Categories:Tax,United States

Treaty developments further US commitment to fostering cross-border investment

Since the start of 2013, there have been three major developments on the US tax treaty front: a new protocol with Spain signed on 14 January, a new protocol with Japan signed on 24 January and a revised treaty with Poland signed on 13 February. While these agreements are not yet in force, they tell us a great deal about the aims of this US administration around cross-border investment.

Under the new Spain protocol, dividends paid to parent companies meeting certain requirements are exempt from withholding tax; otherwise, the rate is 5 percent if the beneficial owner directly owns at least 10 percent of the subsidiary’s voting stock or 15 percent in all other cases.

The new Japan protocol and revised Poland treaty both maintain a 5-percent dividend withholding tax rate for parent companies that own at least 10 percent of the subsidiary’s voting stock. For companies that own less than 10 percent of such stock, the rate is favorably reduced from 15 to 10 percent. The new Japan protocol further broadens a full exemption from withholding tax for parent companies that (i) own “at least” 50 percent of the subsidiary’s voting stock and (ii) hold such stock for six months. The revised Poland treaty exempts dividends paid to pension funds…

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