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HMRC internal manual

Double Taxation Relief Manual

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HM Revenue & Customs
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Double Taxation Relief Manual: Guidance by country: Japan: Dividends

The Japanese tax deducted from dividends at the agreement rate of 10 per cent (or 5 per cent where the beneficial owner of the dividend is a United Kingdom company owning, directly or indirectly, at least 10 per cent of the voting power in the Japanese company during the 6 month period before the dividend is paid) qualifies for credit as a direct tax (see INTM164010(c)). These reduced rates do not apply if the dividends are effectively connected (see INTM153110, fifth sub-paragraph) with a business carried on through a permanent establishment which the recipient has in Japan.

A United Kingdom company controlling, directly or indirectly, at least 10 per cent of the voting power in the Japanese company paying the dividend is entitled, under the agreement, to credit for the underlying tax (see INTM164010(d)) (Article 23(l)(b)).