Dividend withholding tax rates under Japan’s tax treaties

October 2, 2010  |  Withholding tax
Kagura dancer, part of Shinto festival rites and an ancestor of the Noh tradition

Kagura dancer, part of Shinto festival rites and an ancestor of the Noh tradition

The table linked to this article summarizes the withholding tax rates on dividends under Japan’s different tax treaties.

The withholding tax rate on dividends under Japan’s model tax treaty is 15 per cent for portfolio investments and 5 per cent for dividends from parent-subsidiary shareholdings. More recent tax treaties negotiated by Japan such as the new Netherlands Japan treaty have seen a 5 per cent rate or exemption included, but in quite a few of Japan’s older treaties the rate remains at 10 per cent, as the table shows.

Table of withholding tax rates

Table of withholding tax rates

Holding period, minimum shareholding

Note that Japan’s treaties commonly require a six month holding period and a shareholding of 25 per cent or more before the reduced parent subsidiary rate of withholding tax can apply, although in some cases this holding period is extended to twelve months.  This ownership ratio can also range from 10 per cent to up to 50 per cent, although the 25 per cent rate is very common.

Japan’s more modern treaties also allow exemption from dividend withholding tax when specified criteria are met but these treaties – those of the US, UK, Australia, France for example – also include a limitation of benefits clause.

This table may not be up to date by the time you read this article.  Be sure to also check this article for some Japan’s tax treaties in English and this article for the forms required to complete treaty claims for Japanese tax purposes.


  1. Thanks for some interesting articles. I am an American resident in Japan (7 years). I went to the Japan taxman recently and reported all my dividend and interest income on my AMERICAN investments. I was socked with a 140,000 Yen tax bill. I have searched the Internet far and wide and can’t understand the Japan-USA Tax Treaty. I think it only protects citizen/residents of one country from excessive dividend and interest tax rates on investments made in the OTHER country. But since I am an American citizen resident in Japan with investments in the USA, I can be gouged by both Japan and America. Am I understanding this properly?

  2. Hi – this is a surprisingly complicated question despite being a probably pretty common situation. I don’t know all the facts around your position so I can only comment in general terms and not on your specific case. However you probably want to think about the following:

    The idea behind the tax treaty agreed between the US and Japan is to prevent double taxation of the same income in the two countries. In theory this is done by, for example, sharing the right to tax certain types of income paid cross border between the two countries and if income is still subject to tax in both countries then allowing a tax credit for taxes from the other country in order to offset double taxation.

    You can see the section on tax credit in Article 23(2) on page 34 of the US Japan treaty linked here where it talks about a credit for Japanese tax.

    So in theory if you are a US citizen and a permanent tax resident in Japan you have to file a Japanese tax return declaring your worldwide income. However if you suffer any US withholding taxes these may credit and offset your Japan tax liability.

    Given US citizens also have to file a US tax return if you pay any Japanese taxes these may credit against your US tax liability.

    Although the above is the theory in practice matters can be more difficult because of practical issues around timing of tax payments or filings and other administrative matters.

    If you also file income late then matters can become more complex still as you may be too late to re-open a tax return in a particular country and claim the credit or relief.

    Given the above you may want to first take a look at “IRS Publication 54 Tax Guide for US Citizens and Resident Aliens Abroad” where on page 8 it explains you may be able to file a Form w9 to the withholding agent in the US in order to prevent them withholding 30 per cent US tax if you are suffering this tax.

    You will need to supply your Taxpayer Identification Number (TIN) so that the US authorities can cross reference the form with your annual tax filing.

    If you look at page 32 the publication explains about claiming a foreign tax credit (i.e. a credit for the Japanese taxes paid on your dividend income against your US tax liability). You may want to look into whether your could refile your US tax returns to claim a credit for the Japanese taxes.

    This may be time consuming or difficult and you would have to provide your Japanese tax returns and proof of your tax payment to the IRS. You should probably speak to a US tax adviser to see if this is possible or how long it could take.

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