Japan-Sweden Income Tax Protocol which was signed on 5 December 2013 has entered into force on 12 October 2014.

The Protocol will have the following tax effect:

• With respect to taxes withheld at source, for amounts paid or credited on or after 1 January 2015.
• With respect to other income taxes, as regards income for taxable years beginning on or after 1 January 2015.

Provisions regarding the arbitration proceeding, exchange of information and assistance in collection of taxes will also be effective as of 12 October 2014.

Key points of the Protocol are highlighted below:

Withholding taxes

Investment income: The withholding taxes on investment income in the source country will be reduced as follows:

* The shareholder must be a company listed in a stock exchange in its resident country (Country) and more than 50% of whose issued shares must be owned by Governmental bodies of the Country, individuals who are residents of the Country, companies listed in the Country and/or companies more than 50% of issued shares are owned by resident individuals of the Country.

** Certain types of interest calculated based on debtor’s revenue, income, movement of value of assets, etc. is still subject to a 10% withholding tax.

Anti-treaty shopping provisions

 Limitation on Benefits clause:

The withholding tax on investment income at 0% will be available only by persons who fulfill the conditions stipulated in this clause.

 Main purpose clause:

Tax relief will not be available if the main purpose of the creation or assignment of any right or property which generates income is created with a view to take advantage of the treaty benefits.

Expansion of Exchange of Information:

 The Protocol expands the provision for Exchange of Information to be in line with the OECD standard.

 Others:

The following provisions are also included in the protocol:

• Expansion of provisions regarding assistance in the collection of taxes.
• Introduction of mandatory binding arbitration procedures.