Japan and Turkmenistan have signed a new Convention (Treaty) for the Elimination of Double Taxation With Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance. The treaty, originally signed on 16 December 2024, will enter into force on 27 November 2025, after an exchange of diplomatic notes in Ashgabat, the capital of Turkmenistan. It will replace the 1986 treaty between Japan and the former Soviet Union, which has until now governed their tax relations.
A Modern Treaty
The new treaty, which aligns with the OECD Model Tax Convention, reflects modern anti-abuse and transparency standards. It aims to prevent double taxation, strengthen economic cooperation, and ensure that cross-border income is taxed fairly between the two countries.
The key provisions include understanding if employees are covered, and what taxes are covered:
- Article 1 defines that the treaty applies to residents Japan or Turkmenistan. If it’s unclear where someone is a resident, Article 4 clarifies that with a standard tie-breaker rule: home, centre of vital interests, habitual abode, and nationality are essential for determining where an employee is taxable and which state’s rules apply.
- Article 2 clarifies that for Japan, income tax is covered, and for Turkmenistan, tax on the income of individuals is covered.
For the actual determination of which country has the right to assess if their local rules and regulations lead to actual taxation, and possibly mean setting up payroll records, Article 14 is relevant. It states that employment income is taxable where the work is physically performed, unless all of the following conditions are satisfied:
- The employee is present 183 days or less in any 12 months starting or ending in a fiscal year (meaning, it may overlap fiscal years).
- The remuneration is paid by an employer that is not a resident in the work country.
- The remuneration is not borne by a permanent establishment that the employer has in the work country.
Other articles in the treaty that are relevant cover director’s fees (Article 15), entertainers and sportspersons (Article 16), private pensions (Article 17), government services (Article 18), and students (Article 19).
A Global Trend
The Japan-Turkmenistan treaty follows a broader pattern in Japan’s recent international tax policy. Only months earlier, Japan concluded a totalisation agreement with Austria, designed to prevent double social security contributions for employees temporarily working across borders. Together, these moves signal that Japan is tightening coordination between income tax and social security frameworks, reducing overlap and uncertainty for employers managing international assignments.
This is not an isolated step. Around the world, governments are updating tax treaties, totalisation agreements, and telework rules in response to a rapidly expanding distributed workforce. As employees blend on-site, remote, and cross-border work, tax authorities are pushing for clearer rules and stronger data exchange to prevent double taxation and contribution gaps, and to protect their own source of revenues.
A Call to Action
For global payroll leaders, this is the moment to act. Audit your cross-border workforce, map treaty and totalisation coverage, and verify where your employees are truly taxable and socially insured. Staying ahead of these updates is not just compliance; it’s risk prevention and strategic leadership in the new world of work. It offers an opportunity for global payroll to support broader initiatives around the future of work.
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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.
