For the purpose of eliminating double taxation arising between the two countries, this Convention clarifies the scope of taxable income in the two countries
On February 7 (February 8 local time), “Convention between Japan and the People’s Democratic Republic of Algeria for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” (hereinafter referred to as the Convention) (English (PDF) / Japanese (PDF)) was signed in Algiers, the capital of Algeria by H.E. Mr. Kono Akira, Ambassador Extraordinary and Plenipotentiary of Japan to the People’s Democratic Republic of Algeria and H.E. Mr. Brahim Djamel Kassali, Minister of Finance of the People’s Democratic Republic of Algeria.
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For the purpose of eliminating double taxation arising between the two countries, this Convention clarifies the scope of taxable income in the two countries. In addition, this Convention will enable the tax authorities of the two countries to consult each other on taxation not in accordance with the provisions of this Convention, to exchange information concerning tax matters and to mutually lend assistance in the collection of tax claims. It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries while eliminating double taxation and preventing international tax evasion and tax avoidance.
The following are the key points of the New Convention.
(1)Taxation on Business Profits
Where an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch, including the furnishing of services by an enterprise through personnel over a certain period of time) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country.
(2)Taxation on Investment Income
Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries
| Dividends | 5% (holding at least 25% of shares* for 365 days) 10%(others) |
| Interest | Exempted (received by the Governments, etc.) 7% (others) |
| Royalties | 10% |
[Note] voting power (where paid by a company of Japan) or capital (where paid by a company of Algeria)
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(3)Mutual Agreement Procedure
Taxation not in accordance with the provisions of the Convention may be resolved by mutual agreement between the tax authorities of the two countries.
(4)Exchange of Information and Assistance in Collection of Tax Claims
In order to effectively prevent international tax evasion and tax avoidance, the exchange of information concerning tax matters and the mutual assistance in the collection of tax claims between the two countries are introduced.
(5)Prevention of Abuse of the New Convention
In order to prevent abuse of benefits under the Convention, any benefit under the Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
4. After the completion of the domestic procedures in each of the two countries (in Japan, approval by the Diet is necessary), each of the two countries shall send through diplomatic channels to the other country the notification confirming the completion of its internal procedures. This Convention will enter into force on the thirtieth day after the date of receipt of the latter notification and will have effect:
(a) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
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(b) with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
(c) The provisions concerning the exchange of information and the assistance in the collection of taxes will have effect from the date of entry into force of this Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.
