Japan-Singapore DTAA: Tax Treaty Guide with Examples
The Double Taxation Avoidance Agreement (DTAA) between Singapore and Japan is a bilateral treaty designed to ensure that income earned across both countries is not unfairly taxed twice. By clearly defining each country’s taxing rights, the agreement helps individuals and businesses avoid double taxation, supports smoother cross-border trade and investment, and provides certainty in tax matters.
This guide is intended for:
- Individuals who are residents of either Singapore or Japan and earn income from the other country, and
- Companies operating, investing, or providing services across both jurisdictions.
It explains how the DTAA applies to different categories of income, such as business profits, dividends, royalties, capital gains, employment income, and director’s fees, and illustrates these rules with practical tax calculation examples.
If you are considering expanding your business into Singapore as a Japanese investor or entrepreneur, you may also want to review our detailed Singapore Company Registration guide to understand the process of setting up and operating a company in Singapore.
This article covers the following topics of the Singapore-Japan DTAA:
as well as
Japan-Singapore DTAA: Purpose & Scope
The Singapore–Japan DTAA is designed to prevent the same income from being taxed in both countries. It provides rules on how different types of income are taxed, ensures that double taxation is avoided through exemptions or tax credits, and supports cross-border trade and investment. The agreement also promotes cooperation between tax authorities in both countries to reduce tax evasion and provide greater certainty for taxpayers.
Who is Covered
- Individuals who are residents of either Singapore or Japan
- Companies and other legal entities that are tax residents of either country
What is Covered
- Taxes:
- In Japan: income tax, corporation tax, and local inhabitant taxes
- In Singapore: income tax
- Income types: business profits, dividends, interest, royalties, capital gains, employment income and income from independent services, director’s fees, pensions, government service remuneration, artistes' and sportspersons’ income, and students’ income.
For more context on how this treaty interacts with Singapore’s domestic tax framework, see our overviews of the Singapore Tax System, Singapore Corporate Tax, and Singapore Personal Tax.
Japan-Singapore DTAA: Key Terms Defined
Person
Tax Resident
A “tax resident” is any person who, under the laws of Singapore or Japan, is liable to tax in that country due to domicile, residence, place of management, or a similar criterion.
- If an individual is a resident of both countries, tie-breaker rules apply (centre of vital interests, habitual abode, nationality).
- For companies, dual residence cases are resolved by mutual agreement of the tax authorities.
Permanent Establishment (PE)
A “permanent establishment” (PE) means a fixed place of business through which the business of an enterprise is carried out. Examples include a place of management, branch, office, factory, or workshop.
- A construction site or installation project qualifies as a PE if it lasts more than 6 months.
- Preparatory or auxiliary activities, such as storage or information gathering, do not create a PE.
- A dependent agent who habitually concludes contracts in the name of the enterprise may constitute a PE.
Withholding Tax
We Have Helped Thousands Incorporate In Singapore
Japan–Singapore DTAA: Tax on Business Profits
How business profits are taxed under the treaty
Under Article 7 of the Singapore–Japan DTAA, business profits are taxable only in the country of residence, unless the enterprise carries on business in the other country through a permanent establishment situated there. If there is a PE, the other country may also tax the profits, but only the portion attributable to that PE.
Example 1: Singapore company earning from Japan With No PE in Japan
- Applicable rule: Profits are taxable only in Singapore.
- Tax in Japan: Nil, since there is no PE in Japan.
- Tax in Singapore: Entire S$500,000 is taxable at Singapore’s corporate tax rate (17%). Tax = S$85,000.
- Result: Singapore collects S$85,000.
Example 2: Japanese company earning from Singapore With PE in Singapore
- Applicable rule: Singapore may tax profits attributable to the PE.
- Assumption: Entire S$500,000 is attributable to the Singapore PE.
- Tax in Singapore: Corporate tax rate 17%. Tax = S$85,000.
- Tax in Japan: Japan also taxes worldwide income, but a credit is granted for Singapore tax paid. If Japan’s corporate tax is 30%, liability = S$150,000. After credit of S$85,000, net payable in Japan = S$65,000.
- Result: Effective tax burden = S$150,000 (S$85,000 in Singapore + S$65,000 in Japan).
Japan–Singapore DTAA: Tax on Dividends
How dividends are taxed under the treaty
Under Article 10 of the Singapore–Japan DTAA, dividends may be taxed in both the country of residence of the recipient and the source country where the company paying the dividends is located. However, the treaty limits withholding tax rates as follows:
- 5% if the beneficial owner is a company holding at least 25% of the voting shares of the paying company for at least six months before distribution.
- 15% in all other cases.
- Additionally, as long as Singapore does not impose tax on dividends beyond corporate-level taxation, dividends paid by a Singapore company to a Japanese resident are exempt from Singapore withholding tax.
Example 1: Dividends paid by a Singapore company to a Japanese resident
- Amount: S$500,000.
- Tax in Singapore: Nil, since Singapore does not impose withholding tax on dividends.
- Tax in Japan: Taxable at resident’s applicable Japanese tax rates, with credit for underlying corporate tax if shareholding thresholds are met (Article 23).
- Result: Dividend is effectively taxed in Japan only.
Example 2: Dividends paid by a Japanese company to a Singapore resident
- Amount: S$500,000.
- Applicable withholding tax:
- 5% (S$25,000) if the Singapore shareholder is a company holding at least 25% of the Japanese company for six months or more.
- 15% (S$75,000) in all other cases.
- Tax in Japan: Withholding of either S$25,000 or S$75,000 depending on shareholding.
- Tax in Singapore: Dividend is taxable, but a foreign tax credit is available for Japanese tax paid.
- If 15% withholding applies, Japanese tax credit = S$75,000, which offsets Singapore tax liability.
- Result: Effective total tax equals the higher of Japanese withholding or Singapore corporate tax if the recipient is a company (17%) or individual progressive tax rate if the recipient is an individual, with relief provided by credits.
For more details on how cross-border dividends are taxed under local rules, refer to our Singapore Withholding Tax Guide.
Japan–Singapore DTAA: Tax on Capital Gains
How capital gains are taxed under the treaty
Under Article 13 of the Singapore–Japan DTAA, the taxation of capital gains depends on the type of property and whether a permanent establishment or significant shareholding is involved. The main rules are:
- Immovable property: Gains from the sale of immovable property (real estate, land, natural resources) may be taxed in the country where the property is located.
- Business property of a PE or fixed base: Gains from property or assets connected to a PE or fixed base may be taxed in the country where the PE or base is located.
- Ships and aircraft: Gains from the sale of ships or aircraft in international traffic are taxable only in the country of residence of the enterprise.
- Shares: Gains from the sale of shares may be taxed in the country where the company is resident if:
- The shares derive their value mainly from immovable property in that country, or
- The seller holds at least 25% of the company and sells 5% or more of the shares during the tax year.
- Other property: Gains not specifically covered are taxable only in the seller’s country of residence.
Example 1: Sale of Japanese shares by a Singapore resident
- Capital gain: S$500,000.
- Applicable rule: Article 13(4)(b) – Japan may tax the gain if the Singapore seller holds at least 25% of the Japanese company and disposes of 5% or more in the year. Otherwise, only Singapore may tax.
- Tax in Japan: If conditions are met, Japanese capital gains tax ~20%. Tax = S$100,000.
- Tax in Singapore: Singapore does not tax capital gains.
- Result: If the significant shareholding condition applies, Japan collects S$100,000. If not, no tax payable in either country.
Example 2: Sale of Singapore shares by a Japanese resident
- Capital gain: S$500,000.
- Applicable rule: Article 13(4)(b) – Singapore may tax if the Japanese seller holds at least 25% of the Singapore company and disposes of 5% or more in the year.
- Tax in Singapore: If conditions are met, Singapore may tax as income only if the gain is considered revenue in nature (trading). Generally, Singapore does not tax capital gains. Tax usually Nil.
- Tax in Japan: Japan taxes worldwide income of its residents. Capital gain of S$500,000 taxable at ~20%. Tax = S$100,000, with a credit for any Singapore tax paid (if any).
- Result: Effective tax burden is S$100,000 in Japan.
Japan–Singapore DTAA: Tax on Interest Income
How interest income is taxed under the treaty
Under Article 11 of the Singapore–Japan DTAA, interest income may be taxed in both the source country (where the payer is located) and the country of residence of the recipient. However, the treaty caps the withholding tax in the source country at 10% of the gross interest if the beneficial owner is a resident of the other country.
There are exemptions where interest is fully exempt from source taxation, including:
- Interest paid to the government, central bank, or wholly government-owned institutions of the other country
- Interest on certain industrial loans or approved financing (under earlier protocols, though these provisions have expired)
Example 1: Interest paid by a Singapore company to a Japanese resident
- Amount: S$100,000
- Tax in Singapore: Withholding tax at 10% = S$10,000
- Tax in Japan: Entire S$100,000 is taxable at Japanese resident rates, but a credit is given for the S$10,000 Singapore tax paid
- Result: Effective tax is determined by Japanese domestic tax rate, with S$10,000 credit for Singapore tax
Example 2: Interest paid by a Japanese company to a Singapore resident
- Amount: S$100,000
- Tax in Japan: Withholding tax at 10% = S$10,000
- Tax in Singapore: Entire S$100,000 taxable at 17% corporate rate (S$17,000) if recipient is a company, or at progressive resident rates if an individual. Credit is granted for Japanese tax withheld (S$10,000)
- Result: Effective total tax equals the higher of Japanese withholding (10%) or Singapore domestic tax (17% for companies, or individual rates), with relief provided by credits.
Japan–Singapore DTAA: Tax on Royalties
How royalty income is taxed under the treaty
Under Article 12 of the Singapore–Japan DTAA, royalties may be taxed in both the country of source and the country of residence of the recipient. The treaty caps withholding tax in the source country at 10% of the gross royalty if the beneficial owner is a resident of the other country.
Royalties include payments for the use of copyrights, patents, trademarks, designs, models, secret formulas or processes, software, industrial equipment, as well as technical know-how or information. They also include bareboat charter payments for ships or aircraft.
Example 1: Royalty paid by a Singapore company to a Japanese resident
- Amount: S$100,000
- Tax in Singapore: Withholding tax at 10% = S$10,000
- Tax in Japan: Entire S$100,000 taxable under Japanese law, but Japanese resident can claim a credit for the S$10,000 Singapore tax
- Result: Effective total tax depends on Japanese tax rate, with credit given for S$10,000 withheld in Singapore
Example 2: Royalty paid by a Japanese company to a Singapore resident
- Amount: S$100,000
- Tax in Japan: Withholding tax at 10% = S$10,000
- Tax in Singapore: Royalty taxable at corporate rate 17% (S$17,000) if recipient is a company, or at progressive rates if an individual. Credit is allowed for Japanese tax paid (S$10,000)
- Result: Effective total tax equals the higher of Japanese withholding (10%) or Singapore tax (17% for companies, or individual rates), with relief provided by credits.
Japan–Singapore DTAA: Tax on Personal Services
How Independent Services are taxed under the treaty
Under Article 14 of the Singapore–Japan DTAA, income from professional or other independent services is generally taxable only in the country of residence. However, the other country may also tax the income if:
- The professional has a fixed base regularly available in that country, or
- The professional is present in that country for more than 183 days in any 12-month period.
This applies to professions such as doctors, lawyers, engineers, accountants, consultants, and other independent service providers.
Example 1: Services by a Singapore resident to a Japanese company
- Amount: S$100,000 service fee
- Case A: No fixed base in Japan, and presence less than 183 days
- Tax in Japan: Nil
- Tax in Singapore: S$100,000 taxable at personal progressive rates
- Case B: Fixed base in Japan, or presence exceeds 183 days
- Tax in Japan: Taxable in Japan. Assuming corporate/professional rate ~30%, tax = S$30,000
- Tax in Singapore: Income also reportable, but Singapore grants credit for Japanese tax paid. Net Singapore tax likely Nil if Japan’s tax exceeds Singapore’s
Example 2: Services by a Japanese resident to a Singapore company
- Amount: S$100,000 service fee
- Case A: No fixed base in Singapore, and presence less than 183 days
- Tax in Singapore: Nil
- Tax in Japan: Entire S$100,000 taxable under Japanese law at ~30% = S$30,000
- Case B: Fixed base in Singapore, or presence exceeds 183 days
- Tax in Singapore: Taxable at progressive individual rates
- Tax in Japan: Global taxation applies, but credit allowed for Singapore tax
- Result: Effective tax equals the higher of Japan’s or Singapore’s applicable tax, depending on where the fixed base or day-presence test applies, with double taxation relief through credits
How Dependent Services are taxed under the treaty
Under Article 15 of the Singapore–Japan DTAA, salaries, wages, and similar employment income are generally taxable only in the country of residence of the employee.
However, the other country may tax the income if the employment is exercised there. An exception applies where:
- The employee is present in the other country for not more than 183 days in any 12-month period, and
- The remuneration is paid by an employer not resident in that country, and
- The remuneration is not borne by a permanent establishment or fixed base of the employer in that country.
In such cases, the income remains taxable only in the employee’s country of residence
Example 1: Japanese employee working temporarily in Singapore
- Salary: S$100,000
- Case A: Employee stays in Singapore for less than 183 days, salary paid by a Japanese employer, not charged to a Singapore PE
- Tax in Singapore: Nil
- Tax in Japan: Entire S$100,000 taxed in Japan at progressive rates
- Case B: Employee stays in Singapore more than 183 days, or salary is borne by a Singapore PE
- Tax in Singapore: S$100,000 taxed at non-resident employment rates (approx. 15–22%). Assume 20% = S$20,000
- Tax in Japan: Salary still taxable in Japan, but foreign tax credit is given for Singapore tax paid
Example 2: Singapore employee working temporarily in Japan
- Salary: S$100,000
- Case A: Employee stays in Japan for less than 183 days, salary paid by a Singapore employer, not borne by a Japanese PE
- Tax in Japan: Nil
- Tax in Singapore: S$100,000 taxed at Singapore resident progressive rates (max 24%)
- Case B: Employee stays in Japan more than 183 days, or salary paid by/through a Japanese PE
- Tax in Japan: S$100,000 taxed under Japanese employment tax system (approx. 20–30%). Assume 25% = S$25,000
- Tax in Singapore: Salary also taxable, but credit granted for Japanese tax paid
Japan–Singapore DTAA: Tax on Director Fee
How director fee is taxed under the treaty
Under Article 16 of the Singapore–Japan DTAA, directors’ fees and other similar payments derived by a resident of one country in their capacity as a member of the board of directors of a company in the other country may be taxed in the country of the company. This means taxation rights lie with the country where the company paying the fee is resident.
Example 1: Fee paid by a Singapore company to a Japanese resident
- Amount: S$100,000
- Tax in Singapore: Fully taxable in Singapore at non-resident directors’ withholding rate (24%). Tax = S$24,000
- Tax in Japan: Director must also declare worldwide income, but Japan grants a foreign tax credit for S$24,000 Singapore tax
- Result: Effective tax burden equals Japanese tax rate, with credit for Singapore tax paid
Example 2: Fee paid by a Japanese company to a Singapore resident
- Amount: S$100,000
- Tax in Japan: Fully taxable in Japan under Japanese tax law. Withholding applied at Japanese rate (approx. 20%). Tax = S$20,000
- Tax in Singapore: Director must report the fee as income, taxed at corporate rate 17% (if via a company) or progressive personal rates if individual. Credit given for Japanese tax withheld
- Result: Effective total tax equals the higher of Japanese withholding or Singapore domestic tax (corporate 17% or individual progressive rate), with relief provided by credits
Start a Singapore Company
High-quality service — no shortcuts, no surprises
Frequently Asked Questions about Singapore-Japan DTAA
Related Articles
Is Singapore the Right Place to Incorporate?
How to Register a New Company in Singapore
Singapore's Tax System and Types of Taxes