PROTOCOLAMENDING THE CONVENTIONBETWEEN JAPAN AND SWITZERLANDFOR THE AVOIDANCE OF DOUBLE TAXATIONWITH RESPECT TO TAXES ON INCOME

The Government of Japan and the Swiss Federal Council,
Desiring to amend the Convention between Japan and
Switzerland for the Avoidance of Double Taxation withrespect to Taxes on Income signed at Tokyo on 19 January1971 (hereinafter referred to as “the Convention”),
Have agreed as follows:
Article 1
1.
Subparagraph (a) of paragraph 1 of Article 3 of theConvention shall be deleted and replaced by the following:“(a)the term “Japan”, when used in ageographical sense, means all the territoryof Japan, including its territorial sea, inwhich the laws relating to Japanese tax arein force, and all the area beyond its
territorial sea, including the seabed andsubsoil thereof, over which Japan has
sovereign rights in accordance withinternational law and in which the laws
relating to Japanese tax are in force;”2.
Subparagraph (h) of paragraph 1 of Article 3 of theConvention shall be deleted and replaced by the following:“(h)the term “international traffic” means any
transport by a ship or aircraft operated byan enterprise of a Contracting State, except
when the ship or aircraft is operated solely
between places in the other Contracting
State;”

3.
The following new subparagraphs shall be inserted
immediately after subparagraph (h) of paragraph 1 of
Article 3 of the Convention.
“(i)the term “national” means:

1

(j)

(k)

(i)

in the case of Japan, any individual
possessing the nationality of Japan,
any juridical person created ororganised under the laws of Japan andany organisation without juridical
personality treated for the purposes ofJapanese tax as a juridical person
created or organised under the laws ofJapan; and(ii)

in the case of Switzerland, all Swiss
citizens and all legal persons,partnerships and associations deriving
their status as such from the laws inforce in Switzerland;

the term “competent authority” means:(i)in the case of Japan, the Minister ofFinance or his authorised
representative; and(ii)

in the case of Switzerland, theDirector of the Federal Tax
Administration or his authorised
representative; andthe term “pension fund or pension scheme”
means any person that:(i)is established under the laws of aContracting State;(ii)

is operated principally to administeror provide pensions, retirement
benefits or other similar remunerationor to earn income for the benefit ofother pension funds or pension schemes;
and

(iii)

is exempt from tax in that Contracting
State with respect to income derived
from the activities described in clause(ii).”
Article 2

1.
Paragraphs 1 and 2 of Article 4 of the Convention
shall be deleted and replaced by the following:2

“1.
For the purposes of this Convention, the term
“resident of a Contracting State” means any person
who, under the laws of that Contracting State, isliable to tax therein by reason of his domicile,
residence, place of head or main office, place ofmanagement or any other criterion of a similar nature,
and also includes:(a)that Contracting State and any politicalsubdivision or local authority thereof;(b)a pension fund or pension scheme establishedunder the laws of that Contracting State;
and

(c)

an organisation established under the lawsof that Contracting State and operated
exclusively for a religious, charitable,
educational, scientific, artistic, sportive,
cultural or public purpose (or for more than
one of those purposes), only if all or partof its income may be exempt from tax under
the laws of that Contracting State.

This term, however, does not include any person
who is liable to tax in that Contracting State inrespect only of income from sources in thatContracting State.
2.
Where by reason of the provisions of paragraph 1
an individual is a resident of both Contracting
States, then his status shall be determined asfollows:(a)he shall be deemed to be a resident only of
the Contracting State in which he has apermanent home available to him; if he has apermanent home available to him in bothContracting States, he shall be deemed to bea resident only of the Contracting State
with which his personal and economic
relations are closer (centre of vitalinterests);(b)

if the Contracting State in which he has his
centre of vital interests cannot be
determined, or if he has not a permanent
home available to him in either Contracting
State, he shall be deemed to be a resident
only of the Contracting State in which hehas an habitual abode;

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(c)

if he has an habitual abode in bothContracting States or in neither of them, heshall be deemed to be a resident only of theContracting State of which he is a national;(d)

if he is a national of both Contracting
States or of neither of them, the competentauthorities of the Contracting States shallsettle the question by mutual agreement.”

2.
The following new paragraphs shall be inserted
immediately after paragraph 3 of Article 4 of theConvention:“4.
Where, pursuant to any provisions of thisConvention, a Contracting State reduces the rate of
tax on, or exempts from tax, income of a resident of
the other Contracting State and under the laws inforce in that other Contracting State the resident issubjected to tax by that other Contracting State only
on that part of such income which is remitted to or
received in that other Contracting State, then the
reduction or exemption shall apply only to so much ofsuch income as is remitted to or received in that
other Contracting State.
5.

For the purposes of applying this Convention:(a)an item of income:(i)derived from a Contracting Statethrough an entity that is organised in
the other Contracting State, and(ii)

treated as the income of thebeneficiaries, members or participantsof that entity under the tax laws ofthat other Contracting State,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 residentof that other Contracting State, to theextent that such beneficiaries, members or
participants are residents of that other
Contracting State and satisfy any otherconditions specified in the Convention,
without regard to whether the income istreated as the income of such beneficiaries,
members or participants under the tax lawsof the first-mentioned Contracting State;

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(b)

an item of income:(i)derived from a Contracting Statethrough an entity that is organised in
the other Contracting State, and(ii)

treated as the income of that entity
under the tax laws of that other
Contracting State,shall be eligible for the benefits of theConvention that would be granted to aresident of that other Contracting State,
without regard to whether the income istreated as the income of that entity under
the tax laws of the first-mentioned
Contracting State, if such entity is a
resident of that other Contracting State andsatisfies any other conditions specified in
the Convention;(c)an item of income:(i)derived from a Contracting Statethrough an entity that is organised inthat Contracting State, and(ii)

treated as the income of that entity
under the tax laws of the other
Contracting State,shall not be eligible for the benefits of
the Convention.”
Article 3
1.
Paragraph 3 of Article 5 of the Convention shall beamended by replacing the period at the end of subparagraph(e) with a semicolon and by adding the following:“(f)the maintenance of a fixed place of businesssolely for any combination of activities
mentioned in subparagraphs (a) to (e),provided that the overall activity of the
fixed place of business resulting from thiscombination is of a preparatory or auxiliary
character.”2.
Paragraphs 4 and 5 of Article 5 of the Convention
shall be deleted and replaced by the following:5

“4.
Notwithstanding the provisions of paragraphs 1
and 2, where a person - other than an agent of an
independent status to whom the provisions of paragraph
5 apply - is acting on behalf of an enterprise andhas, and habitually exercises, in a Contracting Statean authority to conclude contracts in the name of theenterprise, that enterprise shall be deemed to have apermanent establishment in that Contracting State inrespect of any activities which that person undertakes
for the enterprise, unless the activities of such
person are limited to those mentioned in paragraph 3
which, if exercised through a fixed place of business,would not make this fixed place of business apermanent establishment under the provisions of thatparagraph.”3.
Paragraphs 6 and 7 of Article 5 of the Convention
shall be renumbered as paragraphs 5 and 6 respectively.
Article 4
Paragraph 1 of Article 6 of the Convention shall bedeleted and replaced by the following:“1.
Income derived by a resident of a Contracting
State from immovable property (including income fromagriculture or forestry) situated in the other
Contracting State may be taxed in that other
Contracting State.”
Article 5
Article 9 of the Convention shall be deleted andreplaced by the following:“Article 9
1.

Where
(a)

an enterprise of a Contracting State
participates directly or indirectly in the
management, control or capital of anenterprise of the other Contracting State,or(b)the same persons participate directly or
indirectly in the management, control orcapital of an enterprise of a Contracting
State and an enterprise of the other
Contracting State,6and in either case conditions are made or imposed
between the two enterprises in their commercial or
financial relations which differ from those which
would be made between independent enterprises, thenany profits which would, but for those conditions,have accrued to one of the enterprises, but, by reasonof those conditions, have not so accrued, may be
included in the profits of that enterprise and taxed
accordingly.
2.
Where a Contracting State includes, in accordancewith the provisions of paragraph 1, in the profits ofan enterprise of that Contracting State - and taxes
accordingly - profits on which an enterprise of theother Contracting State has been charged to tax inthat other Contracting State and where the competentauthorities of the Contracting States agree, upon
consultation, that all or part of the profits so
included are profits which would have accrued to theenterprise of the first-mentioned Contracting State if
the conditions made between the two enterprises had
been those which would have been made between
independent enterprises, then that other Contracting
State shall make an appropriate adjustment to theamount of the tax charged therein on those agreed
profits. In determining such adjustment, due regard
shall be had to the other provisions of thisConvention.
3.
Notwithstanding the provisions of paragraph 1, aContracting State shall not change the profits of anenterprise of that Contracting State in thecircumstances referred to in paragraph 1 after the
expiry of the time limits provided in its laws and, inany case, after seven years from the end of thetaxable year in which the profits which would be
subject to such change would have accrued to thatenterprise. The provisions of this paragraph shallnot apply in the case of fraud or wilful default.”
Article 6
Article 10 of the Convention shall be deleted andreplaced by the following:“Article 10
1.
Dividends paid by a company which is a residentof a Contracting State to a resident of the other
Contracting State may be taxed in that other
Contracting State.

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2.
However, such dividends may also be taxed in theContracting State of which the company paying thedividends is a resident and according to the laws ofthat Contracting State, but if the beneficial owner ofthe dividends is a resident of the other Contracting
State, the tax so charged shall not exceed:
(a)

(b)

5 per cent of the gross amount of thedividends if the beneficial owner is acompany that has owned, directly or
indirectly, for the period of six months
ending on the date on which entitlement to
the dividends is determined, either:(i)shares representing at least 10 per
cent of the voting power of the company
paying the dividends where such company
is a resident of Japan; or(ii)shares representing at least 10 per
cent of the capital or of the voting
power of the company paying thedividends where such company is a
resident of Switzerland;

10 per cent of the gross amount of thedividends in all other cases.

3.
Notwithstanding the provisions of paragraph 2,
dividends shall not be taxed in the Contracting Stateof which the company paying the dividends is a
resident if the beneficial owner of the dividends is a
resident of the other Contracting State and is either:(a)a company that has owned, directly or
indirectly, for the period of six months
ending on the date on which entitlement to
the dividends is determined:(i)shares representing at least 50 per
cent of the voting power of the company
paying the dividends where such company
is a resident of Japan; or(ii)shares representing at least 50 per
cent of the capital or of the voting
power of the company paying thedividends where such company is a
resident of Switzerland; or

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(b)

a pension fund or pension scheme, provided
that such dividends are derived from theactivities described in clause (ii) of
subparagraph (k) of paragraph 1 of Article
3.

4.
The provisions of paragraphs 2 and 3 shall notaffect the taxation of the company in respect of the
profits out of which the dividends are paid.
5.
The term “dividends” as used in this Articlemeans income from shares or other rights, not being
debt-claims, participating in profits, as well as
income which is subjected to the same taxation
treatment as income from shares by the tax laws of theContracting State of which the company making the
distribution is a resident.
6.
The provisions of paragraphs 1, 2 and 3 shall not
apply if the beneficial owner of the dividends, beinga resident of a Contracting State, carries on businessin the other Contracting State of which the company
paying the dividends is a resident through a permanentestablishment situated therein, or performs in that
other Contracting State independent personal services
from a fixed base situated therein, and the holding inrespect of which the dividends are paid is effectively
connected with such permanent establishment or fixedbase. In such case the provisions of Article 7 or 14,
as the case may be, shall apply.
7.
Where a company which is a resident of aContracting State derives profits or income from theother Contracting State, that other Contracting State
may not impose any tax on the dividends paid by thecompany, except insofar as such dividends are paid toa resident of that other Contracting State or insofar
as the holding in respect of which the dividends arepaid is effectively connected with a permanentestablishment or a fixed base situated in that other
Contracting State, nor subject the company’s
undistributed profits to a tax on the company’s
undistributed profits, even if the dividends paid or
the undistributed profits consist wholly or partly of
profits or income arising in such other Contracting
State.

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8.
A resident of a Contracting State shall not be
considered the beneficial owner of the dividends paidby a resident of the other Contracting State inrespect of shares or other similar interests if suchshares or other similar interests would not have been
established or acquired unless a person:(a)that is not entitled to benefits withrespect to dividends paid by a resident ofthat other Contracting State which areequivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned Contracting
State; and(b)that is not a resident of either Contracting
State;

owned equivalent shares or other similar interests inthe first-mentioned resident.”
Article 7
Article 11 of the Convention shall be deleted andreplaced by the following:“Article 11
1.
Interest arising in a Contracting State and paid
to a resident of the other Contracting State may betaxed in that other Contracting State.
2.
However, such interest may also be taxed in theContracting State in which it arises and according to
the laws of that Contracting State, but if thebeneficial owner of the interest is a resident of theother Contracting State, the tax so charged shall not
exceed 10 per cent of the gross amount of theinterest.
3.
Notwithstanding the provisions of paragraph 2,interest arising in a Contracting State shall betaxable only in the other Contracting State if:(a)the interest is beneficially owned by theGovernment of that other Contracting State,a political subdivision or local authority
thereof, or the central bank of that other
Contracting State or any institution ownedby that Government;

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(b)

the interest is beneficially owned by aresident of that other Contracting State
with respect to debt-claims guaranteed,insured or indirectly financed by theGovernment of that other Contracting State,a political subdivision or local authority
thereof, or the central bank of that other
Contracting State or any institution ownedby that Government;(c)the interest is beneficially owned by aresident of that other Contracting State
that is either:(i)a bank;(ii)

an insurance company;(iii)

a securities dealer; or(iv)

any other enterprise, provided that in
the three taxable years preceding thetaxable year in which the interest is
paid, the enterprise derives more than
50 per cent of its liabilities from theissuance of bonds in the financial
markets or from taking deposits atinterest, and more than 50 per cent of
the assets of the enterprise consist ofdebt-claims against persons that do nothave with the enterprise a relationshipdescribed in subparagraph (a) or (b) ofparagraph 1 of Article 9;(d)the interest is beneficially owned by apension fund or pension scheme that is a
resident of that other Contracting State,provided that such interest is derived fromthe activities described in clause (ii) of
subparagraph (k) of paragraph 1 of Article
3; or

(e)

the interest is beneficially owned by aresident of that other Contracting State andpaid with respect to indebtedness arising aspart of the sale on credit by a resident ofthat other Contracting State of equipment or
merchandise.

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4.
For the purposes of paragraph 3, the terms “thecentral bank” and “institution owned by that
Government” mean:
(a)

(b)

in the case of Japan:(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 thecapital of which is owned by theGovernment of Japan as may be agreed
upon from time to time between the
Governments of the Contracting States
through an exchange of diplomatic
notes;

in the case of Switzerland:(i)the Swiss National Bank;(ii)

the Swiss Insurance for Exports Risks;(iii)

the Swiss Accident Insurance Fund(SUVA);(iv)

any institution covered by the Federal
Law on old-age and survivors'
insurance, of 20 December 1946; and(v)such other similar institution thecapital of which is owned by theGovernment of Switzerland as may be
agreed upon from time to time between
the Governments of the Contracting
States through an exchange of
diplomatic notes.

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5.
The term “interest” as used in this Article means
income from debt-claims of every kind, whether or notsecured by mortgage and whether or not carrying aright to participate in the debtor’s profits, and inparticular, income from government securities andincome from bonds or debentures, including premiums
and prizes attaching to such securities, bonds ordebentures, and all other income that is subjected tothe same taxation treatment as income from money lentby the tax laws of the Contracting State in which theincome arises. Income dealt with in Article 10 shallnot be regarded as interest for the purposes of thisConvention.
6.
The provisions of paragraphs 1, 2 and 3 shall not
apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on businessin the other Contracting State in which the interest
arises through a permanent establishment situatedtherein, or performs in that other Contracting State
independent personal services from a fixed basesituated therein, and the debt-claim in respect ofwhich the interest is paid is effectively connectedwith such permanent establishment or fixed base. In
such case the provisions of Article 7 or 14, as thecase may be, shall apply.
7.
Interest shall be deemed to arise in aContracting State when the payer is a resident of thatContracting State. Where, however, the person paying
the interest, whether he is a resident of aContracting State or not, has in a Contracting State apermanent establishment or a fixed base in connection
with which the indebtedness on which the interest is
paid was incurred, and such interest is borne by suchpermanent establishment or fixed base, then suchinterest shall be deemed to arise in the Contracting
State in which the permanent establishment or fixedbase is situated.
8.
Where, by reason of a special relationshipbetween the payer and the beneficial owner or between
both of them and some other person, the amount of theinterest, having regard to the debt-claim for which itis paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in
the absence of such relationship, the provisions of
this Article shall apply only to the last-mentioned
amount. In such case, the excess part of the payments
shall remain taxable according to the laws of eachContracting State, due regard being had to the otherprovisions of this Convention.

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9.
A resident of a Contracting State shall not be
considered the beneficial owner of the interest
arising in the other Contracting State in respect of adebt-claim if such debt-claim would not have been
established unless a person:(a)that is not entitled to benefits withrespect to the interest arising in the other
Contracting State which are equivalent to,or more favourable than, those available
under this Convention to a resident of thefirst-mentioned Contracting State; and(b)that is not a resident of either Contracting
State;

owned an equivalent debt-claim against the firstmentioned resident.”
Article 8
Article 12 of the Convention shall be deleted andreplaced by the following:“Article 12
1.
Royalties arising in a Contracting State andbeneficially owned by a resident of the other
Contracting State shall be taxable only in that other
Contracting State.
2.
The term “royalties” as used in this Articlemeans payments of any kind received as a consideration
for the use of, or the right to use, any copyright ofliterary, artistic or scientific work including
cinematograph films and films or tapes for radio or
television broadcasting, any patent, trade mark,design or model, plan, or secret formula or process,or for information concerning industrial, commercial
or scientific experience.
3.
The provisions of paragraph 1 shall not apply if
the beneficial owner of the royalties, being a
resident of a Contracting State, carries on businessin the other Contracting State in which the royalties
arise through a permanent establishment situatedtherein, or performs in that other Contracting State
independent personal services from a fixed basesituated therein, and the right or property in respectof which the royalties are paid is effectively
connected with such permanent establishment or fixedbase. In such case the provisions of Article 7 or 14,
as the case may be, shall apply.

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4.
Where, by reason of a special relationshipbetween the payer and the beneficial owner or between
both of them and some other person, the amount of theroyalties, having regard to the use, right or
information for which they are paid, exceeds theamount which would have been agreed upon by the payer
and the beneficial owner in the absence of such
relationship, the provisions of this Article shallapply only to the last-mentioned amount. In suchcase, the excess part of the payments shall remaintaxable according to the laws of each Contracting
State, due regard being had to the other provisions of
this Convention.
5.
A resident of a Contracting State shall not be
considered the beneficial owner of the royalties
arising in the other Contracting State in respect of
the use of the right or property if such royalties
would not have been paid to the resident unless theresident paid royalties in respect of the use of thesame right or property to a person:(a)that is not entitled to benefits withrespect to royalties arising in that other
Contracting State which are equivalent to,or more favourable than, those available
under this Convention to a resident of thefirst-mentioned Contracting State; and(b)that is not a resident of either Contracting
State.”
Article 9

Article 13 of the Convention shall be deleted andreplaced by the following:“Article 13
1.
Gains derived by a resident of a Contracting
State from the alienation of immovable property
referred to in Article 6 and situated in the other
Contracting State may be taxed in that other
Contracting State.
2.
Gains derived by a resident of a Contracting
State from the alienation of shares in a company or ofinterests in a trust may be taxed in the other
Contracting State where the shares or the interests
derive at least 50 per cent of their value directly or
indirectly from immovable property referred to in
Article 6 and situated in that other Contracting
State.

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3.

(a)

Where
(i)

a Contracting State (including, forthis purpose in the case of Japan, theDeposit Insurance Corporation of Japan)
provides, pursuant to the laws
concerning failure resolution involving
imminent insolvency of financial
institutions of that Contracting State,
substantial financial assistance to afinancial institution that is a
resident of that Contracting State, and(ii)a resident of the other Contracting
State acquires shares in the financial
institution from the first-mentioned
Contracting State,

the first-mentioned Contracting State may
tax gains derived by the resident of theother Contracting State from the alienationof such shares, provided that the alienation
is made within five years from the firstdate on which such financial assistance wasprovided.
(b)

The provisions of subparagraph (a) shall not
apply if the resident of that other
Contracting State acquired any shares in thefinancial institution from the firstmentioned Contracting State before the entry
into force of the provisions of thisparagraph or pursuant to a binding contract
entered into before the entry into force ofthe provisions of this paragraph.

4.
Gains from the alienation of any property, otherthan immovable property, forming part of the businessproperty of a permanent establishment which anenterprise of a Contracting State has in the other
Contracting State or of any property, other thanimmovable property, pertaining to a fixed baseavailable to a resident of a Contracting State in theother Contracting State for the purpose of performing
independent personal services, including such gains
from the alienation of such a permanent establishment(alone or with the whole enterprise) or of such afixed base, may be taxed in that other Contracting
State.

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5.
Gains derived by an enterprise of a Contracting
State from the alienation of ships or aircraft
operated by that enterprise in international traffic
or any property, other than immovable property,
pertaining to the operation of such ships or aircraft
shall be taxable only in that Contracting State.
6.
Gains from the alienation of any property otherthan that referred to in the preceding paragraphs ofthis Article shall be taxable only in the Contracting
State of which the alienator is a resident.”
Article 10
In paragraph 1 of Article 15 of the Convention, thewords “Articles 16, 18, 19 and 20” shall be replaced by thewords “Articles 16, 18 and 19”.
Article 11
Article 17 of the Convention shall be deleted andreplaced by the following:“Article 17
1.
Notwithstanding the provisions of Articles 14 and15, income derived by a resident of a Contracting
State as an entertainer, such as a theatre, motion
picture, radio or television artiste, or a musician,or as a sportsman, from his personal activities assuch exercised in the other Contracting State, may betaxed in that other Contracting State.
2.
Where income in respect of personal activities
exercised by an entertainer or a sportsman in his
capacity as such accrues not to the entertainer or
sportsman himself but to another person, that income
may, notwithstanding the provisions of Articles 7, 14
and 15, be taxed in the Contracting State in which theactivities of the entertainer or sportsman are
exercised.”
Article 12
Article 20 of the Convention shall be deleted andreplaced by the following:"Article 20 (Deleted)"

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Article 13
The following new Article shall be inserted
immediately after Article 21 of the Convention:“Article 21A
Notwithstanding any other provisions of thisConvention, any income and gains derived by a sleeping
partner in respect of a sleeping partnership (Tokumei
Kumiai) contract or other similar contract may betaxed in the Contracting State in which such income
and gains arise and according to the laws of thatContracting State.”
Article 14
Article 22 of the Convention shall be deleted andreplaced by the following:“Article 22
1.
Items of income beneficially owned by a residentof a Contracting State, wherever arising, not dealt
with in the foregoing Articles of this Convention(hereinafter referred to as “other income” in this
Article) shall be taxable only in that Contracting
State.
2.
The provisions of paragraph 1 shall not apply toother income, other than income from immovable
property as defined in paragraph 2 of Article 6, if
the beneficial owner of such other income, being a
resident of a Contracting State, carries on businessin the other Contracting State through a permanentestablishment situated therein, or performs in that
other Contracting State independent personal services
from a fixed base situated therein, and the right orproperty in respect of which the other income is paid
is effectively connected with such permanentestablishment or fixed base. In such case theprovisions of Article 7 or 14, as the case may be,shall apply.

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3.
Where, by reason of a special relationshipbetween the resident referred to in paragraph 1 andthe payer or between both of them and some otherperson, the amount of other income exceeds the amountwhich would have been agreed upon between them in theabsence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount.
In such case, the excess part of the other income
shall remain taxable according to the laws of eachContracting State, due regard being had to the otherprovisions of this Convention.
4.
A resident of a Contracting State shall not be
considered the beneficial owner of the other income
arising in the other Contracting State in respect of
the right or property if such other income would nothave been paid to the resident unless the resident
paid other income in respect of the same right orproperty to a person:(a)that is not entitled to benefits withrespect to other income arising in that
other Contracting State which are equivalent
to, or more favourable than, those available
under this Convention to a resident of thefirst-mentioned Contracting State; and(b)that is not a resident of either Contracting
State.”
Article 15

The following new Article shall be inserted
immediately after Article 22 of the Convention:“Article 22A
1.
Except as otherwise provided in this Article, aresident of a Contracting State that derives income
described in paragraph 3 of Article 10, subparagraph(c), (d) or (e) of paragraph 3 of Article 11, Article
12, paragraph 6 of Article 13 or Article 22 from theother Contracting State shall be entitled to thebenefits granted for a taxable year by the provisionsof those subparagraphs, paragraphs or Articles only ifsuch resident is a qualified person as defined inparagraph 2 and satisfies any other specified
conditions in those subparagraphs, paragraphs or
Articles for the obtaining of such benefits.
2.
A resident of a Contracting State is a qualified
person for a taxable year only if such resident iseither:19

(a)an individual;(b)a qualified governmental entity;(c)a company, if its principal class of sharesis listed or registered on a recognised
stock exchange specified in clause (i) or(ii) of subparagraph (c) of paragraph 8 andis regularly traded on one or more
recognised stock exchanges;(d)a bank, an insurance company or a securities
dealer that is established and regulated assuch under the laws of the Contracting Stateof which it is a resident;(e)a person described in subparagraph (b) or(c) of paragraph 1 of Article 4, provided
that in the case of a person described insubparagraph (b) of that paragraph as of theend of the prior taxable year more than 50
per cent of the person’s beneficiaries,
members or participants are individuals who
are residents of either Contracting State;or(f)a person other than an individual, if
residents of either Contracting State thatare qualified persons by reason of
subparagraph (a), (b), (c), (d) or (e) of
this paragraph own, directly or indirectly,
shares or other beneficial interests
representing at least 50 per cent of thecapital or of the voting power of theperson.

3.
Notwithstanding that a company that is a residentof a Contracting State may not be a qualified person,that resident shall be entitled to the benefits
granted by the provisions of paragraph 3 of Article
10, subparagraph (c), (d) or (e) of paragraph 3 ofArticle 11, Article 12, paragraph 6 of Article 13 or
Article 22 with respect to an item of income describedin those subparagraphs, paragraphs or Articles derived
from the other Contracting State if that resident
satisfies any other specified conditions in thosesubparagraphs, paragraphs or Articles for theobtaining of such benefits and shares representing atleast 75 per cent of the capital or of the voting
power of the company are owned, directly or
indirectly, by seven or fewer persons who areequivalent beneficiaries.

20

4.
Where the provisions of subparagraph (f) ofparagraph 2 or paragraph 3 apply:

5.

(a)

in respect of taxation by withholding at
source, a resident of a Contracting State
shall be considered to satisfy theconditions described in that subparagraph orparagraph for the taxable year in which thepayment of an item of income is made if such
resident satisfies those conditions during
the twelve month period preceding the dateof the payment or, in case of dividends, thedate on which entitlement to the dividends
is determined;(b)

in all other cases, a resident of aContracting State shall be considered tosatisfy the conditions described in thatsubparagraph or paragraph for the taxable
year in which the payment is made if such
resident satisfies those conditions on atleast half the days of the taxable year.

(a)Notwithstanding that a resident of aContracting State may not be a qualified
person, that resident shall be entitled tothe benefits granted by the provisions ofparagraph 3 of Article 10, subparagraph (c),(d) or (e) of paragraph 3 of Article 11,
Article 12, paragraph 6 of Article 13 or
Article 22 with respect to an item of income
described in those subparagraphs, paragraphs
or Articles derived from the other
Contracting State if:(i)that resident functions as aheadquarters company for a
multinational corporate group;(ii)

the item of income derived from that
other Contracting State is derived inconnection with, or is incidental to,
the trade or business activity referred
to in clause (ii) of subparagraph (b);
and

(iii)

that resident satisfies any otherspecified conditions in thosesubparagraphs, paragraphs or Articles
for the obtaining of such benefits.

21

(b)

(c)

A resident of a Contracting State shall beconsidered a headquarters company for a
multinational corporate group for the
purposes of subparagraph (a) only if:(i)that resident provides a substantial
portion of the overall supervision andadministration of the group or provides
financing for the group;(ii)

the group consists of companies which
are resident in and are engaged in an
active trade or business in at least
five countries, and the trade orbusiness activities carried on in eachof the five countries generate at least
5 per cent of the gross income of thegroup;(iii)

the trade or business activities
carried on in any one country otherthan that Contracting State generateless than 50 per cent of the grossincome of the group;(iv)

no more than 50 per cent of its grossincome is derived from the other
Contracting State;(v)that resident has, and exercises,
independent discretionary authority tocarry out the functions referred to inclause (i); and(vi)that resident is subject to the same
income taxation rules in thatContracting State as persons describedin paragraph 6.

For the purposes of subparagraph (b), a
resident of a Contracting State shall bedeemed to satisfy the gross income
requirements described in clause (ii), (iii)or (iv) of that subparagraph for the taxable
year in which the item of income is derived
if that resident satisfies each of thosegross income requirements when averaging thegross income of the three taxable years
preceding that taxable year.

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6.

(a)

(b)

Notwithstanding that a resident of aContracting State may not be a qualified
person, that resident shall be entitled tothe benefits granted by the provisions ofparagraph 3 of Article 10, subparagraph (c),(d) or (e) of paragraph 3 of Article 11,
Article 12, paragraph 6 of Article 13 or
Article 22 with respect to an item of income
described in those subparagraphs, paragraphs
or Articles derived from the other
Contracting State if:(i)that resident is carrying on businessin the first-mentioned Contracting
State (other than the business ofmaking or managing investments for the
resident’s own account, unless thebusiness is banking, insurance or
securities business carried on by abank, insurance company or securities
dealer);(ii)

the item of income derived from theother Contracting State is derived inconnection with, or is incidental to,that business; and(iii)

that resident satisfies any otherspecified conditions in thosesubparagraphs, paragraphs or Articles
for the obtaining of such benefits.

If a resident of a Contracting State derives
an item of income from a business carried onby that resident in the other Contracting
State or derives an item of income arisingin the other Contracting State from a personthat has with the resident a relationshipdescribed in subparagraph (a) or (b) ofparagraph 1 of Article 9, the conditions
described in subparagraph (a) of thisparagraph shall be considered to besatisfied with respect to such item ofincome only if the business carried on in
the first-mentioned Contracting State is
substantial in relation to the businesscarried on in the other Contracting State.
Whether such business is substantial for the
purposes of this paragraph shall be
determined on the basis of all the facts andcircumstances.

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(c)

In determining whether a person is carrying
on business in a Contracting State undersubparagraph (a) of this paragraph, thebusiness conducted by a partnership in whichthat person is a partner and the businessconducted by persons connected to such
person shall be deemed to be conducted bysuch person. A person shall be connected toanother if that person owns, directly or
indirectly, shares or beneficial interests
representing at least 50 per cent of thecapital or of the voting power of the otherperson, or a third person owns, directly or
indirectly, shares or beneficial interests
representing at least 50 per cent of thecapital or of the voting power of each
person. In any case, a person shall beconsidered to be connected to another if, on
the basis of all the facts andcircumstances, one has control of the otheror both are under the control of the same
person or persons.

7.
A resident of a Contracting State that is neither
a qualified person nor entitled under paragraph 3, 5
or 6 to the benefits granted by the provisions ofparagraph 3 of Article 10, subparagraph (c), (d) or(e) of paragraph 3 of Article 11, Article 12,
paragraph 6 of Article 13 or Article 22 with respect
to an item of income described in those subparagraphs,
paragraphs or Articles shall, nevertheless, be grantedsuch benefits if the competent authority of the other
Contracting State determines, in accordance with thelaws or administrative practice of that other
Contracting State, that the establishment, acquisitionor maintenance of such resident and the conduct of theoperations of such resident are considered as nothaving the obtaining of such benefits as one of theprincipal purposes.
8.

For the purposes of this Article:(a)the term “qualified governmental entity”
means the Government of a Contracting State,
any political subdivision or local authority
thereof, the Bank of Japan, the Swiss
National Bank or a person a majority of thecapital of which is owned, directly or
indirectly, by the Government of aContracting State or a political subdivisionor local authority thereof;

24

(b)

the term “principal class of shares” means
the class or classes of shares of a company
which represent a majority of the capital orof the voting power of the company;(c)the term “recognised stock exchange” means:

(d)

(i)

any stock exchange established by a
Financial Instruments Exchange or an
approved-type financial instruments
firms association under the Financial
Instruments and Exchange Law (Law No.
25 of 1948) of Japan;(ii)

any Swiss stock exchange on which
registered dealings in shares takeplace;(iii)

the London Stock Exchange, the Irish
Stock Exchange and the stock exchangesof Amsterdam, Brussels, Düsseldorf,
Frankfurt, Hamburg, Johannesburg,
Lisbon, Luxembourg, Madrid, Mexico,
Milan, New York, Paris, Seoul,
Singapore, Stockholm, Sydney, Toronto
and Vienna, and the NASDAQ system;(iv)

any other stock exchange which thecompetent authorities of theContracting States agree to recognise
for the purposes of this Article;

the term “equivalent beneficiary” means:(i)a resident of a state that has aconvention for the avoidance of double
taxation between that state and theContracting State from which thebenefits of this Convention are claimed
such that:(aa) that convention contains
provisions for effective exchange
of information;

25

(bb) that resident is a qualified
person under the limitation on
benefits provisions in thatconvention or, where there are nosuch provisions in thatconvention, would be a qualified
person when that convention isread as including provisions
corresponding to paragraph 2; and(cc) with respect to an item of income
referred to in paragraph 3 ofArticle 10, subparagraph (c), (d)or (e) of paragraph 3 of Article
11, Article 12, paragraph 6 of
Article 13 or Article 22 that
resident would be entitled underthat convention to a rate of tax
with respect to the particularclass of income for which thebenefits are being claimed under
this Convention that is at least
as low as the rate applicable
under this Convention; or
(ii)

(e)

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

the term “gross income” means the total
revenues derived by an enterprise from its
business, less the direct costs of obtaining
such revenues.”
Article 16

Article 23 of the Convention shall be deleted andreplaced by the following:“Article 23
1.
Subject to the provisions of the laws of Japan
regarding the allowance as a credit against Japanese
tax of tax payable in any country other than Japan,
where a resident of Japan derives income from
Switzerland which may be taxed in Switzerland inaccordance with the provisions of this Convention, theamount of Swiss tax payable in respect of that income
shall be allowed as a credit against the Japanese tax
imposed on that resident. The amount of credit,
however, shall not exceed that part of the Japanese
tax which is appropriate to that income.

26

2.
For the purposes of paragraph 1, income
beneficially owned by a resident of Japan which may betaxed in Switzerland in accordance with the provisionsof this Convention shall be deemed to arise fromsources in Switzerland.
3.
Where a resident of Switzerland derives income
which, in accordance with the provisions of thisConvention, may be taxed in Japan, Switzerland shall,subject to the provisions of paragraph 4 or 6, exempt
such income from tax but may, in calculating tax on
the remaining income of that resident, apply the rateof tax which would have been applicable if the
exempted income had not been so exempted. However,where that resident derives gains referred to in theprovisions of paragraph 2 of Article 13, such
exemption shall apply to such gains only if the amountof tax levied in Japan in accordance with theprovisions of that paragraph is demonstrated.
4.
Where a resident of Switzerland derives dividends
or interest which, in accordance with the provisionsof Article 10 or 11, may be taxed in Japan,
Switzerland shall allow, upon request, a relief tosuch resident. The relief may consist of:(a)a deduction from the tax on the income ofthat resident of an amount equal to the tax
levied in Japan in accordance with theprovisions of Articles 10 and 11; suchdeduction shall not, however, exceed thatpart of the Swiss income tax, as computed
before the deduction is given, which isappropriate to the income which may be taxed
in Japan, or(b)a lump sum reduction of the Swiss tax
determined by standardised formulae whichhave regard to the general principles of therelief referred to in subparagraph (a)above, or(c)a partial exemption of such income from
Swiss tax, in any case consisting at leastof the deduction of the tax levied in Japan
from the gross amount of income derived fromJapan.

27

Switzerland shall determine the applicable relief
and regulate the procedure in accordance with theprovisions relating to the carrying out ofinternational conventions of the Swiss Confederation
for the avoidance of double taxation.
5.
A company which is a resident of Switzerland andwhich derives dividends from a company which is a
resident of Japan shall be entitled, for the purposesof Swiss tax with respect to such dividends, to thesame relief which would be granted to the company if
the company paying the dividends were a resident of
Switzerland.
6.
Where a resident of Switzerland derives income
covered by subparagraph (a) of paragraph 3 of Article
13, Switzerland shall allow, upon request, a deduction
from the Swiss tax on this income of an amount equal
to the tax levied in Japan, in accordance withparagraph 3 of Article 13; such deduction shall not,however, exceed that part of the Swiss income tax, as
computed before the deduction is given, which isappropriate to the income which may be taxed inJapan.”
Article 17
Paragraphs 2 and 3 of Article 24 of the Convention
shall be deleted and replaced by the following:“2.
The taxation on a permanent establishment which
an enterprise of a Contracting State has in the other
Contracting State shall not be less favourably leviedin that other Contracting State than the taxation
levied on enterprises of that other Contracting State
carrying on the same activities. The provisions of
this paragraph shall not be construed as obliging aContracting State to grant to residents of the other
Contracting State any personal allowances, reliefs andreductions for taxation purposes on account of civil
status or family responsibilities which it grants to
its own residents.
3.
Except where the provisions of paragraph 1 of
Article 9, paragraph 8 of Article 11, paragraph 4 of
Article 12, or paragraph 3 of Article 22 apply,interest, royalties and other disbursements paid by anenterprise of a Contracting State to a resident of theother Contracting State shall, for the purpose ofdetermining the taxable profits of such enterprise, be
deductible under the same conditions as if they had
been paid to a resident of the first-mentioned
Contracting State.”

28

Article 18
Paragraph 1 of Article 25 of the Convention shall bedeleted and replaced by the following:“1.
Where a person considers that the actions of one
or both of the Contracting States result or will
result for him in taxation not in accordance with theprovisions of this Convention, he may, irrespective of
the remedies provided by the domestic law of thoseContracting States, present his case to the competentauthority of the Contracting State of which he is a
resident or, if his case comes under paragraph 1 of
Article 24, to that of the Contracting State of which
he is a national. The case must be presented within
three years from the first notification of the action
resulting in taxation not in accordance with theprovisions of the Convention.”
Article 19
The following new Article shall be inserted
immediately after Article 25 of the Convention:“Article 25A
1.
The competent authorities of the Contracting
States shall exchange such information as isforeseeably relevant for carrying out the provisionsof this Convention or to the administration or
enforcement of the domestic laws concerning taxes ofevery kind and description imposed on behalf of theContracting States, or of their political subdivisions
or local authorities, insofar as the taxation
thereunder is not contrary to the Convention. The
exchange of 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 thesame manner as information obtained under the domestic
laws of that Contracting State and shall be disclosed
only to persons or authorities (including courts andadministrative bodies) concerned with the assessment
or collection of, the enforcement or prosecution in
respect of, or the determination of appeals in
relation to the taxes referred to in paragraph 1.
Such persons or authorities shall use the information
only for such purposes. They may disclose theinformation in public court proceedings or in judicial
decisions.

29

3.
In no case shall the provisions of paragraphs 1
and 2 be construed so as to impose on a Contracting
State the obligation:(a)

to carry out administrative measures atvariance with the laws and administrative
practice of that or of the other Contracting
State;(b)

to supply information which is not
obtainable under the laws or in the normal
course of the administration of that or of
the other Contracting State;(c)to supply information which would disclose
any trade, business, industrial, commercial
or professional secret or trade process, orinformation the disclosure of which would becontrary to public policy (ordre public).

4.
If information is requested by a Contracting
State in accordance with this Article, the other
Contracting State shall use its information gathering
measures to obtain the requested information, eventhough that other Contracting State may not need suchinformation for its own tax purposes. The obligation
contained in the preceding sentence is subject to thelimitations of paragraph 3 but in no case shall such
limitations be construed to permit a Contracting Stateto decline to supply information solely because 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 isheld by a bank, other financial institution, nominee
or person acting in an agency or a fiduciary capacity
or because it relates to ownership interests in aperson. In order to obtain such information, the tax
authorities of that Contracting State, if necessary tocomply with its obligations under this paragraph,shall have the power to enforce the disclosure of
information covered by this paragraph, notwithstanding
the provisions of paragraph 3 or any contrary
provisions in its domestic laws.”
Article 20
Article 26 of the Convention shall be deleted andreplaced by the following:

30

“Article 26
1.
Nothing in this Convention shall affect the
fiscal privileges of members of diplomatic missions or
consular posts under the general rules ofinternational law or under the provisions of special
agreements.
2.
Notwithstanding the provisions of Article 4, an
individual who is a member of a diplomatic mission,
consular post or permanent mission of a Contracting
State which is situated in the other Contracting Stateor in a third State shall be deemed, for the purposesof this Convention, to be a resident of the sending
State if:(a)in accordance with international law he is
not liable to tax in the receiving State inrespect of income from sources outside that
State, and(b)

he is liable in the sending State to thesame obligations in relation to tax on his
total income as are residents of that State.

3.
The Convention shall not apply to internationalorganisations, to organs or officials thereof and to
persons who are members of a diplomatic mission,
consular post or permanent mission of a third State,being present in a Contracting State and not treatedin either Contracting State as residents in respect oftaxes on income.”
Article 21
1.
This Protocol amending the Convention (hereinafterreferred to as “the Amending Protocol”) shall be approvedin accordance with the legal procedures of each of theContracting States and shall enter into force on thethirtieth day after the date of exchange of diplomatic
notes indicating such approval.
2.

The Amending Protocol shall be applicable:(a)with respect to taxes withheld at source, foramounts taxable on or after 1 January in thecalendar year next following that in which theAmending Protocol enters into force;

31

(b)

with respect to taxes on income which are notwithheld at source, as regards income for any
taxable year beginning on or after 1 January inthe calendar year next following that in which
the Amending Protocol enters into force; and(c)with respect to other taxes, as regards taxes forany taxable year beginning on or after 1 January
in the calendar year next following that in which
the Amending Protocol enters into force.

3.
The exchange of information under the provisions ofArticle 25A of the Convention as amended by the Amending
Protocol shall be granted for taxable years beginning on orafter 1 January next following the date on which theAmending Protocol enters into force.
4.
The Amending Protocol shall remain in effect as longas the Convention remains in force.
IN WITNESS WHEREOF the undersigned, being duly
authorised thereto by their respective Governments, havesigned the Amending Protocol.
DONE in duplicate at Berne this twenty-first day ofMay, 2010, in the Japanese, German and English languages,
all texts being equally authoritative and, in the casethere is any divergence of interpretation between theJapanese and the German texts, the English text shallprevail.

For the Government of Japan:

For the Swiss Federal
Council:

Ichiro Komatsu

Hans-Rudolf Merz

32

Protocol

At the signing of the Protocol amending the Convention
between Japan and Switzerland for the Avoidance of Double
Taxation with respect to Taxes on Income signed on 19
January 1971, the Government of Japan and the Swiss Federal
Council have agreed upon the following provisions, whichshall form an integral part of the Convention:
1.

With reference to the whole Convention:

No relief shall be available under the Convention if
it was the main purpose of any person concerned with thecreation or assignment of any right or property in respectof which the income is paid or derived to take advantage of
the Convention by means of that creation or assignment.
2.
With reference to subparagraph (k) of paragraph 1 of
Article 3 of the Convention:
It is understood that a pension fund or pension scheme
shall be treated as exempt from tax on income derived withrespect to the activities described in clause (ii) of thatsubparagraph even though it is subjected to the tax
stipulated in Article 8 or 10-2 of the Corporation Tax Law(Law No. 34 of 1965) of Japan or paragraph 1 of Article 20of its supplementary provisions.
3.

With reference to Article 10 of the Convention:

The provisions of subparagraph (a) of paragraph 2 andsubparagraph (a) of paragraph 3 of that Article shall not
apply in the case of dividends paid by a company which isentitled to a deduction for dividends paid to its
beneficiaries in computing its taxable income in theContracting State of which the company paying the dividends
is a resident.
4.
With reference to paragraph 3 of Article 11 andArticle 22A of the Convention:
It is understood that the term “insurance” includes
re-insurance.
5.

With reference to Article 25A of the Convention:

33

(a)

In no case shall the provisions of that Article
be construed so as to impose on a Contracting
State the obligation to supply information if theother Contracting State has not pursued all
reasonable measures of obtaining such information
available under the laws and administrative
practice of that other Contracting State, except
those measures that would give rise todisproportionate difficulties.

(b)

It is understood that the exchange of information
provided for in that Article does not include
measures aimed only at the simple collection ofpieces of evidence (“fishing expeditions”).

(c)

It is understood that, where information isrequested by a Contracting State in accordancewith that Article, the competent authority ofthat Contracting State shall provide thefollowing information to the competent authorityof the other Contracting State:

(d)

(i)

information sufficient to identify the
person under examination (typically, nameand, to the extent known, address, accountnumber or similar identifying information);(ii)

the period of time with respect to therequested information;(iii)

a statement of the information sought
including its nature and the form in which
the first-mentioned Contracting State wishes
to receive the information from the other
Contracting State;(iv)

the tax purpose for which the information issought; and(v)

the name and, to the extent known, theaddress of any person believed to be inpossession of the requested information.

Although Article 25A of the Convention does not
restrict the possible methods for exchanging
information, it shall not commit the Contracting
States to exchange information on an automatic ora spontaneous basis.

34

(e)

A Contracting State may decline to supply
information relating to confidential
communications between attorneys, solicitors orother admitted legal representatives in theirrole as such and their clients to the extent thatthe communications are protected from disclosure
under the domestic laws of that Contracting
State.

(f)

It is understood that, where information isrequested by a Contracting State in accordancewith that Article, the administrative procedural
rules regarding taxpayers’ rights provided for in
the other Contracting State remain applicable tothe extent that they do not prevent or unduly
delay effective exchange of information.

This Protocol enters into force on the same date of
the entry into force of the Protocol amending theConvention between Japan and Switzerland for the Avoidanceof Double Taxation with respect to Taxes on Income signed
on 19 January 1971.
IN WITNESS WHEREOF the undersigned, being duly
authorised thereto by their respective Governments, havesigned this Protocol.
DONE in duplicate at Berne this twenty-first day ofMay, 2010, in the Japanese, German and English languages,
all texts being equally authoritative and, in the casethere is any divergence of interpretation between theJapanese and the German texts, the English text shallprevail.

For the Government of Japan:

For the Swiss Federal
Council:

Ichiro Komatsu

Hans-Rudolf Merz

35