This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Japan and New Zealand sign new double tax agreement

Author: Hadleigh Brock and Bradley Bowman

On 11 December 2012, Revenue Minister Peter Dunne announced the signing of a new double tax agreement (DTA) between New Zealand and Japan. This is a welcomed development as it will replace a very old treaty (1963) and therefore significantly refreshes the DTA in line with other international treaties.

A key change is that the withholding tax rates on dividends are reduced with new interest and royalty articles being included such that the new withholding rates that will apply are:


New WHT rates

Dividends (voting power of 10%+ special criteria met)


Dividends (all other cases)




Interest (interest paid to financial institutions and AIL paid)


Interest (all other cases)



For dividends to qualify for the 0% rate, the beneficial owner of the dividend must directly or indirectly own 10% or more of the voting power of the company paying the dividend for a 6 month period ending on the date on which entitlement to the dividend is determined, and satisfy one of the following:

  • The recipient of the dividend is a qualified person, being a company with its principal class of shares listed or registered on a recognised stock exchange whose shares are regularly traded;
  • The recipient has at least 50% of its voting power in the aggregate owned directly or indirectly by five or fewer qualified persons as defined above;
  • Competent authority approval is obtained.

Consistent with other recent treaties, the new interest article includes a 0% withholding tax where:

  • The interest is beneficially owned by the Government, a political subdivision, or local authority thereof, or central bank of the country of residence, or any institution wholly owned by the Government;
  • The interest is beneficially owned by a resident with respect to debt-claims guaranteed, insured or indirectly financed by the Government of residence;
  • The interest is beneficially owned by a financial institution that is unrelated to and dealing wholly independently with the payer, and 2% approved issuer levy (AIL) is paid.  However, interest derived by financial institutions will be subject to the 10% withholding tax rate if it is paid as part of an arrangement involving back-to-back loans or other arrangements that are economically equivalent and intended to have a similar effect to an arrangement involving back-to-back loans.

The new DTA also contains a limitation of benefits article although the scope of this article is narrower than recent treaties, relating specifically to the 0% withholding rate on interest referred to above and Article 13 relating to the alienation of property.  The new DTA will also include non-discrimination and exchange of information articles.

The new DTA will come into force once both countries have given legal effect to it which in New Zealand will occur through Order in Council. It will apply to withholding taxes for amounts paid or credited on or after 1 January in the calendar year following the year in which the DTA comes into force, so is likely to be applicable for withholding taxes from 1 January 2014 onwards.

For more information on other changes in the new DTA, please contact your usual Deloitte tax advisor.

Tax Alert February 2013 contents


Related links

Stay connected:
Get connected
Share your comments


More on Deloitte
Learn about our site