Double Tax Agreement between Thailand and Japan: A Comprehensive Guide

In an increasingly globalized world, businesses and individuals often find themselves dealing with cross-border transactions. However, dealing with tax-related issues across different jurisdictions can be a complex and daunting task. This is where double tax agreements (DTAs) come into play. DTAs are negotiated agreements between two countries to avoid double taxation of income earned in one country by a resident of the other country. In this article, we will discuss the DTA between Thailand and Japan in detail.

Overview of the Double Tax Agreement between Thailand and Japan

The DTA between Thailand and Japan, signed in 1968, is one of the oldest DTAs that Thailand has with other countries. The treaty was revised in 1980, 1995, and 2016 to incorporate changes in tax laws and to address issues raised by both countries. The main objective of the DTA is to promote trade and investment between Thailand and Japan by providing certainty to taxpayers on tax matters.

The DTA applies to taxes on income and gains imposed by each country. These taxes include income tax, corporation tax, and capital gains tax. The treaty also covers the tax on dividends, interest, and royalties. The treaty also outlines the rules for determining the tax residence of a person and the allocation of taxing rights between the two countries.

Key Provisions of the Double Tax Agreement between Thailand and Japan

1. Residence

The DTA defines the tax residency of a person as the country where the person has a permanent home available to him/her. If the person has a permanent home in both countries, the residency is determined based on other factors such as the center of vital interests, habitual abode, and nationality.

2. Business profits and income from employment

The DTA states that business profits of an enterprise are taxable only in the country where the enterprise is located. However, if the enterprise carries out activities in the other country through a permanent establishment, the profits attributable to that permanent establishment are taxable in that country.

For income from employment, the treaty provides that income from employment exercised in one country is taxable in that country unless the employment is exercised in the other country. In that case, the income is taxable only in the country of residence of the employee.

3. Dividends, interest, and royalties

The DTA provides that dividends paid by a company resident in one country to a resident of the other country are taxable in the country of residence of the recipient. However, the tax rate on dividends is capped at 15%.

Interest and royalties paid by a resident of one country to a resident of the other country are taxable only in the country of residence of the recipient.

4. Capital gains

The DTA provides that gains from the sale of immovable property are taxable in the country where the property is situated. Gains from the sale of movable property such as shares are taxable in the country of residence of the seller unless the seller has a permanent establishment in the other country.

Conclusion

In conclusion, the double tax agreement between Thailand and Japan provides a framework for the avoidance of double taxation of income and gains. The treaty ensures that individuals and businesses are not taxed twice on the same income or gains. It also provides a legal framework for resolving disputes that may arise between the two countries. As such, the DTA plays an important role in promoting trade and investment between Thailand and Japan.