Associated Press

Tokyo, March 30:

Japan and the United States sealed a revised tax treaty on Tuesday aimed at encouraging trade and investment between the world’s two largest economies.The agreement was finalised in a ceremony at a state guesthouse by US ambassador to Japan Howard Baker and senior vice-minister of foreign affairs Ichiro Aisawa.Baker praised the treaty as “one more symbol of the cooperation, trust and true friendship that exists between our two countries,” according to a statement from the US embassy in Japan.Japanese government officials say the revisions will likely provide immediate savings to businesses in both countries and create incentives for new investments. The treaty, which will take effect in July, eliminates or reduces withholding taxes on dividend and interest payments by subsidiaries to parent companies in the other country.

It eliminates withholding taxes on all royalty income and certain interest income, including income earned by financial institutions. It also has provisions that help affiliated companies in both countries and make investments easier, the US Embassy statement said.“The conclusion of this new tax treaty is expected to further promote investment and cultural exchange between Japan and the United States as well as mutual visits by both nationals,” the Japanese foreign ministry said in a statement.The revisions to the 30-year Japan-US tax treaty have strong backing from the business communities in both countries.

Finance minister Sadakazu Tanigaki said Japan would like to carry out similar reviews of tax treaties with countries in Europe and in Asia.

“We believe this agreement will lead to increased business opportunities and to the creation of new jobs,” he said.The new pact replaces the US-Japan tax treaty which dates back to 1971.“The new US-Japan treaty will significantly reduce existing tax barriers to investment and trade in both directions,” US treasury secretary John Snow said in a statement.

The treaty will “foster still closer economic ties between the world’s two largest economies,” and expand trade opportunities, which in turn will create more jobs, he said.