Problems relating to Trade and Investment on G. Britain
14. Taxation Systems |
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Issue |
Issue details |
Requests |
Reference |
| (1) Withholding Tax Levy on Interest | - British Government (GOU) levies withholding tax of 10% on interest. | - It is requested that GOJ and GOU amend the Japan-U.K. Tax Treaty to make it comparable to the Japan- U.S. Tax Treaty. |
- The Japan-U.K. Tax Treaty |
| (Info) - The reduced tax rates under the tax treaty are; Interest: 10%, Dividends: 10% (General), 0% (between Parent/Subsidiary with more than 50% share ownership), and 5% (between Parent/Subsidiary with 10-50% share ownership and satisfying certain conditions), Royalties: 0%. The application of the reduced tax rates is subject to prior approval of the taxation authority. With the purposes of promoting the bilateral exchange of investment and preventing international tax evasion/avoidance, the both countries have negotiated further amendment of the tax treaty, and reached agreement in principle on the draft amendment on 21 March 2013. The pending amendment, will effect further reduction in income on investment (dividends and interests), introduce arbitration clause on bilateral negotiation and mutually collect tax of the other country. (http://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_pricing/index_en.htm) |
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| (2) Double taxation risk under TPTS | - Particularly under TPTS, due to the inconsistent rules in each country, its interpretation varies. The member firm is faced with the risk of double taxation as a group of companies. | - It is requested that GOV and GOJ work toward developing the world standard TPTS (in the form of guidelines, for example). | |
| (3) Issues on Resolving Double Taxation under Tax Treaty | - For avoidance of double taxation, the going legislation requires "exercise of best efforts" upon authorities of both countries in resolving and excluding double taxation. In EU, taxation authority has introduced "mutual acceptance procedures" for 3-years to expel double taxation, making insufficient "exercise of best efforts" provisions under Japan/ U.K. agreement. |
- It is requested that both GOU and GOJ institute multi-national measures under OECD BEPS (Base Erosion and Profit Shifting) initiative. This multi-national arrangement will obviate the need for re-negotiation on tax treaty, expediting the entire process. | - Various laws in each EU country and Japan |
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