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September 5, 2019

US Treasury Department announces entry-into-force dates of tax treaty protocols with Japan and Spain

On 30 August 2019, the United States (US) Treasury Department announced the entry-into-force dates of the protocols to the US tax treaties with Japan and Spain.

The protocol with Japan entered into force on 30 August 2019, and the protocol with Spain will enter into force on 27 November 2019. The effective date of specific provisions within the protocols are described in this Alert. For an in-depth discussion of the provisions of each protocol, see EY Global Tax Alert, US Senate approves four protocols updating the existing bilateral tax treaties with Luxembourg, Switzerland, Japan and Spain, dated 18 July 2019.

Japanese protocol

Key provisions of the Japanese protocol include:

  • A revised dividend withholding tax exemption
  • A general withholding tax exemption on cross-border interest payments
  • A new definition of indirect interest in real property
  • Mandatory binding arbitration procedures
  • Revised exchange of information provisions
  • Expanded and strengthened provisions regarding assistance in the collection of taxes

The Japanese protocol will have effect for withholding taxes (e.g., related to dividends and interest) for amounts paid or credited on or after the first day of the third month following the date on which the protocol enters into force — that is, 1 November 2019. For all other taxes, the Japanese Protocol will apply to tax years beginning on or after 1 January 2020. The provisions regarding mandatory arbitration will have effect for cases that are under consideration by the Competent Authorities as of 30 August 2019, as well as cases that come under consideration after that date. The provisions of the new Exchange of Information Article will have effect as of 30 August 2019.

Spanish protocol

Key provisions of the Spanish protocol include:

  • A revised dividend withholding tax exemption
  • New fiscally transparent entity rules
  • General exemption from source-country withholding tax on cross-border interest, royalty and capital gains
  • A new limitation on benefits article
  • Mandatory binding arbitration procedures
  • Revised exchange of information provisions

For withholding taxes, the Spanish protocol generally will apply to amounts paid or credited on or after 27 November 2019, the date on which the protocol enters into force. For taxes determined by reference to a tax period, the protocol will apply for tax years beginning on or after 27 November 2019 (e.g., 1 January 2020, for calendar-year taxpayers). In all other cases, the protocol will apply on or after 27 November 2019.


The announcement of the entry into force dates of each of these protocols is a welcome development and provides taxpayers with guidance on the effective dates of the new provisions. The new lower withholding taxes under both protocols will take effect before the end of 2020. For the Spanish protocol, the new limitation on benefits requirements must be met timely for treaty-based withholding rates to apply.

It remains to be seen whether the Senate will maintain resolve to advance the approval of the other outstanding agreements (i.e., treaties with Hungary, Poland and Chile) in the near term. Moreover, those agreements will likely require modifications in the form of reservation language to account for the 2017 enactment of the base erosion and anti-abuse tax in the Tax Cuts and Jobs Act. There is no indication when the instruments of ratification will be exchanged with respect to the protocols to the US tax treaties with Switzerland and Luxembourg, which the Senate approved earlier this year.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, International Tax and Transaction Services, Washington, DC
  • Julia M Tonkovich |
  • Arlene S Fitzpatrick |
  • Lilo Hester |
  • Anna Moss | 



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