Mandatory binding arbitration clause is included in the tax treaty protocols to resolve tax treaty disputes.
The protocol to the US-Japan tax treaty entered into force on August 30, 2019, the US Treasury Department has announced.
The Treasury also announced that the protocol to the US-Spain tax treaty will enter into force on November 27, 2019.
Both protocols were approved by an overwhelming majority in the US Senate, the US Treasury said, adding that the protocols will provide certainty to Americans conducting business abroad and promote free, fair, and reciprocal trade.
The protocol to the US-Japan tax treaty reduces tax on interest and certain dividends. It provides for mandatory binding arbitration to resolve tax treaty disputes, resulting in certainty for taxpayers.
The Spain Protocol reduces tax on interest, royalties, certain direct dividends, and capital gains. It too provides for mandatory binding arbitration.
Secretary Steven Mnuchin said: “These tax treaty protocols will help to create a level-playing field for American businesses and workers and foster stronger economic growth for both the US and our trading partners.”
“We are pleased to continue working with members of the US Senate from both parties to achieve strong, bipartisan approval of modernized tax treaties and protocols to encourage investment and job growth in America.”
Japan and Spain are two key trading partners of the US.