On Feb. 27, a new Japanese-U.S. treaty on taxation was finally submitted to the Diet for ratification by the legislature. The treaty, if approved, will make dividends and royalties earned by U.S. subsidiaries in which the Japanese parent firm has a stake of more than 50 percent tax-free, doing away with the current 10-percent tax imposed on such payments.
More than 30 years have passed since the current treaty underwent a full-scale revision in 1971, and the business community has been calling for a new overhaul for quite some time.
In November 1999, Minoru Makihara, chairman of the Japan-U.S. Business Council, and his U.S. counterpart Michael Armstrong submitted a joint petition to Tokyo and Washington calling for its revision. Such efforts prompted the two governments to start negotiating a new treaty in October 2001. After a basic agreement was reached in June 2003, the new treaty was officially signed by the two governments in November and is now awaiting ratification by the legislatures of both countries.