Japan and Brunei Darussalam have reached basic agreement on adopting bilateral tax treaty which aims to prevent double taxation pertaining to economic and investment activities between the two countries, following formal negotiation held November 2007. The proposed new treaty is based on the OECD Model and is intended to promote mutual investments and increase business transactions between the two countries.
General outlines of the agreed contents:-Withholding tax imposed on income from business activities in the contracting state-Withholding tax will be imposed only on income arising from business activities which is produced based on a Permanent Establishment (PE) in the contracting state (such as branch offices etc.,)
Conditions of withholding tax rates for investment income (dividends, interest and usage fees etc.,) in the other contracting state
-Interest income received by certain entities such as governmental organisations and central banks etc., will be eliminated at the source country.
Discussion on taxation matters between the competent authorities of each contracting stateIn light of double taxation treaty, if inappropriate taxation is imposed in the other contracting state, such entity is able to require the competent tax authority of its own country to negotiate in solving cross border tax disputes.
Exchange of information between the competent authorities of each contracting stateFor the purpose of appropriate bilateral taxation, the competent tax authorities of each contracting state will become able to exchange information pertaining to taxation directly.
The new tax treaty between Japan and Brunei Darussalam will be effective upon approval of the Diet, after the two countries confirmed the contents and officially signed the treaty. When concluded, this is to become the first double taxation treaty between Japan and Brunei Darussalam.