Tax Convention Signed Between Lithuania and Japan

Custody Newsflash

July 20th, 2017

Tax Convention Signed between Lithuania and Japan

Category / Tax Issues
Summary / On July13 in Vilnius, the Government of Japan and the Government of the Republic of Lithuania signed the Convention between Japan and the Republic of Lithuania for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.
Impact / Investors residing in Lithuania and holding Japanese stocks and/or bondswill be able to apply tax exemption or/and reduction under the new tax treaty when the convention enters into force.
Action / Foreign intermediaries are encouraged to inform their relevant customers if necessary.

The following information is compiled from MOF and MOFA websites as well as BTMU’s own sources.

On July13 in Vilnius, the Government of Japan and the Government of the Republic of Lithuania signed the Convention between Japan and the Republic of Lithuania for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.This is the first tax convention to be concluded between Japan and the Republic of Lithuania in light of an increasingly close economic relationship between the two countries.

This Convention clarifies the scope of taxable income in the two countries for eliminating double taxation arising between the two countries. In addition, this Convention willenable the tax authorities of the two countries to consult each other on taxation not in accordance with the provisions of this Convention, exchange information concerning tax matters and mutually lend assistance in the collection of tax claims. It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries

The following are the key elements of the Convention:

Substantial exemption/reduction in taxation on investment income

Tax rates on investment income (dividends and interest) in the source country is subjected to the maximum rates or exempted as follows:

Dividends / Interest
Exempted: a person* other than an individual
10%: Others / Exempted: a person* other than an individual
10%: Others

*: the term “person” includes an individual, acompany and any other body of persons

Tax exemption is not applicable for dividends on REIT

Tax reduction or exemption will be applicable to profits from redemption of discount bonds as well as interest on bond.

Limitation of Benefits (LoB) will be applicable only to tax-exemption on dividends and Interest.

Other elements are:

-Taxation on profits from business activities

-Provision for prevention of abuse of the Convention

-Dispute resolution between the tax authorities

-Exchange of information and assistance in the collection of taxes

Next steps for the Convention’s entry into force

After the completion of the necessary domestic procedures in each of the two countries (in the case of Japan, approval by the Diet), the Convention will enter into force on the date of exchange of diplomatic notes indicating such approval.This Convention will have effect in the two countries:

(a) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1 January in the calendar year next following that in which the Convention enters into force; and

(b)with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after 1 January in the calendar year next following that in which the Convention enters into force.

(c) The provisions concerning the exchange of information and assistance in the collection of taxes have effect from the date of entry into force of this Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.

Please refer to the following websites for full details of the announcement::

English)

(MOF: Japanese)

(MOFA: English)

(MOFA: Japanese)

(Reference) Texts and Key Points of the Agreement

“Convention between Japan and the Republic of Lithuania for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance”

(Japanese •English(298KB/335KB) MOFA)

Should you have any inquiries, please feel free to contact us.

Best regards,

Transaction Services Division / The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Past Newsflash issues are available on the BTMU Yen Custody Website; This site isdedicated to our clients, and accessible only with “ID” and “Password”. Should you require them, please contact usYusuke Kawabe, Manager e-mail: / Sakiko Muramatsu, Manager e-mail:

The information contained herein has been derived from several sources believed to be reliable at the time of publication. Although having made every effort to ensure the accuracy of the contents, The Bank of Tokyo-Mitsubishi UFJ, Ltd. does not assume any liability for losses either direct or consequential caused by the use of this information.

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