U.S. Chamber Welcomes Japanese Action on Tax Treaty

WASHINGTON, D.C. – The United States Chamber of Commerce applauded the Japanese Cabinet's approval of a new tax treaty between the United and Japan, calling it an important victory for U.S. and Japanese businesses as well as the overall bilateral commercial relationship.

"We are pleased that Japan and the United States have completed work on this new and much improved tax treaty," said Thomas Donohue, Chamber President and CEO. "The substantial reductions in withholding taxes on interest, dividends, and royalties add up to a big win for companies on both sides of the Pacific."

The treaty replaces the current U.S.-Japan Tax Treaty that the two countries signed in 1971. The previous treaty applied withholding rates to U.S. firms that were double the rate faced by many of Japan's other trading partners, putting American companies at a significant competitive disadvantage.

The U.S. Senate and Japanese Diet already ratified the tax treaty earlier this month. All that remains is for the two countries to exchange instruments of ratification. If the treaty enters into force before April 1, the lower withholding rates can take effect as early as July 1.

"We're close to the end of a long journey on this treaty," said Donohue. "Companies in the two countries will finally have a modern tax regime that reflects our current economic relationship."

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

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