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11 October 2018 Japan deposits its instrument of ratification of the BEPS Multilateral Convention On 26 September 2018, Japan deposited its instrument of ratification, acceptance or approval of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) with the Organisation for Economic Co-operation and Development (the OECD1) and also submitted its definitive MLI positions. Japan listed 39 income tax treaties that it would like to designate as Covered Tax Agreements (CTAs). The MLI will enter into force for Australia, France, Israel, Japan, New Zealand, Poland, Slovakia, Sweden and the United Kingdom (UK) on 1 January 2019. On 7 June 2017, Japan signed the MLI2 and submitted a list of 35 income tax treaties which Japan entered into with other jurisdictions that Japan wished to designate as CTAs, i.e., tax treaties to be amended through the MLI. Together with the list of CTAs, Japan also submitted a provisional list of reservations and notifications (MLI positions) in respect of the various provisions of the MLI. On 26 September 2018, Japan deposited its instrument of ratification of the MLI with the OECD. At the time of depositing the instrument of ratification, jurisdictions must confirm their MLI positions. Accordingly, Japan confirmed its MLI positions. Also, Japan now has 39 income tax treaties it wishes to designate as CTAs by adding four more income tax treaties with Egypt, Kazakhstan, UAE and Ukraine. At the time Japan deposited its instrument of ratification of the MLI, 84 jurisdictions have signed the MLI and 15 have deposited their instrument of ratification with the OECD. The MLI will enter into force on 1 January 2019 as Japan deposited its instrument of ratification on 26 September 2018. With respect to specific bilateral income tax treaties, the MLI provisions will become effective after the MLI has entered into force for both parties to an income tax treaty and certain time has elapsed. The specified time differs for different provisions. For taxes withheld at source, the provisions of the MLI will have an effect on events giving rise to such taxes on or after 1 January following the MLI entry into force for both parties to an income tax treaty. Accordingly, for the income tax treaties with Australia, France, Israel, New Zealand, Poland, Slovakia and the UK, the MLI will be effective for taxes withheld at source by Japan from 1 January 2019.3 The MLI provisions will be effective for other taxes imposed on income for periods beginning on or after the expiration of a period of six calendar months from the date the MLI entered into force for both parties to a tax treaty. For income tax treaties with Australia, France, Israel, New Zealand, Poland, Slovakia and the UK, the MLI will be effective on taxes imposed by Japan for taxable periods starting on or after 1 July 2019.4 For Article 16 (Mutual Agreement Procedure) and Part VI (Mandatory Binding Arbitration) of the MLI, the MLI will generally be effective for CTAs for a case presented to the competent authority of a Contracting Jurisdiction on or after the date the MLI entered into force for both parties to an income tax treaty. 1. For an overview of the MLI provisions, see EY Global Tax Alert, OECD releases multilateral instrument to implement treaty related BEPS measures on hybrid mismatch arrangements, treaty abuse, permanent establishment status and dispute resolution, and Mandatory Binding Treaty Arbitration under OECD’s Multilateral Instrument, both dated 2 December 2016. 2. See EY Global Tax Alert, Japan passes bill on multilateral instrument, dated 6 June 2018. 3. With respect to the tax treaty with Sweden, the MLI will have an effect on taxes imposed on or after 30 days after the date of receipt by the Depositary of the latest notification by Sweden that it has completed its internal procedures for the entry into effect of the provisions. 4. With respect to the tax treaty with Sweden, the MLI will have an effect on taxes imposed with respect to taxable periods starting on or after the expiration of a period of six calendar months from 30 days after the date of receipt by the Depositary of the latest notification by Sweden that it has completed its internal procedures for the entry into effect of the provisions. Ernst & Young Tax Co., Tokyo
Ernst & Young LLP, Japanese Tax Desk, New York
Ernst & Young LLP, Asia Pacific Business Group, New York
Document ID: 2018-6194 |
