Japan and Britain have reached an agreement to revise a bilateral tax treaty to significantly reduce taxes for Japanese companies operating in Britain and vice versa, the Finance Ministry said Friday.
The agreement to revise the pact, which took effect in 1970 and was revised in 1980, is expected to stimulate investment between the two major economies, the ministry said in a statement.
A key feature of the revision is the elimination or halving of source-country taxation on dividend payments by a subsidiary in one country to a parent company in another when the parent has a controlling stake in the subsidiary.
A 10 percent tax is now applied under the pact, officially known as the Convention between Japan and the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.
Royalty income from trademarks and patents will also be exempted from taxes under the newly revised pact, a change from the current 10 percent source-country tax.
The revision is also aimed at preventing tax evasion involving Japan and Britain, the ministry said.
A ministry official said the two nations plan to sign the revised treaty and activate it as early as possible following deliberations in both legislatures.