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U.S., Japan Agree on Arbitration Process to Resolve Double Taxation Issues

By Jyme Mariani, Esq.

The IRS announced that the United States and Japan have entered into an arrangement to implement the arbitration process provided for in the countries’ Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income agreement [Announcement 2021-5; 2021-13 IRB 965].

Details on the Arrangement

The arbitration process will apply to cases, subject to certain listed exceptions, that Japan and the U.S. have determined are suitable for assistance under the mutual agreement procedure in accordance with published guidance. The published guidance for the U.S. is Revenue Procedure 2015-40 or its successor. The arrangement states both countries will follow its procedures in good faith and will ensure the presenter of the case and the arbitrators will follow the procedures in good faith.

The arrangement explains which cases are and are not eligible for arbitration and how to appoint arbitrators and determine their eligibility. Other details are also explained, including costs, the determination of the arbitration panel, and how to terminate the proceedings.

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Jyme MirianiJyme Mariani, Esq., is Managing Editor of Payroll Information Resources for the American Payroll Association (APA) and the Global Payroll Management Institute (GPMI).