In Japan the Cabinet Office has published a discussion paper setting out current tax issues for consultation. This paper concerns the developments in respect of base erosion and profit shifting (BEPS) and the implications of the issues for the Japanese tax system. In particular the discussion draft looks at double non-taxation that can arise when redeemable preference shares are issued by Australian subsidiaries of Japanese companies and looks at this in connection to the OECD work on neutralizing the effects of hybrid mismatch arrangements. There is therefore a possibility that the Japanese foreign dividend exclusion could be removed in respect of dividends on instruments that are treated as tax-deductible debt instruments in Australia.
The BEPS action plan is likely to have other important implications as Japan and other major economies review their international tax measures in the light of the reports to be issued during the course of the BEPS project.
