more DTAs then click here to be forwarded to our section DTAs where you can link to numerous governmental websites on which you can find links to the texts of DTAs as concluded by that State.

 

 

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