Japan and the United Kingdom Signing of the Protocol Amending Tax Convention with the United Kingdom on 17 December 2013 which amending the current income tax treaty between the two countries.
Before it enters into force the Protocol must be approved by both states.
Following measures are changes to the treaty:
1. Reduction or Exemption of Taxes on Investment Income:
- Taxation on investment income dividends in the source country is reduced from 50% to 10%.
- Also interest payments would be exempt from tax in a country where the interest arises.
2. Under the current tax treaty, when a parent company holding 25% or more of shares in a company located in the other treaty-partner country sells 5% or more of the shares in a tax year, capital gains from the sale that are not subject to tax in the parent company’s country of residence may be subject to tax in the subsidiary company’s country of residence.
3. Article 7 (business profits) will be modified to reflect Article 7 of the OECD Model Tax Convention, which is in line with the Authorized OECD Method as a method to compute income attributable to a permanent establishment.
