Moshe Bina, Senior Manager, International Taxation Department, Deloitte Israel

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1 Moshe Bina, Senior Manager, International Taxation Department, Deloitte Israel

2 Doing business in Japan Tax Aspects and a glance at BEPS Moshe Bina, Adv. September 6 th, 2015

3 Our main Topics. Country Domestic Tax Rates Treaty Main Aspects Entering Japan Common Models BEPS Overview

4 Country Domestic Rates Comparison 2013 Brightman Almagor Zohar & Co.

5 Domestic Tax Rates 35 Japan Israel p e r c e n t a g e corporate Tax Effective (VAT/Consumpt ion) Withholding Tax (Div) Withholding Tax (Int) Withholding Tax (Roy) Japan Israel

6 Treaty Main Aspects 2013 Brightman Almagor Zohar & Co.

7 Treaty Main Aspects Signed on march 8 th 1993 in effect since January 1994 OECD Based WHT Rate Reduced Special arrangement for IP transactions 7

8 Israel Japan Tax Treaty - Major Stats IL-JPN Treaty Dividend WHT Interest WHT Royalties WHT 5/15% 10% 10% Limitation of Benefits (LOB) 8

9 Entering Japan Common Models 2013 Brightman Almagor Zohar & Co.

10 Entering Japan Common Models Joint Venture Branch Subsidiary 10

11 Expected Tax Outcomes Local Japanese Tax 33.06% (effective) Withholding Tax 20.42% (may be reduced by treaty) Israeli Income Tax 26.5% (corporate) 11

12 Planning Tools Transfer Pricing Commercial arrangement s Planning Tools Local Incentives Financing 12

13 BEPS Overview 2013 Brightman Almagor Zohar & Co.

14 What is the debate all about? Cross Border Income Shift Intercompany Loans, Licensing, Production and Sale of Products and Provision of Services High Taxed Countries Interest Low Taxed Countries Belgium France Germany Royalties Ireland Malta Luxembourg Spain Japan Brazil Products Cayman Islands Singapore Hong Kong Italy Mexico Colombia Services Switzerland Bermuda Argentina Is Each Country Engaged in these Transactions Receiving Their Fair Share of Revenue?

15 BEPS history and timeline G20 leaders met European council meeting G8 Summit November 2012 Feb 2013 May 2013 June 2013 July 2013 OECD released Addressing Base Erosion and Profit Shifting Forum of Tax Administration meeting OECD s Committee on Fiscal Affairs to agree action plan OECD s action plan delivered to G20 Finance Ministers September 2014 September 2015 December 2015 Delivery of: - Report on digital environment - Changes to model tax convention - Recommendations for domestic rules - Review of member country tax regimes - Changes to Transfer Pricing Guidelines - Report on international law and multilateral instrument Delivery of: - Further recommendations for domestic rules - Strategy to expand participation to non-oecd members - Further changes to the model tax convention - Changes to the transfer pricing guidelines - Recommendations regarding data to be collected Delivery of: - Further changes to the transfer pricing guidelines (re: interest deductions) - Revision of existing criteria regarding harmful tax regimes - A multilateral instrument 15

16 OECD/G20 BEPS project who s doing the work? Working Party 1 Tax Treaties Working Party 6 Taxation of MNES Working Party 11 Aggressive Tax Planning Sept 2014 Action 2 Neutralising hybrids Action 6 Prevent treaty abuse Action 13 Transfer pricing documentation and country by country reporting to tax authorities Action 8 Transfer pricing of intangibles (1) Action 2 Neutralising hybrids Action 5 Counter harmful tax practices Sept 2015 Action 7 Prevent permanent establishment avoidance Action 14 Dispute resolution Action 8 Transfer pricing of intangibles (2) Action 9 Risk and capital Action 10 Transfer pricing high risk transactions Action 3 Strengthen CFC rules Action 12 Disclosure (aggressive tax planning) Action 4 Limit interest deductions Dec 2015 Action 4 Transfer pricing guidelines on financial transactions 16 Action 1 Digital economy (Digital Task Force) Action 11 Data collection / analysis (Working Party 2) Action 15 - Multilateral instrument

17 BEPS - Next Steps for Businesses Understand the actions identified by the OECD Prepare for changes at a pace faster than usual Consider current and proposed business plans and models in light of possible changes Focus on digital delivery, permanent establishments, transfer pricing of risk and intangibles, characterization of transactions and entities and deductibility of interest Participate in consultations both domestic and OECD 17 17

18 Thank you for your Cooperative Participation Moshe Bina Adv.* LL.M Senior Manager International Tax *Admitted to practice in Israel & NY Tel/Direct: +972 (3) Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see for a more detailed description of DTTL and its member firms. Member of Deloitte Touche Tohmatsu Limited.