[Provisional translation]
[Attachment]
The tax convention agreed in principle aims to clarify the taxable scope on investment and economic activities between Japan and the State of Kuwait for the purpose of relieving international double taxation. Furthermore, the conclusion of this convention will establish a cooperative relationship between the tax authorities of the two countries for preventing tax avoidance. It is expected that this will ensure legal stability concerning the taxation of enterprises carrying on businesses in the partner country and promote further investment and economic exchanges between the two countries.
The key points of the tax convention agreed in principle are as follows.
1. Clarification of taxable scope in the partner country where enterprises carry on businesses
If a Japanese company establishes a permanent establishment (branch, etc.) and conducts business activities in the State of Kuwait, only business profits resulting from the business activities carried out through the permanent establishment is to be subject to tax in the State of Kuwait.
2. Reduction of taxation on investment income (dividends, interest, and royalties) in the source country
In the source country, investment income (dividends, interest, and royalties) is subject to tax within the following maximum tax rates in accordance with the following income category.
| Income category | Maximum tax rate | |
|---|---|---|
| Dividends | Between parent and subsidiary (Shareholding: at least 10 %) | 5% |
| Others | 10% | |
| Interest | 10%* | |
| Royalties | 10% | |
* Interest received by the government, the central bank, and other certain government organizations is exempted from taxation
3. Dispute resolution on taxes between the tax authorities of the two countries
If a taxpayer considers that any tax was imposed on him/her was not in accordance with the provisions of the convention in the country where he/she has carried out a business or investment, he/she may request for dispute resolution between the tax authorities for resolving this (mutual agreement procedure).
4. Exchange of information on taxes between the tax authorities of the two countries
For the purpose of ensuring proper taxation in both countries, the tax authorities may directly exchange various kinds of information regarding tax matters.