The US-Japan income tax treaty

By Brent Chudoba, editor Updated September 15, 2026

Under the US-Japan income tax treaty, the most the paying country can withhold from an ordinary investor is 10% on dividends, 0% on interest and 0% on royalties. Some recipients and some kinds of payment get a different rate, and the table below lists each one. Without a treaty, US-source dividends and royalties paid to a nonresident are withheld at 30%, while the tax code already exempts most portfolio and bank-deposit interest whether or not a treaty applies.

The treaty has generally applied since 2005, and IRS lists its most recent protocol as taking effect in 2020. It also decides residency when both countries claim you, and assigns who taxes pensions and Social Security. It does not generally stop the US taxing its own citizens.

What are the US-Japan treaty withholding rates?

US-Japan treaty withholding rates and who qualifies
Income	Rate cap	Who gets this rate, and where the treaty says so
Dividends	10%	Anyone not in a category below, including an ordinary individual investor (Article 10(2)(b))
Dividends	5%	a company that owns, directly or indirectly, at least 10% of the voting stock of the paying company on the date entitlement to the dividend is determined (Article 10(2)(a))
Dividends	0%	a company that has owned, directly or indirectly through residents of either country, at least 50% of the voting stock of the paying company for the six months ending on the date entitlement to the dividend is determined, and that also passes one of the extra anti-treaty-shopping tests in Article 22 (a listed-company test, an ownership and base-erosion test plus an active-business test, or a competent authority determination) (Article 10(3)(a))
Dividends	0%	a pension fund resident in the other country, on dividends not derived from a business the fund carries on directly or indirectly (Article 10(3)(b))
Interest	0%	Anyone not in a category below, including an ordinary individual investor (Article 11(1))
Interest	10%	contingent interest, meaning interest measured by the debtor's (or a related person's) receipts, sales, income, profits or other cash flow, change in property value, or dividends and similar payments (Article 11(2)(a))
Interest	5%	the part of interest between related parties that exceeds an arm's-length amount, taxed on that excess only (Article 11(6))
Royalties	0%	Anyone not in a category below, including an ordinary individual investor (Article 12(1))
Royalties	5%	the part of a royalty between related parties that exceeds an arm's-length amount, taxed on that excess only (Article 12(4))

The cap applies to income paid from one country to a resident of the other, and each treaty conditions it on that resident being the real recipient rather than a conduit; the article cited beside each rate is the one that sets the condition. Which document sets each rate today: dividends, 2003 Convention Article 10(2) for the 10% and 5% rates and Article 10(3)(b) for pension funds, unchanged since; the 0% company tier is Article 10(3)(a) as amended by Article III(1) of the 2013 Protocol (in force August 30, 2019, effective for withholding from November 1, 2019), which lowered the test from more than 50% for twelve months to at least 50% for six months; interest, Article IV of the 2013 Protocol, which replaced Article 11 entirely; the new withholding rules apply to amounts paid or credited on or after the first day of the third month after entry into force (Protocol Article XV(2)(a)), which with entry into force on August 30, 2019 is November 1, 2019; royalties, 2003 Convention Article 12, not amended by the 2013 Protocol.

What else changes the rate?

These are edge cases. If you hold ordinary shares, bonds or a copyright, skip to the next section.

Dividends: The 5% and 0% company tiers never apply to dividends from a US RIC or REIT, or from a Japanese company that deducts dividends paid (Article 10(4) and 10(5)). RIC dividends still get the 10% rate, or 0% for a qualifying pension fund. REIT dividends (and dividends from a Japanese dividend-deducting company that is mostly Japanese real property) get the 10% or pension-fund 0% rate only for an individual or pension fund holding not more than 10%, a holder of not more than 5% of a publicly traded class, or a holder of not more than 10% of a diversified entity; otherwise no treaty cap applies. For a dividend from a Japanese company, the Treasury Technical Explanation says the entitlement date is understood to be the end of the accounting period for which profits are distributed (2003 Exchange of Notes, paragraph 4). The rates are symmetrical. Under Article 4(5), if the recipient's country taxes the income only when remitted, the reduction applies only to the amount remitted. IRS Table 1 (Rev. May 2023) still describes the 0% company tier as needing more than 50% ownership, which is the pre-2019 text.

Interest: Interest paid on ownership interests in a securitization vehicle (such as a REMIC residual interest) may be taxed under domestic law with no treaty cap, to the extent it exceeds the return on comparable debt, Article 11(2)(b). Anti-conduit rule in Article 11(7). Before November 1, 2019 the 2003 text allowed 10% at source, with exemptions for governments, banks and similar financial institutions, pension funds and sales on credit; IRS Table 1 (Rev. May 2023) still shows that 10% rate under Article 11(2).

Royalties: Anti-conduit rule in Article 12(5).

Which country are you a resident of under the US-Japan treaty?

If the US and Japan both treat you as a resident under their own laws, Article 4(3) decides. It works through these tests in order, and stops at the first one that points to a single country:

Where you have a permanent home available to you
If you have a permanent home in both countries, where your personal and economic ties are closer (your centre of vital interests)
If that centre cannot be determined, or you have no permanent home in either country, where you have a habitual abode
If you have a habitual abode in both countries or in neither, the country you are a national of
If you are a national of both countries or of neither, the two tax authorities settle it by mutual agreement

Using the tie-breaker to be treated as a resident of Japan has US consequences: you file Form 1040-NR with Form 8833 attached, and a green card holder of 8 of the last 15 years who makes the claim is treated as having ended US residency. The details are on the hub page.

How does the US-Japan treaty tax pensions and Social Security?

Pensions (Article 17(1)). Private pensions and similar payments, periodic or lump-sum, are taxable only in the country where the owner lives, and annuities likewise (Article 17(2)); but the saving clause lets the United States still tax a US citizen living in Japan on them, and pensions for government service fall instead under Article 18(2), taxable only by the paying government unless the recipient is both a resident and a national of the other country.

Social Security (Article 17(1)). Social security benefits are taxable only in the country where the recipient lives, so US Social Security paid to a resident of Japan is taxable only in Japan; the saving clause overrides this for US citizens, whom the United States still taxes on their benefits wherever they live, and a Japanese pension paid for Japanese government service falls under Article 18(2) instead.

Does the treaty stop the US taxing its own citizens?

Generally no. The saving clause (Article 1(4)) keeps that right. Each country keeps the right to tax its own residents, and the United States its citizens, as if the treaty did not exist, and for ten years the United States may also tax a former citizen or long-term resident who gave up that status with tax avoidance as a principal purpose (Article 1(4)(b)).

The exceptions: Article 1(5), as amended by Article I of the 2013 Protocol, keeps the correlative adjustment and time-limit rules of Article 9(2) and 9(3), the support-payment rule of Article 17(3), and Articles 23 (double tax relief), 24 (non-discrimination), 25 (mutual agreement) and 28 (diplomats) working despite the saving clause; government service (Article 18) and student (Article 19) benefits also survive, except that benefits the United States grants under those two articles go only to people who are neither US citizens nor green card holders.

What does the treaty say about students?

Article 19. A student or business apprentice who is, or was just before the visit, a resident of the other country and is present mainly for education or training pays no host-country tax on payments from outside that country for maintenance, education or training, with the apprentice exemption limited to one year from the start of training.

What do people most often get wrong about this treaty?

Three things a reader gets wrong. First, IRS Table 1 (Rev. May 2023) is out of date for Japan: it still shows interest at 10% and says the 0% dividend tier needs more than 50% ownership, but the 2013 Protocol, in force August 30, 2019 and effective for withholding from November 1, 2019, made most interest exempt at source and lowered the 0% dividend test to at least 50% for six months. Second, the ordinary dividend rate is 10%, below the 15% that Table 1 shows for most US treaty partners, and there are four dividend rates (10%, 5%, 0% for 50%-owned subsidiaries that pass extra anti-treaty-shopping tests, 0% for pension funds). Third, Social Security is taxed only where the recipient lives under Article 17(1), but the saving clause means a US citizen living in Japan is still taxed by the United States on US Social Security and on private pensions. US citizens and green card holders also face a special residence rule in Article 4(2): they count as US residents for the treaty only if they are not Japanese residents, have a substantial presence, permanent home or habitual abode in the United States, and are not treated as resident of a third country under a Japanese treaty with it; the Article 4(3) tie-breaker covers only other individuals.

How do you claim the treaty rate?

Give the US payer Form W-8BEN naming Japan as your country of residence, before the payment. Many countries ask a US resident for Form 6166, a US residency certificate requested on Form 8802, before they apply the lower rate on their side. Both, with the fees and who can get them, are covered on US tax treaties by country.

Sources

Every rate and article on this page was read in the treaty text and its protocols, then checked a second time by a separate review of the same documents, on September 15, 2026.