DTC agreement between Netherlands and Japan

8/3/2019 DTC agreement between Netherlands and Japan

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CONVENTION BETWEENJAPAN AND THE KINGDOM OF THE NETHERLANDS

FOR THE AVOIDANCE OF DOUBLE TAXATIONAND THE PREVENTION OF FISCAL EVASION WITH RESPECTTO TAXES ON INCOME

Japan and the Kingdom of the Netherlands,

Desiring to conclude a new Convention for theavoidance of double taxation and the prevention of fiscalevasion with respect to taxes on income,

Have agreed as follows:

Article 1PERSONS COVERED

This Convention shall apply to persons who areresidents of one or both of the Contracting States.

Article 2TAXES COVERED

1. This Convention shall apply to taxes on income imposedon behalf of a Contracting State or of its political

subdivisions or local authorities, irrespective of themanner in which they are levied.

2. There shall be regarded as taxes on income all taxesimposed on total income or on elements of income, includingtaxes on gains from the alienation of any property andtaxes on the total amounts of wages or salaries paid byenterprises.

3. The existing taxes to which this Convention shallapply are:

a) in the case of Japan:

(i) the income tax (Shotokuzei);(ii) the corporation tax (Hojinzei); and

(iii) the local inhabitant taxes (Juminzei)(hereinafter referred to as Japanese tax); and

b) in the case of the Netherlands:


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(i) the income tax (de inkomstenbelasting);(ii)

the wages tax (de loonbelasting);

(iii) the company tax (de vennootschapsbelasting),including the Government share in the netprofits of the exploitation of naturalresources levied pursuant to the Mining Act(Mijnbouwwet); and

(iv) the dividend tax (de dividendbelasting)(hereinafter referred to as Netherlands tax).

4. This Convention shall apply also to any identical or

substantially similar taxes that are imposed after the dateof signature of the Convention in addition to, or in placeof, the existing taxes. The competent authorities of theContracting States shall notify each other of anysignificant changes that have been made in their taxationlaws, within a reasonable period of time after suchchanges.

Article 3GENERAL DEFINITIONS

1. For the purposes of this Convention, unless the

context otherwise requires:

a) the term Japan, when used in a geographicalsense, means all the territory of Japan,including its territorial sea, in which the lawsrelating to Japanese tax are in force, and allthe area beyond its territorial sea, includingthe seabed and subsoil thereof, over which Japanhas sovereign rights in accordance withinternational law and in which the laws relatingto Japanese tax are in force;

b) the term the Netherlands means the part of theKingdom of the Netherlands that is situated inEurope, including its territorial sea and anyarea beyond the territorial sea within which theNetherlands, in accordance with internationallaw, exercises jurisdiction or sovereign rights;

c) the terms a Contracting State and the otherContracting State mean Japan or the Netherlands,as the context requires;


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d) the term tax means Japanese tax or Netherlandstax, as the context requires;

e) the term person includes an individual, acompany and any other body of persons;

f) the term company means any body corporate orany entity that is treated as a body corporatefor tax purposes;

g) the term enterprise applies to the carrying onof any business;

h) the terms enterprise of a Contracting State andenterprise of the other Contracting State mean

respectively an enterprise carried on by aresident of a Contracting State and an enterprisecarried on by a resident of the other ContractingState;

i) the term international traffic means anytransport by a ship or aircraft operated by anenterprise of a Contracting State, except whenthe ship or aircraft is operated solely betweenplaces in the other Contracting State;

j) the term competent authority means:

(i) in the case of Japan, the Minister ofFinance or his authorised representative;and

(ii) in the case of the Netherlands, the Ministerof Finance or his authorised representative;

k) the term national means:

(i) in the case of Japan, any individualpossessing the nationality of Japan, anyjuridical person created or organised underthe laws of Japan and any organisationwithout juridical personality treated forthe purposes of Japanese tax as a juridicalperson created or organised under the lawsof Japan; and

(ii) in the case of the Netherlands, anyindividual possessing the nationality of theNetherlands and any legal person,partnership or association deriving itsstatus as such from the laws in force in theNetherlands;


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l) the term business includes the performance ofprofessional services and of other activities of

an independent character; and

m) the term pension fund means any person that:

(i) is established and regulated as such underthe laws of a Contracting State;

(ii) is operated principally to administer orprovide old age, disability or survivorspensions, retirement benefits or othersimilar remuneration or to earn income forthe benefit of other pension funds; and

(iii) is exempt from tax in that Contracting Statewith respect to income derived from theactivities described in clause (ii).

2. As regards the application of this Convention at anytime by a Contracting State, any term not defined thereinshall, unless the context otherwise requires, have themeaning that it has at that time under the laws of thatContracting State for the purposes of the taxes to whichthe Convention applies, any meaning under the applicabletax laws of that Contracting State prevailing over ameaning given to the term under other laws of that

Contracting State.

Article 4RESIDENT

1. For the purposes of this Convention, the termresident of a Contracting State means any person who,under the laws of that Contracting State, is liable to taxtherein by reason of his domicile, residence, place of heador main office, place of management or any other criterionof a similar nature, and also includes:

a) that Contracting State and any politicalsubdivision or local authority thereof;

b) a pension fund established and regulated as suchunder the laws of that Contracting State; and

c) a person established and operated in thatContracting State principally for a religious,charitable, educational, scientific, artistic,cultural or public purpose, only if all or a partof its income is exempt from tax under the lawsof that Contracting State.


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This term, however, does not include any person who isliable to tax in that Contracting State in respect only of

income from sources in that Contracting State.

2. Where by reason of the provisions of paragraph 1 anindividual is a resident of both Contracting States, thenhis status shall be determined as follows:

a) he shall be deemed to be a resident only of theContracting State in which he has a permanenthome available to him; if he has a permanent homeavailable to him in both Contracting States, heshall be deemed to be a resident only of theContracting State with which his personal andeconomic relations are closer (centre of vital

interests);

b) if the Contracting State in which he has hiscentre of vital interests cannot be determined,or if he has not a permanent home available tohim in either Contracting State, he shall bedeemed to be a resident only of the ContractingState in which he has an habitual abode;

c) if he has an habitual abode in both ContractingStates or in neither of them, he shall be deemedto be a resident only of the Contracting State of

which he is a national;

d) if he is a national of both Contracting States orof neither of them, the competent authorities ofthe Contracting States shall settle the questionby mutual agreement.

3. Where by reason of the provisions of paragraph 1 aperson other than an individual is a resident of bothContracting States, then it shall be deemed to be aresident only of the Contracting State in which its placeof head or main office is situated.

4. Where, pursuant to any provisions of this Convention,a Contracting State reduces the rate of tax on, or exemptsfrom tax, an item of income of a resident of the otherContracting State and under the laws in force in that otherContracting State the resident is subject to tax by thatother Contracting State only on that part of such item ofincome which is remitted to or received in that otherContracting State, then the reduction or exemption shallapply only to so much of such item of income as is remittedto or received in that other Contracting State.


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5. For the purposes of applying this Convention:

a) an item of income:

(i) derived from a Contracting State through anentity that is organised in the otherContracting State; and

(ii) treated as the income of the beneficiaries,members or participants of that entity underthe tax laws of that other ContractingState;

shall be eligible for the benefits of theConvention that would be granted if it were

directly derived by a beneficiary, member orparticipant of that entity who is a resident ofthat other Contracting State, to the extent thatsuch beneficiaries, members or participants areresidents of that other Contracting State andsatisfy any other conditions specified in theConvention, without regard to whether the incomeis treated as the income of such beneficiaries,members or participants under the tax laws of thefirst-mentioned Contracting State;

b) an item of income:

(i) derived from a Contracting State through anentity that is organised in the otherContracting State; and

(ii) treated as the income of that entity underthe tax laws of that other ContractingState;

shall be eligible for the benefits of theConvention that would be granted to a resident ofthat other Contracting State, without regard towhether the income is treated as the income ofthe entity under the tax laws of the first-mentioned Contracting State, if such entity is aresident of that other Contracting State andsatisfies any other conditions specified in theConvention;

c) an item of income:

(i) derived from a Contracting State through anentity that is organised in a state otherthan the Contracting States; and


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(ii) treated as the income of the beneficiaries,members or participants of that entity under

the tax laws of the other Contracting Stateand under the tax laws of the state wherethe entity is organised;

shall be eligible for the benefits of theConvention that would be granted if it weredirectly derived by a beneficiary, member orparticipant of that entity who is a resident ofthat other Contracting State, to the extent thatsuch beneficiaries, members or participants areresidents of that other Contracting State andsatisfy any other conditions specified in theConvention, without regard to whether the income

is treated as the income of such beneficiaries,members or participants under the tax laws of thefirst-mentioned Contracting State, provided thatthe state where the entity is organised hasconcluded with the first-mentioned ContractingState a convention which contains provisions foreffective exchange of information on tax matters;

d) an item of income:

(i) derived from a Contracting State through anentity that is organised in a state other

than the Contracting States; and

(ii) treated as the income of that entity underthe tax laws of the other Contracting State;

shall not be eligible for the benefits of theConvention; and

e) an item of income:

(i) derived from a Contracting State through anentity that is organised in that ContractingState; and

(ii) treated as the income of that entity underthe tax laws of the other Contracting State;

shall not be eligible for the benefits of theConvention.


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Article 5PERMANENT ESTABLISHMENT

1. For the purposes of this Convention, the termpermanent establishment means a fixed place of businessthrough which the business of an enterprise is wholly orpartly carried on.

2. The term permanent establishment includesespecially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop; and

f) a mine, an oil or gas well, a quarry or any otherplace of extraction of natural resources.

3. A building site or construction or installationproject constitutes a permanent establishment only if itlasts more than twelve months.

4. Notwithstanding the preceding provisions of thisArticle, the term permanent establishment shall be deemednot to include:

a) the use of facilities solely for the purpose ofstorage, display or delivery of goods ormerchandise belonging to the enterprise;

b) the maintenance of a stock of goods ormerchandise belonging to the enterprise solelyfor the purpose of storage, display or delivery;

c) the maintenance of a stock of goods ormerchandise belonging to the enterprise solelyfor the purpose of processing by anotherenterprise;

d) the maintenance of a fixed place of businesssolely for the purpose of purchasing goods ormerchandise or of collecting information, for theenterprise;


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e) the maintenance of a fixed place of businesssolely for the purpose of carrying on, for the

enterprise, any other activity of a preparatoryor auxiliary character;

f) the maintenance of a fixed place of businesssolely for any combination of activitiesmentioned in subparagraphs a) to e), providedthat the overall activity of the fixed place ofbusiness resulting from this combination is of apreparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2,where a person - other than an agent of an independentstatus to whom the provisions of paragraph 6 apply - is

acting on behalf of an enterprise and has, and habituallyexercises, in a Contracting State an authority to concludecontracts in the name of the enterprise, that enterpriseshall be deemed to have a permanent establishment in thatContracting State in respect of any activities which thatperson undertakes for the enterprise, unless the activitiesof such person are limited to those mentioned in paragraph4 which, if exercised through a fixed place of business,would not make this fixed place of business a permanentestablishment under the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent

establishment in a Contracting State merely because itcarries on business in that Contracting State through abroker, general commission agent or any other agent of anindependent status, provided that such persons are actingin the ordinary course of their business.

7. The fact that a company which is a resident of aContracting State controls or is controlled by a companywhich is a resident of the other Contracting State, orwhich carries on business in that other Contracting State(whether through a permanent establishment or otherwise),shall not of itself constitute either company a permanentestablishment of the other.

Article 6INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting Statefrom immovable property (including income from agricultureor forestry) situated in the other Contracting State may betaxed in that other Contracting State.


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2. The term immovable property shall have the meaningwhich it has under the laws of the Contracting State in

which the property in question is situated. The term shallin any case include property accessory to immovableproperty, livestock and equipment used in agriculture andforestry, rights to which the provisions of general lawrespecting landed property apply, usufruct of immovableproperty and rights to variable or fixed payments asconsideration for the working of, or the right to work,mineral deposits, sources and other natural resources;ships and aircraft shall not be regarded as immovableproperty.

3. The provisions of paragraph 1 shall apply to incomederived from the direct use, letting, or use in any other

form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also applyto the income from immovable property of an enterprise.

Article 7BUSINESS PROFITS

1. The profits of an enterprise of a Contracting Stateshall be taxable only in that Contracting State unless theenterprise carries on business in the other ContractingState through a permanent establishment situated therein.

If the enterprise carries on business as aforesaid, theprofits of the enterprise may be taxed in that otherContracting State but only so much of them as isattributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where anenterprise of a Contracting State carries on business inthe other Contracting State through a permanentestablishment situated therein, there shall in eachContracting State be attributed to that permanentestablishment the profits which it might be expected tomake if it were a distinct and separate enterprise engagedin the same or similar activities under the same or similarconditions and dealing wholly independently with theenterprise of which it is a permanent establishment.

3. In determining the profits of a permanentestablishment, there shall be allowed as deductionsexpenses which are incurred for the purposes of thepermanent establishment, including executive and generaladministrative expenses so incurred, whether in theContracting State in which the permanent establishment issituated or elsewhere.


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4. Insofar as it has been customary in a ContractingState to determine the profits to be attributed to a

permanent establishment on the basis of an apportionment ofthe total profits of the enterprise to its various parts,nothing in paragraph 2 shall preclude that ContractingState from determining the profits to be taxed by such anapportionment as may be customary; the method ofapportionment adopted shall, however, be such that theresult shall be in accordance with the principles containedin this Article.

5. No profits shall be attributed to a permanentestablishment by reason of the mere purchase by thatpermanent establishment of goods or merchandise for theenterprise.

6. For the purposes of the preceding paragraphs of thisArticle, the profits to be attributed to the permanentestablishment shall be determined by the same method yearby year unless there is good and sufficient reason to thecontrary.

7. Where profits include items of income which are dealtwith separately in other Articles of this Convention, thenthe provisions of those Articles shall not be affected bythe provisions of this Article.

Article 8SHIPPING AND AIR TRANSPORT

1. Profits from the operation of ships or aircraft ininternational traffic carried on by an enterprise of aContracting State shall be taxable only in that ContractingState.

2. Notwithstanding the provisions of Article 2, where anenterprise of a Contracting State carries on the operationof ships or aircraft in international traffic, thatenterprise, if an enterprise of the Netherlands, shall beexempt from the enterprise tax of Japan, and, if anenterprise of Japan, shall be exempt from any tax similarto the enterprise tax of Japan which may hereafter beimposed in the Netherlands.

3. The provisions of the preceding paragraphs of thisArticle shall also apply to profits from the participationin a pool, a joint business or an international operatingagency.


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Article 9ASSOCIATED ENTERPRISES

1. Where

a) an enterprise of a Contracting State participatesdirectly or indirectly in the management, controlor capital of an enterprise of the otherContracting State, or

b) the same persons participate directly orindirectly in the management, control or capitalof an enterprise of a Contracting State and anenterprise of the other Contracting State,

and in either case conditions are made or imposed betweenthe two enterprises in their commercial or financialrelations which differ from those which would be madebetween independent enterprises, then any profits whichwould, but for those conditions, have accrued to one of theenterprises, but, by reason of those conditions, have notso accrued, may be included in the profits of thatenterprise and taxed accordingly.

2. Where a Contracting State includes, in accordance withthe provisions of paragraph 1, in the profits of anenterprise of that Contracting State - and taxes

accordingly - profits on which an enterprise of the otherContracting State has been charged to tax in that otherContracting State and where the competent authorities ofthe Contracting States agree that all or part of theprofits so included are profits which would have accrued tothe enterprise of the first-mentioned Contracting State ifthe conditions made between the two enterprises had beenthose which would have been made between independententerprises, then that other Contracting State shall makean appropriate adjustment to the amount of the tax chargedtherein on those agreed profits. In determining suchadjustment, due regard shall be had to the other provisionsof this Convention and the competent authorities of theContracting States shall if necessary consult each other.

3. Notwithstanding the provisions of paragraph 1, aContracting State shall not change the profits of anenterprise of that Contracting State in the circumstancesreferred to in that paragraph after seven years from theend of the taxable year in which the profits that would besubject to such change would, but for the conditionsreferred to in that paragraph, have accrued to thatenterprise. The provisions of this paragraph shall notapply in the case of fraud or wilful default.


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Article 10DIVIDENDS

1. Dividends paid by a company which is a resident of aContracting State to a resident of the other ContractingState may be taxed in that other Contracting State.

2. However, such dividends may also be taxed in theContracting State of which the company paying the dividendsis a resident and according to the laws of that ContractingState, but if the beneficial owner of the dividends is aresident of the other Contracting State, the tax so chargedshall not exceed:

a) 5 per cent of the gross amount of the dividends

if the beneficial owner is a company that hasowned, directly or indirectly, sharesrepresenting at least 10 per cent of the votingpower of the company paying the dividends for theperiod of six months ending on the date on whichentitlement to the dividends is determined; or

b) 10 per cent of the gross amount of the dividendsin all other cases.

3. Notwithstanding the provisions of paragraph 2, suchdividends shall not be taxed in the Contracting State of

which the company paying the dividends is a resident if thebeneficial owner of the dividends is a resident of theother Contracting State and is either:

a) a company that has owned, directly or indirectly,shares representing at least 50 per cent of thevoting power of the company paying the dividendsfor the period of six months ending on the dateon which entitlement to the dividends isdetermined; or

b) a pension fund, provided that such dividends arenot derived from the carrying on of a business,directly or indirectly, by such pension fund.

4. The provisions of paragraphs 2 and 3 shall not affectthe taxation of the company in respect of the profits outof which the dividends are paid.

5. The provisions of subparagraph a) of paragraph 2 andsubparagraph a) of paragraph 3 shall not apply in the caseof dividends paid by a company which is entitled to adeduction for dividends paid to its beneficiaries incomputing its taxable income in Japan.


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6. The term dividends as used in this Article meansincome from shares, jouissance shares or jouissance

rights, mining shares, founders shares or other rights,not being debt-claims, participating in profits, as well asincome which is subjected to the same taxation treatment asincome from shares by the tax laws of the Contracting Stateof which the company making the distribution is a resident.

7. The provisions of paragraphs 1, 2, 3 and 10 shall notapply if the beneficial owner of the dividends, being aresident of a Contracting State, carries on business in theother Contracting State of which the company paying thedividends is a resident through a permanent establishmentsituated therein and the holding in respect of which thedividends are paid is effectively connected with such

permanent establishment. In such case the provisions ofArticle 7 shall apply.

8. Where a company which is a resident of a ContractingState derives profits or income from the other ContractingState, that other Contracting State may not impose any taxon the dividends paid by the company, except insofar assuch dividends are paid to a resident of that otherContracting State or insofar as the holding in respect ofwhich the dividends are paid is effectively connected witha permanent establishment situated in that otherContracting State, nor subject the companys undistributed

profits to a tax on the companys undistributed profits,even if the dividends paid or the undistributed profitsconsist wholly or partly of profits or income arising insuch other Contracting State.

9. A resident of a Contracting State shall not beconsidered the beneficial owner of dividends paid by aresident of the other Contracting State in respect ofpreferred shares or other similar interests if suchpreferred shares or other similar interests would not havebeen established or acquired unless a person:

a) that is not entitled to benefits with respect todividends paid by a resident of that otherContracting State which are equivalent to, ormore favourable than, those available under thisConvention to a resident of the first-mentionedContracting State; and

b) that is not a resident of either ContractingState;

owned equivalent preferred shares or other similarinterests in the first-mentioned resident.


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10. Notwithstanding the provisions of paragraphs 1, 2 and8, dividends paid by a company whose capital is divided

into shares and which, under the laws of a ContractingState, is a resident of that Contracting State, to anindividual who is a resident of the other Contracting Statemay be taxed in the first-mentioned Contracting State inaccordance with the laws of the first-mentioned ContractingState, if that individual - either alone or with his or herspouse or one of their relatives by blood or marriage inthe direct line - directly or indirectly, owns at least 5per cent of a particular class of shares in that company.This provision shall apply only if the individual to whomthe dividends are paid was a resident of the first-mentioned Contracting State at any time or the entire timeduring the last ten years preceding the year in which the

dividends are paid and provided that, at the time he or shebecame a resident of the other Contracting State, theabove-mentioned conditions regarding share ownership in thesaid company were satisfied and only insofar as part of theassessment that has been issued in connection with theabove-mentioned share ownership and with his or heremigration is still outstanding under the laws of thefirst-mentioned Contracting State.

Article 11INTEREST

1. Interest arising in a Contracting State and paid to aresident of the other Contracting State may be taxed inthat other Contracting State.

2. However, such interest may also be taxed in theContracting State in which it arises and according to thelaws of that Contracting State, but if the beneficial ownerof the interest is a resident of the other ContractingState, the tax so charged shall not exceed 10 per cent ofthe gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2,interest arising in a Contracting State shall be taxableonly in the other Contracting State if:

a) the interest is beneficially owned by theGovernment of that other Contracting State, apolitical subdivision or local authority thereof,or the central bank of that other ContractingState or any institution owned by thatGovernment;


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b) the interest is beneficially owned by a residentof that other Contracting State with respect to

debt-claims guaranteed, insured or indirectlyfinanced by the Government of that otherContracting State, a political subdivision orlocal authority thereof, or the central bank ofthat other Contracting State or any institutionowned by that Government;

c) the interest is beneficially owned by a residentof that other Contracting State that is either:

(i) a bank;

(ii) an insurance company;

(iii) a securities company; or

(iv) any other enterprise, provided that in thethree taxable years preceding the taxableyear in which the interest is paid, theenterprise derives more than 50 per cent ofits liabilities from the issuance of bondsin the financial markets or from takingdeposits at interest, and more than 50 percent of the assets of the enterprise consistof debt-claims against persons that do not

have with the enterprise a relationshipdescribed in subparagraph a) or b) ofparagraph 1 of Article 9;

d) the interest is beneficially owned by a pensionfund that is a resident of that other ContractingState, provided that such interest is not derivedfrom the carrying on of a business, directly orindirectly, by such pension fund; or

e) the interest is beneficially owned by a residentof that other Contracting State and paid withrespect to indebtedness arising as a consequenceof the sale on credit by a resident of that otherContracting State of any equipment, merchandiseor service.


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4. The term interest as used in this Article meansincome from debt-claims of every kind, whether or not

secured by mortgage and whether or not carrying a right toparticipate in the debtors profits, and in particular,income from government securities and income from bonds ordebentures, including premiums and prizes attaching to suchsecurities, bonds or debentures, and all other income thatis subjected to the same taxation treatment as income frommoney lent by the tax laws of the Contracting State inwhich the income arises. Income dealt with in Article 10shall not be regarded as interest for the purposes of thisConvention.

5. The provisions of paragraphs 1, 2 and 3 shall notapply if the beneficial owner of the interest, being a

resident of a Contracting State, carries on business in theother Contracting State in which the interest arisesthrough a permanent establishment situated therein and thedebt-claim in respect of which the interest is paid iseffectively connected with such permanent establishment.In such case the provisions of Article 7 shall apply.

6. Interest shall be deemed to arise in a ContractingState when the payer is a resident of that ContractingState. Where, however, the person paying the interest,whether such person is a resident of a Contracting State ornot, has in a Contracting State or a state other than the

Contracting States, a permanent establishment in connectionwith which the indebtedness on which the interest is paidwere incurred, and such interest is borne by such permanentestablishment, then:

a) if the permanent establishment is situated in aContracting State, such interest shall be deemedto arise in that Contracting State; and

b) if the permanent establishment is situated in astate other than the Contracting States, suchinterest shall not be deemed to arise in eitherContracting State.

7. Where, by reason of a special relationship between thepayer and the beneficial owner or between both of them andsome other person, the amount of the interest, havingregard to the debt-claim for which it is paid, exceeds theamount which would have been agreed upon by the payer andthe beneficial owner in the absence of such relationship,the provisions of this Article shall apply only to thelast-mentioned amount. In such case, the excess part ofthe payments shall remain taxable according to the laws ofeach Contracting State, due regard being had to the otherprovisions of this Convention.


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8. A resident of a Contracting State shall not beconsidered the beneficial owner of interest arising in the

other Contracting State in respect of a debt-claim if suchdebt-claim would not have been established unless a person:

a) that is not entitled to benefits with respect tointerest arising in the other Contracting Statewhich are equivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned ContractingState; and

b) that is not a resident of either ContractingState;

owned an equivalent debt-claim against the first-mentionedresident.

Article 12ROYALTIES

1. Royalties arising in a Contracting State andbeneficially owned by a resident of the other ContractingState shall be taxable only in that other ContractingState.

2. The term royalties as used in this Article means

payments of any kind received as a consideration for theuse of, or the right to use, any copyright of literary,artistic or scientific work including cinematograph filmsand films or tapes for radio or television broadcasting,any patent, trade mark, design or model, plan, or secretformula or process, or for information concerningindustrial, commercial or scientific experience.

3. The provisions of paragraph 1 shall not apply if thebeneficial owner of the royalties, being a resident of aContracting State, carries on business in the otherContracting State in which the royalties arise through apermanent establishment situated therein and the right orproperty in respect of which the royalties are paid iseffectively connected with such permanent establishment.In such case the provisions of Article 7 shall apply.


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4. Where, by reason of a special relationship between thepayer and the beneficial owner or between both of them and

some other person, the amount of the royalties, havingregard to the use, right or information for which they arepaid, exceeds the amount which would have been agreed uponby the payer and the beneficial owner in the absence ofsuch relationship, the provisions of this Article shallapply only to the last-mentioned amount. In such case, theexcess part of the payments shall remain taxable accordingto the laws of each Contracting State, due regard being hadto the other provisions of this Convention.

5. A resident of a Contracting State shall not beconsidered the beneficial owner of royalties arising in theother Contracting State in respect of the use of the right

or property if such royalties would not have been paid tothe resident unless the resident paid royalties in respectof the use of the same right or property to a person:

a) that is not entitled to benefits with respect toroyalties arising in the other Contracting Statewhich are equivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned ContractingState; and

b) that is not a resident of either Contracting

State.

Article 13CAPITAL GAINS

1. Gains derived by a resident of a Contracting Statefrom the alienation of immovable property referred to inArticle 6 and situated in the other Contracting State maybe taxed in that other Contracting State.

2. Gains derived by a resident of a Contracting Statefrom the alienation of shares in a company or of interestsin a partnership or trust may be taxed in the otherContracting State where the shares or the interests deriveat least 50 per cent of their value directly or indirectlyfrom immovable property referred to in Article 6 andsituated in that other Contracting State, unless therelevant class of the shares or the interest is traded on arecognised stock exchange specified in subparagraph c) ofparagraph 8 of Article 21 and the resident and personsrelated or connected to that resident own in the aggregate5 per cent or less of that class of the shares or theinterests.


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3. a) Where

(i) a Contracting State (including, for thispurpose in the case of Japan, the DepositInsurance Corporation of Japan) provides,pursuant to the laws of that ContractingState concerning failure resolutioninvolving imminent insolvency of financialinstitutions, substantial financialassistance to a financial institution thatis a resident of that Contracting State, and

(ii) a resident of the other Contracting Stateacquires shares in the financial institutionfrom the first-mentioned Contracting State,

the first-mentioned Contracting State may taxgains derived by the resident of the otherContracting State from the alienation of suchshares, provided that the alienation is madewithin five years from the first date on whichsuch financial assistance was provided.

b) The provisions of subparagraph a) shall not applyif the resident of that other Contracting Stateacquired any shares in the financial institutionfrom the first-mentioned Contracting State before

the entry into force of this Convention orpursuant to a binding contract entered intobefore the entry into force of the Convention.

4. Gains from the alienation of any property, other thanimmovable property, forming part of the business propertyof a permanent establishment which an enterprise of aContracting State has in the other Contracting State,including such gains from the alienation of such apermanent establishment (alone or with the wholeenterprise), may be taxed in that other Contracting State.

5. Gains derived by a resident of a Contracting Statefrom the alienation of ships or aircraft operated by thatresident in international traffic or any property, otherthan immovable property, pertaining to the operation ofsuch ships or aircraft shall be taxable only in thatContracting State.

6. Gains from the alienation of any property other thanthat referred to in the preceding paragraphs of thisArticle shall be taxable only in the Contracting State ofwhich the alienator is a resident.


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7. Notwithstanding the provisions of paragraph 6, gainsderived from the alienation of shares in or jouissance

rights or debt-claims on a company whose capital is dividedinto shares and which, under the laws of a ContractingState, is a resident of that Contracting State or from thealienation of part of the rights attached to the saidshares, jouissance rights or debt-claims by an individualwho is a resident of the other Contracting State may betaxed in the first-mentioned Contracting State inaccordance with the laws of the first-mentioned ContractingState and with their interpretation, including theinterpretation of the term alienation, if that individual- either alone or with his or her spouse or one of theirrelatives by blood or marriage in the direct line -directly or indirectly, owns at least 5 per cent of a

particular class of shares in that company. This provisionshall apply only if the individual who derives the gainswas a resident of the first-mentioned Contracting State atany time or the entire time during the last ten yearspreceding the year in which the gains are derived andprovided that, at the time he or she became a resident ofthe other Contracting State, the above-mentioned conditionsregarding share ownership in the said company weresatisfied and only insofar as part of the assessment thathas been issued in connection with the above-mentionedshare ownership and with his or her emigration is stilloutstanding under the laws of the first-mentioned

Contracting State.

Article 14INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15, 17 and 18,salaries, wages and other similar remuneration derived by aresident of a Contracting State in respect of an employmentshall be taxable only in that Contracting State unless theemployment is exercised in the other Contracting State. Ifthe employment is so exercised, such remuneration as isderived therefrom may be taxed in that other ContractingState.

2. Notwithstanding the provisions of paragraph 1,remuneration derived by a resident of a Contracting Statein respect of an employment exercised in the otherContracting State shall be taxable only in the first-mentioned Contracting State if:

a) the recipient is present in the other ContractingState for a period or periods not exceeding inthe aggregate 183 days in any twelve month periodcommencing or ending in the taxable yearconcerned,


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b) the remuneration is paid by, or on behalf of, anemployer who is not a resident of that other

Contracting State, and

c) the remuneration is not borne by a permanentestablishment which the employer has in thatother Contracting State.

3. Notwithstanding the provisions of the precedingparagraphs of this Article, remuneration derived in respectof an employment exercised aboard a ship or aircraftoperated in international traffic by an enterprise of aContracting State may be taxed in that Contracting State.

Article 15

DIRECTORS FEES

Directors fees and other payments derived by aresident of a Contracting State in his capacity as a memberof the board of directors of a company which is a residentof the other Contracting State may be taxed in that otherContracting State.

Article 16ENTERTAINERS AND SPORTSPERSONS

1. Notwithstanding the provisions of Articles 7 and 14,

income derived by an individual who is a resident of aContracting State as an entertainer, such as a theatre,motion picture, radio or television artiste, or a musician,or as a sportsperson, from his personal activities as suchexercised in the other Contracting State, may be taxed inthat other Contracting State.

2. Where income in respect of personal activitiesexercised in a Contracting State by an individual in hiscapacity as an entertainer or a sportsperson accrues not tothe individual himself but to another person who is aresident of the other Contracting State, that income may,notwithstanding the provisions of Articles 7 and 14, betaxed in the Contracting State in which the activities ofthe individual are exercised.


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Article 17PENSIONS AND ANNUITIES

1. Subject to the provisions of paragraph 2 of Article18, pensions and other similar remuneration, includingsocial security payments, beneficially owned by a residentof a Contracting State shall be taxable only in thatContracting State. However, such pensions and othersimilar remuneration, including social security payments,may also be taxed in the other Contracting State if theyarise in that other Contracting State and they are notadequately subject to tax in the first-mentionedContracting State.

2. Annuities derived and beneficially owned by an

individual who is a resident of a Contracting State shallbe taxable only in that Contracting State. However, suchannuities may also be taxed in the other Contracting Stateif they arise in that other Contracting State and they arenot adequately subject to tax in the first-mentionedContracting State. The term annuities as used in thisArticle means a stated sum paid periodically at statedtimes during the life of the individual, or during aspecified or ascertainable period of time, under anobligation to make the payments in return for adequate andfull consideration in money or moneys worth.

3. Lump sums in lieu of the right to receive a pension orother similar remuneration, or to receive an annuity, paidto an individual who is a resident of a Contracting Stateshall be taxable only in that Contracting State. However,such lump sums may also be taxed in the other ContractingState if they arise in that other Contracting State.

Article 18GOVERNMENT SERVICE

1. a) Salaries, wages and other similar remunerationpaid by a Contracting State or a politicalsubdivision or local authority thereof to anindividual in respect of services rendered tothat Contracting State or political subdivisionor local authority, in the discharge of functionsof a governmental nature, shall be taxable onlyin that Contracting State.

b) However, such salaries, wages and other similarremuneration shall be taxable only in the otherContracting State if the services are rendered inthat other Contracting State and the individualis a resident of that other Contracting Statewho:


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(i) is a national of that other ContractingState; or

(ii) did not become a resident of that otherContracting State solely for the purpose ofrendering the services.

2. a) Notwithstanding the provisions of paragraph 1,pensions and other similar remuneration paid by,or out of funds to which contributions are madeor created by, a Contracting State or a politicalsubdivision or local authority thereof to anindividual in respect of services rendered tothat Contracting State or political subdivisionor local authority shall be taxable only in that

Contracting State.

b) However, such pensions and other similarremuneration shall be taxable only in the otherContracting State if the individual is a residentof, and a national of, that other ContractingState.

3. The provisions of Articles 14, 15, 16 and 17 shallapply to salaries, wages, pensions, and other similarremuneration in respect of services rendered in connectionwith a business carried on by a Contracting State or a

political subdivision or local authority thereof.

Article 19STUDENTS

Payments which a student or business apprentice who isor was immediately before visiting a Contracting State aresident of the other Contracting State and who is presentin the first-mentioned Contracting State solely for thepurpose of his education or training receives for thepurpose of his maintenance, education or training shall notbe taxed in the first-mentioned Contracting State, providedthat such payments are made to him from outside that first-mentioned Contracting State. The exemption provided bythis Article shall apply to a business apprentice only fora period not exceeding one year from the date he firstbegins his training in the first-mentioned ContractingState.


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Article 20OTHER INCOME

1. Items of income beneficially owned by a resident of aContracting State, wherever arising, not dealt with in theforegoing Articles of this Convention (hereinafter referredto as other income in this Article) shall be taxable onlyin that Contracting State.

2. The provisions of paragraph 1 shall not apply to otherincome, other than income from immovable property asdefined in paragraph 2 of Article 6, if the beneficialowner of such other income, being a resident of aContracting State, carries on business in the otherContracting State through a permanent establishment

situated therein and the right or property in respect ofwhich the other income is paid is effectively connectedwith such permanent establishment. In such case theprovisions of Article 7 shall apply.

3. Where, by reason of a special relationship between theresident referred to in paragraph 1 and the payer orbetween both of them and some other person, the amount ofother income exceeds the amount which would have beenagreed upon between them in the absence of suchrelationship, the provisions of this Article shall applyonly to the last-mentioned amount. In such case, the

excess part of the other income shall remain taxableaccording to the laws of each Contracting State, due regardbeing had to the other provisions of this Convention.

4. A resident of a Contracting State shall not beconsidered the beneficial owner of other income arising inthe other Contracting State in respect of the right orproperty if such other income would not have been paid tothe resident unless the resident paid other income inrespect of the same right or property to a person:

a) that is not entitled to benefits with respect toother income arising in the other ContractingState which are equivalent to, or more favourablethan, those available under this Convention to aresident of the first-mentioned ContractingState; and

b) that is not a resident of either ContractingState.


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Article 21LIMITATION ON BENEFITS

1. Except as otherwise provided in this Article, aresident of a Contracting State that derives income fromthe other Contracting State described in paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article 12, 13 or20 shall be entitled to the benefits granted for a taxableyear by the provisions of those paragraphs or Articles onlyif such resident is a qualified person as defined inparagraph 2 and satisfies any other specified conditions inthose paragraphs or Articles for the obtaining of suchbenefits.

2. A resident of a Contracting State is a qualified

person for a taxable year only if such resident is either:

a) an individual;

b) the Government of a Contracting State, anypolitical subdivision or local authority thereof,the Bank of Japan, the Central Bank of theNetherlands or a person that is owned, directlyor indirectly, by the Government of a ContractingState or a political subdivision or localauthority thereof;

c) a company, if the principal class of its sharesis listed or registered on a recognised stockexchange and is regularly traded on one or morerecognised stock exchanges, provided that, if theshares are listed or registered on a recognisedstock exchange specified in clause (iii) or (iv)of subparagraph c) of paragraph 8, the primaryplace of management and control of the company isin the Contracting State of which it is aresident;

d) a person that is either:

(i) a person as described in subparagraph b) orc) of paragraph 1 of Article 4, providedthat in the case of a person described insubparagraph b) of that paragraph:

(aa) as of the end of the prior taxable yearmore than 50 per cent of the personsbeneficiaries, members or participantsare individuals who are residents ofeither Contracting State; or


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(bb) more than 75 per cent of thecontributions made to the person is

derived from residents of eitherContracting State which are qualifiedpersons; or

(ii) a bank, an insurance company or a securitiescompany that is established and regulated assuch under the laws of the Contracting Stateof which it is a resident; or

e) a person other than an individual, if residentsof either Contracting State that are qualifiedpersons by reason of subparagraph a), b), c) ord) of this paragraph own, directly or indirectly,

shares or other beneficial interests representingat least 50 per cent of the voting power of theperson.

3. Notwithstanding that a company that is a resident of aContracting State may not be a qualified person, thatcompany shall be entitled to the benefits granted by theprovisions of paragraph 3 of Article 10, paragraph 3 ofArticle 11 or Article 12, 13 or 20 with respect to an itemof income described in those paragraphs or Articles derivedfrom the other Contracting State if that company satisfiesany other specified conditions in those paragraphs or

Articles for the obtaining of such benefits and sharesrepresenting at least 75 per cent of the voting power ofthat company are owned, directly or indirectly, by seven orfewer persons who are equivalent beneficiaries.

4. Where the provisions of subparagraph e) of paragraph 2or paragraph 3 apply:

a) in respect of taxation by withholding at source,a resident of a Contracting State shall beconsidered to satisfy the conditions described inthat subparagraph or paragraph for the taxableyear in which the payment of an item of income ismade if such resident satisfies those conditionsduring the twelve month period preceding the dateof the payment or, in the case of dividends, thedate on which entitlement to the dividends isdetermined; and


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b) for all other cases, a resident of a ContractingState shall be considered to satisfy the

conditions described in that subparagraph orparagraph for the taxable year in which the itemof income is derived if such resident satisfiesthose conditions on at least half the days of thetaxable year.

5. a) Notwithstanding that a resident of a ContractingState may not be a qualified person, thatresident shall be entitled to the benefitsgranted by the provisions of paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article12, 13 or 20 with respect to an item of incomedescribed in those paragraphs or Articles derived

from the other Contracting State if:

(i) that resident is carrying on business in thefirst-mentioned Contracting State (otherthan the business of making or managinginvestments for the residents own account,unless the business is banking, insurance orsecurities business carried on by a bank,insurance company or securities company);

(ii) the item of income derived from that otherContracting State is derived in connection

with, or is incidental to, that business;and

(iii) that resident satisfies any other specifiedconditions in those paragraphs or Articlesfor the obtaining of such benefits.

b) If a resident of a Contracting State derives anitem of income from a business carried on by thatresident in the other Contracting State orderives an item of income arising in the otherContracting State from any of its associatedenterprises carrying on business in that otherContracting State, the conditions described insubparagraph a) shall be considered to besatisfied with respect to such item of incomeonly if the business carried on in the first-mentioned Contracting State is substantial inrelation to the business carried on in the otherContracting State. Whether such business issubstantial for the purposes of this paragraphshall be determined based on all the facts andcircumstances.


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c) In determining whether a person is carrying onbusiness in a Contracting State under

subparagraph a), the business conducted by apartnership in which that person is a partner andthe business conducted by persons connected tosuch person shall be deemed to be conducted bysuch person. A person shall be connected toanother if one owns, directly or indirectly, atleast 50 per cent of the beneficial interest inthe other (or, in the case of a company, sharesrepresenting at least 50 per cent of the votingpower of the company) or a third person owns,directly or indirectly, at least 50 per cent ofthe beneficial interest (or, in the case of acompany, shares representing at least 50 per cent

of the voting power of the company) in eachperson. In any case, a person shall beconsidered to be connected to another if, on thebasis of all the facts and circumstances, one hascontrol of the other or both are under thecontrol of the same person or persons.

6. a) Notwithstanding that a resident of a ContractingState may not be a qualified person, thatresident shall be entitled to the benefitsgranted by the provisions of paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article

12, 13 or 20 with respect to an item of incomedescribed in those paragraphs or Articles derivedfrom the other Contracting State if:

(i) that resident functions as a headquarterscompany for a multinational corporate group;

(ii) the item of income derived from that otherContracting State either is derived inconnection with, or is incidental to, thebusiness referred to in clause (ii) ofsubparagraph b); and

(iii) that resident satisfies any other specifiedconditions in those paragraphs or Articlesfor the obtaining of such benefits.

b) A resident of a Contracting State shall beconsidered a headquarters company for amultinational corporate group for the purpose ofsubparagraph a) only if:


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(i) that resident provides a substantial portionof the overall supervision and

administration of the group or providesfinancing for the group;

(ii) the group consists of companies which areresident in, and are carrying on businessin, at least five countries, and thebusiness carried on in each of the fivecountries generates at least 5 per cent ofthe gross income of the group;

(iii) the business carried on in any one countryother than that Contracting State generateless than 50 per cent of the gross income of

the group;

(iv) no more than 50 per cent of its gross incomeis derived from the other Contracting State;

(v) that resident has, and exercises,independent discretionary authority to carryout the functions referred to in clause (i);and

(vi) that resident is subject to the same incometaxation rules in that Contracting State as

persons described in paragraph 5.

c) For the purpose of subparagraph b), a resident ofa Contracting State shall be deemed to satisfythe gross income requirements described in clause(ii), (iii) or (iv) of that subparagraph for thetaxable year in which the item of income isderived if the resident satisfies each of thosegross income requirements when averaging thegross income of the three taxable years precedingthat taxable year.

7. A resident of a Contracting State that is neither aqualified person nor entitled under paragraph 3, 5 or 6 tothe benefits granted by the provisions of paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article 12,13 or20 with respect to an item of income described in thoseparagraphs or Articles shall, nevertheless, be granted suchbenefits if the competent authority of the otherContracting State determines, in accordance with its lawsor administrative practice, that the establishment,acquisition or maintenance of such resident and the conductof its operations did not have as one of the principalpurposes the obtaining of such benefits.


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8. For the purposes of this Article:

a) the term principal class of shares means theclass or classes of shares of a company which inthe aggregate represent a majority of the votingpower of the company;

b) the term shares shall include depositoryreceipts of shares or trust certificates ofshares;

c) the term recognised stock exchange means:

(i) any stock exchange established by aFinancial Instruments Exchange or an

approved-type financial instruments firmsassociation under the Financial Instrumentsand Exchange Law (Law No. 25 of 1948) ofJapan;

(ii) any regulated market established in theNetherlands subject to regulation by theAuthority for the Financial Markets (or itssuccessor) under a license as meant inparagraph 1 of Article 5:26 of the Act onFinancial Supervision (or its successor) ofthe Netherlands;

(iii) the Irish Stock Exchange, the London StockExchange, the Swiss Stock Exchange and thestock exchanges of Brussels, Dusseldorf,Frankfurt, Hamburg, Hong Kong, Johannesburg,Lisbon, Luxembourg, Madrid, Mexico, Milan,New York, Paris, Seoul, Singapore,Stockholm, Sydney, Toronto and Vienna andthe NASDAQ System; and

(iv) any other stock exchange which the competentauthorities of the Contracting States agreeto recognise for the purposes of thisArticle;

d) the term equivalent beneficiary means:

(i) a resident of a state that has a conventionfor the avoidance of double taxation and theprevention of fiscal evasion between thatstate and the Contracting State from whichthe benefits of this Convention are claimedsuch that:


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(aa) that convention contains provisions foreffective exchange of information;

(bb) that resident is a qualified personunder the limitation on benefitsprovisions in that convention or, whenthere are no such provisions in thatconvention, would be a qualified personwhen that convention is read asincluding provisions corresponding toparagraph 2; and

(cc) with respect to an item of incomereferred to in paragraph 3 of Article10, paragraph 3 of Article 11 or

Article 12, 13 or 20 that residentwould be entitled under that conventionto a rate of tax with respect to theparticular class of income for whichthe benefits are being claimed underthis Convention that is at least as lowas the rate applicable under thisConvention; or

(ii) a qualified person by reason of subparagrapha), b), c) or d) of paragraph 2;

e) the term associated enterprises meansenterprises which have a relationship with eachother as described in subparagraph a) or b) ofparagraph 1 of Article 9; and

f) the term gross income means the total revenuesderived by an enterprise from its business, lessthe direct costs of obtaining such revenues.

Article 22ELIMINATION OF DOUBLE TAXATION

1. Subject to the provisions of the laws of Japanregarding the allowance as a credit against the Japanesetax of tax payable in any country other than Japan, where aresident of Japan derives income from the Netherlands whichmay be taxed in the Netherlands in accordance with theprovisions of this Convention, the amount of theNetherlands tax payable in respect of that income shall beallowed as a credit against the Japanese tax imposed onthat resident. The amount of credit, however, shall notexceed that part of the Japanese tax which is appropriateto that income.


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2. Where the income derived from the Netherlands isdividends paid by a company which is a resident of the

Netherlands to a company which is a resident of Japan andwhich has owned at least 10 per cent either of the votingshares issued by the company paying the dividends, or ofthe total shares issued by that company, during the periodof six months immediately before the day when theobligation to pay dividends is confirmed, such dividendsshall be excluded from the basis upon which the Japanesetax is imposed. Such exclusion shall be subject to theprovisions, other than the provisions with regard toownership requirements of shares, of the laws of Japanregarding the exclusion of dividends from the basis uponwhich the Japanese tax is imposed.

3. The Netherlands, when imposing tax on its residents,may include in the basis upon which such taxes are imposedthe items of income which, according to the provisions ofthis Convention, may be taxed or shall be taxable only inJapan.

4. However, where a resident of the Netherlands derivesitems of income which according to paragraphs 1, 3 and 4 ofArticle 6, paragraph 1 of Article 7, paragraph 7 of Article10, paragraph 5 of Article 11, paragraph 3 of Article 12,paragraphs 1, 2, 3 and 4 of Article 13, paragraphs 1 and 3of Article 14, paragraphs 1 and 2 of Article 17,

subparagraph a) of paragraph 1 and subparagraph a) ofparagraph 2 of Article 18 and paragraph 2 of Article 20 maybe taxed or shall be taxable only in Japan and are includedin the basis referred to in paragraph 3, the Netherlandsshall exempt such items of income by allowing a reductionof its tax. This reduction shall be computed in conformitywith the provisions of the Netherlands law for theavoidance of double taxation. For that purpose the saiditems of income shall be deemed to be included in theamount of the items of income which are exempt fromNetherlands tax under those provisions.


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5. Further, the Netherlands shall allow a deduction fromthe Netherlands tax so computed for the items of income

which according to paragraphs 2 and 10 of Article 10,paragraph 2 of Article 11, paragraph 7 of Article 13,Article 15, paragraphs 1 and 2 of Article 16 and paragraph3 of Article 17 may be taxed in Japan to the extent thatthese items are included in the basis referred to inparagraph 3. The amount of the deduction shall be equal tothe tax paid in Japan on these items of income, but shall,in case the provisions of the Netherlands law for theavoidance of double taxation provide so, not exceed theamount of the deduction which would be allowed if the itemsof income so included were the sole items of income forwhich the Netherlands gives a reduction under theprovisions of the Netherlands law for the avoidance of

double taxation.

This paragraph shall not restrict allowance now orhereafter accorded by the provisions of the Netherlands lawfor the avoidance of double taxation, but only as far asthe calculation of the amount of the deduction ofNetherlands tax is concerned with respect to theaggregation of income from more than one country and thecarry forward of the tax paid in Japan on the said items ofincome to subsequent years.

6. Notwithstanding the provisions of paragraph 4, the

Netherlands shall allow a deduction from the Netherlandstax for the tax paid in Japan on items of income whichaccording to paragraph 1 of Article 7, paragraph 7 ofArticle 10, paragraph 5 of Article 11, paragraph 3 ofArticle 12 and paragraph 2 of Article 20 may be taxed inJapan to the extent that these items are included in thebasis referred to in paragraph 3, insofar as theNetherlands under the provisions of the Netherlands law forthe avoidance of double taxation allows a deduction fromthe Netherlands tax of the tax levied in another country onsuch items of income. For the computation of thisdeduction the provisions of paragraph 5 of this Articleshall apply accordingly.

7. For the purposes of the preceding paragraphs of thisArticle, income beneficially owned by a resident of aContracting State which may be taxed or shall be taxableonly in the other Contracting State in accordance with thisConvention shall be deemed to arise from sources in thatother Contracting State.


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Article 23NON-DISCRIMINATION

1. Nationals of a Contracting State shall not besubjected in the other Contracting State to any taxation orany requirement connected therewith, which is other or moreburdensome than the taxation and connected requirements towhich nationals of that other Contracting State in the samecircumstances, in particular with respect to residence, areor may be subjected. This provision shall, notwithstandingthe provisions of Article 1, also apply to persons who arenot residents of one or both of the Contracting States.

2. The taxation on a permanent establishment which anenterprise of a Contracting State has in the other

Contracting State shall not be less favourably levied inthat other Contracting State than the taxation levied onenterprises of that other Contracting State carrying on thesame activities. This provision shall not be construed asobliging a Contracting State to grant to residents of theother Contracting State any personal allowances, reliefsand reductions for taxation purposes on account of civilstatus or family responsibilities which it grants to itsown residents.

3. Except where the provisions of paragraph 1 of Article9, paragraph 7 of Article 11, paragraph 4 of Article 12 or

paragraph 3 of Article 20 apply, interest, royalties andother disbursements paid by an enterprise of a ContractingState to a resident of the other Contracting State shall,for the purpose of determining the taxable profits of suchenterprise, be deductible under the same conditions as ifthey had been paid to a resident of the first-mentionedContracting State.

4. Enterprises of a Contracting State, the capital ofwhich is wholly or partly owned or controlled, directly orindirectly, by one or more residents of the otherContracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or anyrequirement connected therewith which is other or moreburdensome than the taxation and connected requirements towhich other similar enterprises of the first-mentionedContracting State are or may be subjected.

5. The provisions of this Article shall, notwithstandingthe provisions of Article 2, apply to taxes of every kindand description imposed on behalf of a Contracting State orof its political subdivisions or local authorities.


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Article 24MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one orboth of the Contracting States result or will result forhim in taxation not in accordance with the provisions ofthis Convention, he may, irrespective of the remediesprovided by the domestic law of those Contracting States,present his case to the competent authority of theContracting State of which he is a resident or, if his casecomes under paragraph 1 of Article 23, to that of theContracting State of which he is a national. The case mustbe presented within three years from the first notificationof the action resulting in taxation not in accordance withthe provisions of the Convention.

2. The competent authority shall endeavour, if theobjection appears to it to be justified and if it is notitself able to arrive at a satisfactory solution, toresolve the case by mutual agreement with the competentauthority of the other Contracting State, with a view tothe avoidance of taxation which is not in accordance withthe provisions of this Convention. Any agreement reachedshall be implemented notwithstanding any time limits in thedomestic law of the Contracting States.

3. The competent authorities of the Contracting States

shall endeavour to resolve by mutual agreement anydifficulties or doubts arising as to the interpretation orapplication of this Convention. In particular thecompetent authorities of the Contracting States may agree:

a) to the same attribution of income, deductions,credits, or allowances of an enterprise of aContracting State to its permanent establishmentsituated in the other Contracting State;

b) to the same allocation of income, deductions,credits, or allowances between persons;

c) to the settlement of conflicting application ofthe Convention, including conflicts regarding:

(i) the characterisation of particular items ofincome;

(ii) the characterisation of persons;


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(iii) the application of source rules with respectto particular items of income; and

(iv) the meaning of any term used in theConvention; and

d) to advance pricing arrangements.

They may also consult together for the elimination ofdouble taxation in cases not provided for in theConvention.

4. The competent authorities of the Contracting Statesmay communicate with each other directly, including througha joint commission consisting of themselves and their

representatives, for the purpose of reaching an agreementin the sense of the preceding paragraphs of this Article.

5. Where,

a) under paragraph 1, a person has presented a caseto the competent authority of a Contracting Stateon the basis that the actions of one or both ofthe Contracting States have resulted for thatperson in taxation not in accordance with theprovisions of this Convention, and

b) the competent authorities are unable to reach anagreement to resolve that case pursuant toparagraph 2 within two years from thepresentation of the case to the competentauthority of the other Contracting State,

any unresolved issues arising from the case shall besubmitted to arbitration if the person so requests. Theseunresolved issues shall not, however, be submitted toarbitration if a decision on these issues has already beenrendered by a court or administrative tribunal of eitherContracting State. Unless a person directly affected bythe case does not accept the mutual agreement thatimplements the arbitration decision, that decision shall bebinding on both Contracting States and shall be implementednotwithstanding any time limits in the domestic laws ofthese Contracting States. The competent authorities of theContracting States shall by mutual agreement settle themode of application of this paragraph.


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Article 25EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting Statesshall exchange such information as is foreseeably relevantfor carrying out the provisions of this Convention or tothe administration or enforcement of the domestic lawsconcerning taxes of every kind and description imposed onbehalf of the Contracting States, or of their politicalsubdivisions or local authorities, insofar as the taxationthereunder is not contrary to the Convention. The exchangeof information is not restricted by Articles 1 and 2.

2. Any information received under paragraph 1 by aContracting State shall be treated as secret in the same

manner as information obtained under the domestic laws ofthat Contracting State and shall be disclosed only topersons or authorities (including courts and administrativebodies) concerned with the assessment or collection of, theenforcement or prosecution in respect of, the determinationof appeals in relation to the taxes referred to inparagraph 1, or the oversight of the above. Such personsor authorities shall use the information only for suchpurposes. They may disclose the information in publiccourt proceedings or in judicial decisions.

3. In no case shall the provisions of paragraphs 1 and 2

be construed so as to impose on a Contracting State theobligation:

a) to carry out administrative measures at variancewith the laws and administrative practice of thator of the other Contracting State;

b) to supply information which is not obtainableunder the laws or in the normal course of theadministration of that or of the otherContracting State;

c) to supply information which would disclose anytrade, business, industrial, commercial orprofessional secret or trade process, orinformation the disclosure of which would becontrary to public policy (ordre public).


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4. If information is requested by a Contracting State inaccordance with this Article, the other Contracting State

shall use its information gathering measures to obtain therequested information, even though that other ContractingState may not need such information for its own taxpurposes. The obligation contained in the precedingsentence is subject to the limitations of paragraph 3 butin no case shall such limitations be construed to permit aContracting State to decline to supply information solelybecause it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 beconstrued to permit a Contracting State to decline tosupply information solely because the information is heldby a bank, other financial institution, nominee or person

acting in an agency or a fiduciary capacity or because itrelates to ownership interests in a person.

Article 26ASSISTANCE IN THE COLLECTION OF TAXES

1. Each of the Contracting States shall endeavour tocollect such taxes imposed by the other Contracting Stateas will ensure that any exemption or reduced rate of taxgranted under this Convention by that other ContractingState shall not be enjoyed by persons not entitled to suchbenefits. The Contracting State making such collections

shall be responsible to the other Contracting State for thesums thus collected.

2. In no case shall the provisions of paragraph 1 beconstrued so as to impose upon either of the ContractingStates endeavouring to collect the taxes the obligation tocarry out administrative measures at variance with the lawsand administrative practice of that Contracting State orwhich would be contrary to the public policy (ordre public)of that Contracting State.

Article 27MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Convention shall affect the fiscalprivileges of members of diplomatic missions or consularposts under the general rules of international law or underthe provisions of special agreements.


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Article 28TERRITORIAL EXTENSION

1. This Convention may be extended, either in itsentirety or with any necessary modifications, to the partsof the Kingdom of the Netherlands which are not situated inEurope. Any such extension shall take effect from suchdate and shall be subject to such modifications andconditions, including conditions as to termination, as maybe specified and agreed in notes to be exchanged throughdiplomatic channels.

2. Unless otherwise agreed, the termination of thisConvention shall not also terminate any extension of theConvention to any part of the Kingdom of the Netherlands to

which it has been extended under this Article.

Article 29HEADINGS

The headings of the Articles of this Convention areinserted for convenience of reference only and shall notaffect the interpretation of the Convention.

Article 30ENTRY INTO FORCE

1. This Convention shall be approved in accordance withthe legal procedures of each of the Contracting States andshall enter into force on the thirtieth day after the dateof exchange of diplomatic notes indicating such approval.

2. This Convention shall be applicable:


(i) with respect to taxes withheld at source,for amounts taxable on or after 1 January inthe calendar year next following that inwhich the Convention enters into force;

(ii) with respect to taxes on income which arenot withheld at source, as regards incomefor any taxable year beginning on or after 1January in the calendar year next followingthat in which the Convention enters intoforce; and


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(iii) with respect to other taxes, as regardstaxes for any taxable year beginning on or

after 1 January in the calendar year nextfollowing that in which the Conventionenters into force; and


(i) with respect to taxes withheld at source,for amounts taxable on or after 1 January inthe calendar year next following that inwhich the Convention enters into force;

(ii) with respect to taxes on income which arenot withheld at source, as regards income

for any taxable year and period beginning onor after 1 January in the calendar year nextfollowing that in which the Conventionenters into force; and

(iii) with respect to other taxes, as regardstaxes for any taxable year and periodbeginning on or after 1 January in thecalendar year next following that in whichthe Convention enters into force.

3. The Convention between the Government of Japan and the

Government of the Kingdom of the Netherlands for theAvoidance of Double Taxation with respect to Taxes onIncome, with Protocol, signed at The Hague on 3 March,1970, as amended by the Protocol signed at The Hague on 4March, 1992 (hereinafter in this Article referred to asthe prior Convention) shall cease to be applicable fromthe date upon which this Convention applies in respect ofthe taxes to which the Convention applies in accordancewith the provisions of paragraph 2 of this Article.

4. Notwithstanding the provisions of paragraph 3, whereany person entitled to benefits under the prior Conventionwould have been entitled to greater benefits thereunderthan those under this Convention, the prior Conventionshall, at the election of such person, continue to apply inits entirety for the period of twelve months from the dateon which the provisions of this Convention otherwise wouldapply under paragraph 2.

5. The prior Convention shall terminate on the last dateon which it applies in accordance with the provisions ofthe preceding paragraphs of this Article.


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Article 31TERMINATION

This Convention shall remain in force until terminatedby a Contracting State. Either Contracting State mayterminate the Convention, through diplomatic channels, bygiving notice of termination at least six months before theend of any calendar year beginning after the expiry of fiveyears from the date of entry into force of the Convention.In such event, the Convention shall cease to have effect:


(i) with respect to taxes withheld at source,for amounts taxable on or after 1 January in

the calendar year next following that inwhich the notice is given;

(ii) with respect to taxes on income which arenot withheld at source, as regards incomefor any taxable year beginning on or after 1January in the calendar year next followingthat in which the notice is given; and

(iii) with respect to other taxes, as regardstaxes for any taxable year beginning on orafter 1 January in the calendar year next

following that in which the notice is given;and


(i) with respect to taxes withheld at source,for amounts taxable on or after 1 January inthe calendar year next following that inwhich the notice is given;

(ii) with respect to taxes on income which arenot withheld at source, as regards incomefor any taxable year and period beginning onor after 1 January in the calendar year nextfollowing that in which the notice is given;and

(iii) with respect to other taxes, as regardstaxes for any taxable year and periodbeginning on or after 1 January in thecalendar year next following that in whichthe notice is given.


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IN WITNESS WHEREOF the undersigned, being dulyauthorised thereto by their respective Governments, have

signed this Convention.

DONE at Tokyo this twenty-fifth day of August, 2010,in duplicate, in the English language.

For Japan: For the Kingdomof the Netherlands:

Koichi Takemasa Philip De Heer


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Protocol

At the signing today of the Convention between Japanand the Kingdom of the Netherlands for the Avoidance ofDouble Taxation and the Prevention of Fiscal Evasion withrespect to Taxes on Income (hereinafter referred to as theConvention), Japan and the Kingdom of the Netherlands haveagreed upon the following provisions, which shall form anintegral part of the Convention.

1. With reference to clause (iii) of subparagraph m) ofparagraph 1 of Article 3 of the Convention, it isunderstood that a pension fund shall be treated as exempt

from tax on income derived with respect to the activitiesdescribed in clause (ii) of that subparagraph even thoughit is subject to the tax stipulated in Articles 8 or 10-2of the Corporation Tax Law (Law No. 34 of 1965) of Japan orparagraph 1 of Article 20 of its supplementary provisions.

2. With reference to Articles 6 and 13 of the Convention,rights to the exploration and exploitation of naturalresources shall be regarded as immovable property situatedin the Contracting State to whose seabed - and subsoilthereof - these rights apply. Furthermore, theaforementioned rights include rights to interests in, or

benefits from assets that arise from, that exploration orexploitation.

3. With reference to Article 7 of the Convention, it isunderstood that in the case of profits from survey, supply,installation or construction activities, only so much ofthem will be attributable to a permanent establishment asresults from the actual performance of such activity bythat permanent establishment.

4. With reference to Article 9 of the Convention, it isunderstood that the fact that the enterprises that have a

relationship with each other as described in subparagrapha) or b) of paragraph 1 of that Article have concludedarrangements among them to share the costs and risks ofdeveloping, producing or obtaining assets, services, orrights, and to determine the nature and extent of theinterests of each participant in those assets, services, orrights, shall not of itself satisfy the conditions as meantin paragraph 1 of that Article.


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5. With reference to Articles 10 and 13 of theConvention, the Netherlands treats income received in

connection with the whole or partial winding-up of acompany or a purchase of own shares by a company asdividends as referred to in Article 10 of the Conventionand not as capital gains as referred to in Article 13 ofthe Convention.

6. With reference to paragraph 3 of Article 11 of theConvention, the terms the central bank and institutionowned by that Government mean:


(i) the Bank of Japan;

(ii) the Japan Finance Corporation;

(iii) the Japan International Cooperation Agency;

(iv) the Nippon Export and Investment Insurance;and

(v) such other similar institution the capitalof which is owned by the Government of Japanas may be agreed upon from time to timebetween the Governments of the Contracting

States through an exchange of diplomaticnotes; and


(i) the Central Bank of the Netherlands (DeNederlandsche Bank NV);

(ii) the Netherlands Development Finance Company(de Nederlandse Financierings-Maatschappijvoor Ontwikkelingslanden NV);

(iii) the Netherlands Investment Bank forDeveloping Countries (de NederlandseInvesteringsbank voor OntwikkelingslandenNV); and

(iv) such other similar institution the capitalof which is owned by the Government of theNetherlands as may be agreed upon from timeto time between the Governments of theContracting States through an exchange ofdiplomatic notes.


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7. With reference to Article 15 of the Convention, wherea company is a resident of the Netherlands, the term

members of the board of directors includes both abestuurder and a commissaris. The terms bestuurderand commissaris mean respectively persons who are chargedwith the general management of the company and persons whoare charged with the supervision thereof.

8. With reference to Articles 17 and 18 of theConvention, it is understood that whether and to whatextent a pension or other similar remuneration falls underArticle 17 or under Article 18 of the Convention isdetermined by the nature (private or governmental) duringthe period or periods in which the entitlement to suchpension or other similar remuneration was built up.

9. Nothing in the Convention shall prevent Japan fromimposing tax at sour

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DTC agreement between Netherlands and Japan

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