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Japan and the Hellenic Republic Signed the Tax Convention

On November 1, a “Convention between Japan and the Hellenic Republic for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” was signed in Athens, which is the capital of the Hellenic Republic. The convention was signed by the Ambassador Extraordinary and Plenipotentiary of Japan to the Hellenic Republic, H.E. Mr. Nakayama Yasunori, and the Minister of National Economy and Finance, H.E. Mr. Konstantinos Hatzidakis.

Given the evolution of the two nations’ economic ties, this convention is the first tax agreement to be signed between Japan and the Hellenic Republic. This Convention makes clear the range of taxable income between the two nations in order to prevent double taxation between them. In addition, this Convention will allow the tax authorities of the two nations to confer with one another regarding taxation not in accordance with the provisions of this Convention, to share information about tax-related matters, and to mutually lend assistance in tax claim collection. It is anticipated that this Convention will encourage additional bilateral investments and economic interactions between the two nations while doing away with double taxation and combating international tax evasion and tax avoidance.

The convention’s main points are listed below:

  1. Business Profits Taxation

When an enterprise from one of the two countries maintains a permanent establishment (such as a branch) through which it does business, only the profits attributable to the permanent establishment may be subject to taxation in the other nation.

  1. Investment Income Taxation

In the source country, taxes on investment income (royalties, dividends, and interest) will either be free from taxation altogether or subject to the highest rates.

  1. Mutual Agreement Strategy and Arbitration Proceedings

The tax authorities of the two nations may agree to a mutual agreement to address taxes that do not comply with the Convention’s terms. Furthermore, if the taxation issue remains unresolved after three years of consultation between the tax authorities of the two nations, the unresolved matter will be resolved pursuant to a decision of an arbitration panel made up of third parties.

  1. Information Sharing and Support for Tax Claims Collection

The two nations have introduced the exchange of information regarding tax affairs and mutual cooperation in the collection of tax claims in order to effectively combat international tax evasion and tax avoidance.

  1. Preventing Abuse of the Agreement

Any benefit under the Convention will not be granted if the income is attributable to a permanent establishment in a third country and the tax on the income in the third country is less than a certain amount of tax, or if it is reasonable to conclude that obtaining such a benefit was one of the main purposes of any transaction.