FROM THE OFFICE OF PUBLIC AFFAIRS

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I would like to thank you all for being here today at this important ceremony, and I would like to welcome our friends from Japan, especially the Honorable Ryozo Kato, Ambassador of Japan to the United States.
I also would like to thank all those who worked so hard to bring this income tax treaty to fruition, both from the Japanese side and from the American side.  As you know, this new treaty has been many years in the making, and could not have been concluded without the hard work of many people in each of our governments.

This Administration has made a strong commitment to our income tax treaty program.  Tax treaties are important to the overall international economic policy of the United States because they serve to reduce tax barriers to international trade and investment.

A healthy trade and investment relationship between the United States and Japan, the world's two largest economies, is critical to creating economic growth throughout the world.  The new income tax treaty we will sign today will significantly reduce existing tax-related barriers to trade and investment between Japan and the United States.  By reducing such barriers, the new treaty will foster still-closer economic ties between our two great nations.  This will enhance the competitiveness of our businesses, and create new opportunities for trade and investment between our two nations.

Most significantly, the new income tax treaty completely eliminates source-country withholding taxes on certain income, including:

• the elimination of withholding taxes on all royalty income,
• the elimination of withholding taxes on certain interest income, including interest income earned by financial institutions, and
• the elimination of withholding taxes on dividend income paid to parent companies with a controlling interest in the paying company.
The new income tax treaty also ensures treaty benefits in appropriate circumstances for investments made through partnerships, allowing flexibility in business form.  In addition, the new treaty includes important provisions regarding the application of international standards for transfer pricing between affiliated companies operating in both countries.

Since the current U.S.-Japan tax treaty was signed over 30 years ago, the relationship between our two countries has become truly global in scope.  Our economic relationship is strong and increasingly interdependent.  It is firmly rooted in the shared interests and responsibility of the United States and Japan to promote global growth and a vital world trading system.

I am very pleased to have the opportunity today to sign this new income tax treaty between the United States and Japan.  We will be proud to transmit this treaty for consideration by our Senate.  We look forward to the day when this new tax treaty is in force, operating to enhance the environment for trade and investment between our two nations.

Documents Attached:

Related Documents:

• Convention Final
• Protocol Final
• US Note Final