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Japan and the Netherlands signed a new tax treaty Wednesday to help facilitate investment between the two countries and avoid tax evasion, the Finance Ministry said.

The treaty is expected to come into effect as early as 2011 after necessary domestic procedures are completed.

The new treaty comes amid an increase in tax evasion cases relating to the transfer of investment returns from Japan to the Netherlands that involve anonymous partnerships. The new treaty aims to prevent such tax evasion by clarifying Japan’s domestic taxation rights regarding income distributions earned by anonymous partnerships.

In another provision of the treaty, tax on investment income such as dividends and interest will be reduced in the country that received the investment, in an effort to boost bilateral economic activity and investment.

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