"Notification of Tax Treaty" for reduction or exemption of withholding tax.

When making payments such as royalties to persons outside Japan (corporations and individuals), the payer in Japan must deduct withholding tax in accordance with the provisions of the Japanese Income Tax Act and pay it to the government by the 10th of the following month. If the withholding tax rate is 20.42%, the amount paid to the other party will be 79.58%.

However, if there is a tax treaty between the country of residence of the payee and Japan, the withholding tax can be reduced or exempted by submitting the required notification in advance (i.e. by the day before the remittance).

Check the tax treaty with the other country and the applicable reduction or exemption, prepare the necessary notification, etc., and submit a "Notification of Tax Treaty (withholding tax related)" to the tax office in the payer's jurisdiction (via the payer).

In the case of a tax treaty that has a so-called "benefit clause" that specifies the conditions for residents who can receive the benefits of the tax treaty, in order to apply a reduction or exemption to income subject to the benefit clause, in addition to the notification form, you will need to submit the "Benefit Clause Schedule (Form 17)" and "Resident Certificate (document proving that you are a resident who is subject to tax in the other country)".

1. Confirm the contents of the tax treaty with the other country

Dividends - The limited tax rate varies depending on whether it is a parent-child relationship or not. For parent-child requirements, you need to check whether the investment ratio and ownership period are met. If the other party is a parent company, there are some countries where the conditions to be met are complex, so you need to have the parent company check whether the requirements are met.

Royalties - Even if the other country is tax-exempt (= zero percent) in the United States, the United Kingdom, Germany, etc., you need to submit a tax treaty notification form before applying it.

Others - When paying interest, capital gains, professional income, director's compensation, retirement pension, government employee, professor, student/business collection vehicle, etc., or other income (non-Meiji income), you must check the tax treaty.

When making payments such as royalties to persons outside Japan (corporations and individuals), the payer in Japan must deduct withholding tax in accordance with the provisions of the Japanese Income Tax Act and pay it to the government by the 10th of the following month. If the withholding tax rate is 20.42%, the amount paid to the other party will be 79.58%.

2. "Withholding tax on real estate rental".

Anyone who rents real estate in Japan from a non-resident or foreign corporation (hereinafter referred to as "non-resident, etc.") and pays the rent in Japan must withhold income tax and special reconstruction income tax calculated at the 20.42% tax rate when making the payment, whether they are a corporation or an individual (regardless of whether they are a business owner or not).

If the owner of the real estate is a non-resident, etc., withholding tax will be applied to the rental. Withholding tax is required even if the payment destination is a domestic bank account. Failure to pay withholding tax will be the responsibility of the payer, and penalties will be incurred. In addition, withholding tax is not required for real estate rental paid by an individual who rents land, house, etc. for their own or their relatives' residence.

3. "Claiming a refund of withholding tax amount related to tax treaties".

In order to apply tax treaties with other countries that have preferential clauses, it may be necessary to submit a notification form every year. Our firm provides this type of support to Japanese companies (i.e. Japanese subsidiaries of foreign-affiliated companies) on the payer side.

For non-resident recipients, our firm can also act as a tax agent and support claims for refunds of withholding taxes.