Global Daily Tax News, Japan, Kyrgyzstan Conclude New Double Tax Pact, (Dec 31, 2025)

The new double tax agreement concluded between Japan and Kyrgyzstan provides for the reduction of withholding tax rates that may be charged on cross-border passive income.

The new agreement will replace the two countries' existing convention, which was concluded with the USSR and entered into force in 1986.

When the agreement becomes effective, the treaty will cap the maximum rate of tax that may be charged on dividends income at five percent, providing that the recipient has held at least 10 percent of the capital of the paying company in the case of a company of the Kyrgyz Republic, or at least 10 percent of the voting power of the paying company in the case of a Japanese company, for a period of at least six months. Otherwise, the maximum tax rate on dividends will be capped at 10 percent.

The maximum rate of tax on interest and royalties income will be capped at eight percent, down from 10 percent in the existing agreement.

The new agreement includes a preamble that states that the DTA is not intended to create opportunities for non-taxation or reduced taxation through tax evasion or avoidance, or treaty shopping. Further, the agreement includes provisions to counter treaty abuse, prevent the artificial avoidance of permanent establishment status, neutralize the effects of hybrid mismatch arrangements, and improve dispute resolution mechanisms.

The agreement, signed on December 19, 2025, must now be ratified by both countries before it can become effective for both parties.