New Zealand and Japan have signed a new double tax agreement to replace the existing 1963 treaty, Revenue Minister Peter Dunne announced today.
The updated agreement was signed in Tokyo last night New Zealand time by Japan’s Parliamentary Senior Vice Minister of Foreign Affairs, Kazuya Shimba, and the New Zealand Ambassador to Japan, Mark Sinclair.
“New Zealand has a long-standing relationship with Japan. In fact, this year marks the 60th anniversary of formal diplomatic relations with Japan,” Mr Dunne said.
“Japan is one of New Zealand’s largest trading partners and the existing treaty is our oldest tax information exchange agreement. Updating the agreement recognises the volume of trade between our two nations and the significance of our relationship with Japan.
“This agreement will help New Zealand-based businesses compete in Japan and help make New Zealand a more attractive place to invest in, and it will modernise our tax treaty arrangements with Japan bringing them more into line with best international practice,” he said.
A key feature of the updated agreement will be lower withholding taxes on interest, dividend and royalty payments between the two countries making it less costly for businesses to invest in each country and to bring profits home for reinvestment or distribution to shareholders.
Double tax agreements help reduce tax impediments to trade and investment between countries by preventing cross-border business income being taxed twice and therefore give greater certainty about how that income will be taxed.
“They are also a valuable tool in combating tax avoidance, which is a high priority for us,” Mr Dunne said.
The updated agreement with Japan will come into force once both countries have given legal effect to it. In New Zealand, this will occur through an Order in Council.
The text of the new double tax agreement is available at taxpolicy.govt.nz/tax-treaties