US-Japan Income Tax Treaty is a bilateral agreement between the US and Japan that aims to eliminate double taxation and prevent tax evasion on income earned by individuals and businesses in both countries. The treaty is officially called the Convention between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. As you may agree, the official name is pretty long and a bit too complicated. To avoid potential confusion, we will refer to it US-Japan Tax Treaty. When referring to both US and Japan, we will use the term contracting states.

Background And History Of The U.S.-Japan Tax Treaty
Aside from improving the business climate, the principal purpose of international tax agreements between the US and a foreign country is to reduce or eliminate double taxation, and to prevent tax evasion. The US-Japan Tax Treaty is no exception.

This treaty has a long history of evolution as one of the first international tax treaties that the US ever signed. It has undergone several updates and amendments over the years to reflect changes in tax laws and economic conditions in both countries. The first version of the treaty was signed back in 1954 and was followed by updated versions in 1972 and 2003. The most recent amending protocol was signed by both governments on January 24, 2013.

While Japan ratified the Protocol in 2013, it was ratified by the US almost six years later, in July 2019. This amended protocol introduced a number of changes to the treaty:

-General withholding tax exemption for interest and a broader withholding tax exemption for certain dividends
-The introduction of mandatory binding arbitration under the mutual agreement procedure (MAP).
-Reinforcement of Assistance in the Collection of Taxes.
-Each Contracting State has an obligation to notify each other of any substantial changes in their tax laws, or any changes that affect their obligations under the applicable Treaty.

Key Points & Benefits Of The U.S.-Japan Tax Treaty
The amended Japan-US tax treaty entered into force in 2019, after Japan and the US officially exchanged instruments of ratification. The treaty provides several benefits for individuals and businesses in both countries:
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