The Japanese Ministry of Finance on 26 July 2017 issued a press release announcing that the double taxation agreement (DTA) between Japan and Slovenia, signed on 10 September 2016, will enter into force on 23 August 2017.
The Treaty contains following treaty-based recommendations from the BEPS project:
- Action 2 (neutralizing the effects of hybrid mismatch arrangements);
- Action 6 (preventing the granting of treaty benefits inappropriate circumstances),
- Action 7 (preventing the artificial avoidance of permanent establishment status); and
- Action 14 (making dispute resolution mechanisms more effective).
In addition, its preamble clarifies that tax treaty is not intended to be used to generate double non-taxation or reduced taxation through tax evasion and avoidance and in cases where a person other than an individual is resident in both Japan and Slovenia, both competent authorities shall endeavour to determine by mutual agreement the Contracting State of which the person shall be deemed to be a resident. Furthermore, the Treaty contains a PPT.
On the PE front, the Treaty contains an anti-fragmentation rule and the new definition of agency PE. Moreover, the Treaty enables taxpayers to present a case for mutual agreement procedure to the competent authorities of either Contracting State and any unresolved issues arising from the case shall be submitted to arbitration if the person so requests.
Japan and Slovenia also have signed the MLI. Given that the treaty already incorporated the treaty-related BEPS minimum standards, it can be expected that this treaty will not be listed as a covered tax agreement and thus will not likely be further modified by the MLI.
