Japan-US treaty: status and key articles
The Japan-US tax convention is comprehensive. Current version with the 2013 Protocol covers income tax, dividends, royalties, interest, capital gains, pensions, and residency tie-breakers in detail.
- Article 7 (Business Profits): Japanese-resident operating profits are taxable only in Japan without US PE.
- Article 10 (Dividends): 0% in qualifying parent-subsidiary cases (50%+ ownership, 12-month holding). 5% for 10%+. 10% standard.
- Article 11 (Interest): 0% on most portfolio interest.
- Article 12 (Royalties): 0% under the treaty for most royalty types.
- Article 22 (Limitation on Benefits): LOB rules apply.
Withholding rates by income type for Japanese residents
| Income type | Default US rate | Japan treaty rate |
|---|---|---|
| US-source dividends (50%+ qualifying) | 30% | 0% |
| US-source dividends (10%+ ownership) | 30% | 5% |
| US-source dividends (standard) | 30% | 10% |
| US-source portfolio interest | 30% | 0% |
| US-source royalties | 30% | 0% |
| Business profits without US PE | Generally not taxed | Generally not taxed |
How the NTA treats US LLCs
Japan's National Tax Agency (NTA) treatment of US LLCs is fact-specific. NTA case rulings have varied between treating LLCs as transparent (combined-pass-through, taxed at member level) and opaque (treated as a foreign corporation, taxed on distributions).
The Tokyo District Court's 2014 ruling held a Delaware LLC opaque in one specific case, but this is not a categorical rule for all LLCs. Most Japanese founders we serve work with a zeirishi (Japanese tax accountant) to document transparent treatment based on the operating agreement's member-rights structure.
How to file W-8BEN-E from Japan
- Line 1: LLC legal name
- Line 4: Chapter 3 status: Disregarded Entity
- Line 5: Country of residence: Japan
- Line 6: Permanent residence address in Japan
- Line 8: US TIN (EIN)
- Line 9: Foreign TIN (your Japanese My Number)
- Part III: claim treaty benefits citing Article 10 for dividends
Common mistakes by Japanese founders
- Not securing transparent treatment documentation from a zeirishi
- Not filing W-8BEN-E with US payers (30% default applies)
- Missing Form 5472 + 1120 ($25K penalty)
- Missing Japan's foreign-asset reporting (kokugai zaisan chosa-sho) above JPY 50M threshold
- Triggering taxkin gaisha (CFC) rules on low-tax-jurisdiction holdings