Japan: Guidance, tax agreement with Taiwan | KPMG | GLOBAL

Japan: Guidance, application forms relating to tax agreement with Taiwan

Japan: Guidance, tax agreement with Taiwan

Japan’s national tax agency released guidance and forms relating to Japan’s tax agreement with Taiwan.

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Background

Japan has maintained its relationship with Taiwan on the basis of non-governmental, working-level relations through the Interchange Association (Japanese side) and the Association of East Asian Relations (Taiwanese side). These associations signed a tax agreement (known in English as the “Agreement between the Interchange Association and the Association of East Asian Relations for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income”) on 26 November 2015 and that tax agreement entered into force on 13 June 2016. Consequently, a framework equivalent to that for tax treaties was established between Japan and Taiwan, and Japanese withholding tax will be exempt or reduced by submitting application forms in a similar way to applying tax treaties.

Under Japan’s 2016 tax reform, the rules for the “Mutual Exemption Law for Income of Foreign Nationals Related to International Transportation Business” were amended and renamed the “Mutual Exemption Law for Income of Foreign Residents” in order to implement measures provided for under the tax agreement between Japan and Taiwan. Those tax reform changes will be effective 1 January 2017.

Guidance from Japan’s tax agency

Japan’s national tax agency on 30 November 2016 released guidance with respect to withholding taxes and forms for application of the mutual exemption provisions for income of foreign residents.

  • The Guidance on amendment to withholding taxes (Japanese) [PDF 587 KB] provides an explanation of the exemption or reduction measures applicable to Japanese source income derived by Taiwanese residents under the “Mutual Exemption Law for Income of Foreign Residents.”
  • The application forms for the “Mutual Exemption Law for Income of Foreign Residents” are to be used when a Taiwanese resident wants to apply for exemption or reduction with respect to Japanese withholding tax on Japanese source income in accordance with the measures.

 

Read a November 2016 report [PDF 145 KB] prepared by the KPMG member firm in Japan

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