Today, on 5 June, the Verkhovna Rada of Ukraine adopted the Law of Ukraine "On Ratification of the Convention between the Government of Ukraine and the Government of Japan for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Fiscal Evasion and Avoidance and the Protocol thereto".

The adoption of the Law provides the legal basis for completing the domestic procedures necessary for the entry into force of the Convention and its Protocol, concluded on 19 February 2024 in Tokyo.

The Convention establishes the rules for the distribution between Ukraine and Japan of the rights to tax certain types of income received by residents of one Contracting State from sources in the other Contracting State. In particular, the right of the country of source of income to tax is limited for the following:

dividends (15% - general tax rate and 5% - for dividends received by a company of a Contracting State that owns at least 25% of the capital of the company of the other Contracting State that pays such dividends);

interests (10% - general tax rate; 5% - if the beneficial owner of the interest is a bank, insurance company, securities trader or recognised pension fund; and if interest is paid on debt claims arising from the sale of equipment or goods or provision of services on credit; 0% - if the beneficial owner of the interest is the other Contracting State, its authority, central bank or any institution wholly owned by that Contracting State; or in respect of debt claims guaranteed, insured, or indirectly financed by that other Contracting State, its authority, central bank or any institution wholly owned by that Contracting State);

royalties (5%).

The Convention also sets out the methods for the elimination of double taxation by the Contracting States, establishes arrangements for the exchange of tax information between the tax authorities of Ukraine and Japan and for the mutual agreement procedure to be carried out by the competent authorities if a resident of one of the Contracting States believes that, as a result of the actions of one or both of the Contracting States, he or she either is or will be subject to taxation that does not comply with the provisions of this Convention.

The entry into force of the bilateral Ukrainian-Japanese Convention and its Protocol is an important step for the development of Ukrainian-Japanese economic relations and cooperation in the tax area, as well as will help prevent tax evasion and mutually reduce tax obstacles to foreign investment and trade.

The Convention and its Protocol will enter into force on the thirtieth day after the date of receipt of the last notification confirming that the Contracting States have completed the internal procedures necessary for their entry into force. The Ministry of Finance of Ukraine and the State Tax Service of Ukraine are the implementing authorities of the Convention and the Protocol.