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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Japan: Interest

Interest arising in Japan and beneficially owned by a United Kingdom resident may be taxed in Japan at a rate of 10 per cent (Article 11(2)).

Interest arising in Japan and paid to a United Kingdom resident is, however, exempt from Japanese tax if the beneficial owner is:

  • the United Kingdom government or the Bank of England (or the loan is guaranteed by the government or the Bank of England)
  • a bank
  • an insurance company
  • a securities dealer
  • other financial enterprises (subject to various provisos)
  • a pension fund or scheme
  • or the interest arises in connection with the sale on credit of equipment or merchandise.

Where the interest is effectively connected with a permanent establishment which the United Kingdom resident recipient has in Japan, the provisions of Article 7 will apply.