"Today, the Ministry of Foreign Affairs of Japan announced that negotiations on the update of the 1986 Convention on Avoidance of Double Taxation will begin on March 22," Daisuke Kitade, a researcher at Mitsui & Co. Global Strategic Studies Institute (Japan), said at the online discussion “Ukraine-Japan-EU trade connectivity: mutual impact and new opportunities”, an Ukrinform correspondent reports.
As noted, the convention, which is a legacy of Soviet times, is still in force between Japan and Ukraine. According to this document, Japanese companies in Ukraine have to pay higher taxes than the companies of other countries.
"Since Japanese companies have suffered from this outdated convention, I hope that the negotiations will be completed and the convention will be updated as soon as possible," said the Japanese researcher.
In turn, Ambassador of Ukraine to Japan Sergiy Korsunsky informed that the Embassy of Ukraine initiated this process after a series of meetings with the heads of six major trading houses of Japan.
"The Ministry of Finance of Ukraine reacted immediately, the Ministry of Foreign Affairs of Japan identified this as a priority for the Ministry of Finance of Japan, and they will begin online consultations. Our project has been submitted to the Japanese side," the diplomat said.
As noted in the analytical commentary by Daisuke Kitade and First Deputy Director of the New Europe Center (Ukraine) Sergiy Solodkyy, presented during the online discussion, the outdated convention has long raised reservations in Japan because legal entities of Japanese origin must pay a 15 percent tax when sending dividends to their parent company in Japan. Meanwhile, representative offices of other G7 countries have to pay a dividend tax of only 5 percent (Chinese and Korean companies pay the same share). Japanese business drew attention to the fact that the 15 percent
tax is provided only for companies from Japan and Belarus. Japan has already revised the old convention with other countries of the former Soviet Union; consequently, its companies in Russia, Kazakhstan and Uzbekistan pay only five percent. The agreement with Georgia was renewed on January 29, 2021. The settlement of this issue may have a positive impact on attracting Japanese investment, the researches consider.
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