AGREEMENT BETWEENJAPAN AND THE REPUBLIC OF CROATIAFOR THE ELIMINATION OF DOUBLE TAXATIONWITH RESPECT TO TAXES ON INCOME
AND THE PREVENTION OF TAX EVASION AND AVOIDANCEAGREEMENT BETWEENJAPAN AND THE REPUBLIC OF CROATIAFOR THE ELIMINATION OF DOUBLE TAXATIONWITH RESPECT TO TAXES ON INCOME
AND THE PREVENTION OF TAX EVASION AND AVOIDANCEJapan and the Republic of Croatia,
Desiring to further develop their economic
relationship and to enhance their co-operation in tax
matters,
Intending to conclude an Agreement for the eliminationof double taxation with respect to taxes on income without
creating opportunities for non-taxation or reduced taxation
through tax evasion or avoidance (including through treatyshopping arrangements aimed at obtaining reliefs provided
in this Agreement for the indirect benefit of residents ofthird States),
Have agreed as follows:
Article 1
PERSONS COVERED1.
This Agreement shall apply to persons who areresidents of one or both of the Contracting States.
2.
For the purposes of this Agreement, income derived byor through an entity or arrangement that is treated aswholly or partly fiscally transparent under the tax law ofeither Contracting State shall be considered to be incomeof a resident of a Contracting State but only to the extent
that the income is treated, for purposes of taxation bythat Contracting State, as the income of a resident of thatContracting State.
3.
This Agreement shall not affect the taxation, by aContracting State, of its residents except with respect tothe benefits granted under paragraph 3 of Article 7,paragraph 2 of Article 9 and Articles 18, 19, 22, 23, 24
and 27.
Article 2
TAXES COVERED1.
This Agreement shall apply to taxes on income imposedon behalf of a Contracting State or of its politicalsubdivisions or local authorities, irrespective of themanner in which they are levied.

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2.
There shall be regarded as taxes on income all taxes
imposed on total income or on elements of income, including
taxes on gains from the alienation of any property, taxes
on the total amounts of wages or salaries paid byenterprises, as well as taxes on capital appreciation.
3.
The existing taxes to which this Agreement shall apply
are:
(a)

in Croatia:(i)the profit tax;(ii)

the income tax; and(iii)

the surtax on the income tax(hereinafter referred to as “Croatian tax”);(b)in Japan:(i)

the income tax;(ii)

the corporation tax;(iii)

the special income tax for reconstruction;(iv)

the local corporation tax; and(v)

the local inhabitant taxes(hereinafter referred to as “Japanese tax”).
4.
This Agreement shall apply also to any identical or
substantially similar taxes that are imposed after the dateof signature of the Agreement in addition to, or in placeof, the existing taxes. The competent authorities of theContracting States shall notify each other of any
significant changes that have been made in their taxation
laws.
Article 3
GENERAL DEFINITIONS
1.
For the purposes of this Agreement, unless the context
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(a)the term “Croatia” means the Republic of Croatia
and, when used in a geographical sense, theterritory of the Republic of Croatia as well as
those maritime areas adjacent to the outer limitof territorial sea, including the seabed andsubsoil thereof, over which the Republic of
Croatia in accordance with international law andthe laws of the Republic of Croatia exercises its
sovereign rights and jurisdiction;(b)

the term “Japan”, when used in a geographicalsense, means all the territory of Japan,
including its territorial sea, in which the laws
relating to Japanese tax are in force, and all
the area beyond its territorial sea, including
the seabed and subsoil thereof, over which Japan
has sovereign rights in accordance withinternational law and in which the laws relating
to Japanese tax are in force;(c)the terms “a Contracting State” and “the other
Contracting State” mean Japan or Croatia, as thecontext requires;(d)the term “person” includes an individual, acompany and any other body of persons;(e)the term “company” means any body corporate or
any entity that is treated as a body corporate
for tax purposes;(f)the term “enterprise” applies to the carrying onof any business;(g)

the terms “enterprise of a Contracting State” and“enterprise of the other Contracting State” mean
respectively an enterprise carried on by aresident of a Contracting State and an enterprise
carried on by a resident of the other Contracting
State;(h)the term “international traffic” means any
transport by a ship or aircraft except when theship or aircraft is operated solely between
places in a Contracting State and the enterprisethat operates the ship or aircraft is not anenterprise of that Contracting State;(i)the term “competent authority” means:- 3 -クロアチア_英文【本文】.indd

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(j)

(i)

in Croatia, the Minister of Finance or his
authorised representative; and(ii)

in Japan, the Minister of Finance or his
authorised representative;

the term “national”, in relation to a Contracting
State, means:(i)

any individual possessing the nationality ofthat Contracting State; and(ii)

any legal person, partnership or association
deriving its status as such from the laws inforce in that Contracting State;(k)the term “business” includes the performance ofprofessional services and of other activities ofan independent character;(l)the term “recognised pension fund” of aContracting State means an entity or arrangement
established under the law of that Contracting
State that is treated as a separate person under
the taxation laws of that Contracting State and:(i)that is established and operated exclusively
or almost exclusively to administer orprovide retirement benefits and ancillary or
incidental benefits or other similar
remuneration to individuals and that isregulated as such by that Contracting Stateor one of its political subdivisions or
local authorities; or(ii)that is established and operated exclusively
or almost exclusively to invest funds forthe benefit of other recognised pension
funds of that Contracting State.

Where an entity or arrangement established under
the law of a Contracting State would constitute arecognised pension fund under clause (i) or (ii)
if it were treated as a separate person under the
taxation laws of that Contracting State, it shallbe considered, for the purposes of the Agreement,
as a separate person treated as such under the
taxation laws of that Contracting State and all
the assets and income of the entity or
arrangement shall be treated as assets held andincome derived by that separate person and not byanother person.

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2.
As regards the application of this Agreement at any
time by a Contracting State, any term not defined thereinshall, unless the context otherwise requires or thecompetent authorities of the Contracting States agree to adifferent meaning pursuant to the provisions of Article 24,
have the meaning that it has at that time under the law ofthat Contracting State for the purposes of the taxes towhich the Agreement applies, any meaning under theapplicable tax laws of that Contracting State prevailingover a meaning given to the term under other laws of thatContracting State.
Article 4
RESIDENT1.
For the purposes of this Agreement, the term “residentof a Contracting State” means any person who, under thelaws of that Contracting State, is liable to tax therein byreason of his domicile, residence, place of head or main
office, place of management or any other criterion of asimilar nature, and also includes that Contracting Stateand any political subdivision or local authority thereof as
well as a recognised pension fund of that Contracting
State. This term, however, does not include any person who
is liable to tax in that Contracting State in respect onlyof income from sources in that Contracting State.
2.
Where by reason of the provisions of paragraph 1 an
individual 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 permanent
home 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 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 tohim in either Contracting State, he shall bedeemed to be a resident only of the Contracting
State in which he has an habitual abode;(c)

if he has an habitual abode in both Contracting
States or in neither of them, he shall be deemed
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(d)if he is a national of both Contracting States orof neither of them, the competent authorities of
the Contracting States shall settle the question
by mutual agreement.

3.
Where by reason of the provisions of paragraph 1 aperson other than an individual is a resident of bothContracting States, the competent authorities of theContracting States shall endeavour to determine by mutual
agreement the Contracting State of which such person shallbe deemed to be a resident for the purposes of thisAgreement, having regard to its place of head or main
office, its place of registration, its place of effective
management, the place where it is incorporated or otherwise
constituted and any other relevant factors. In the absenceof such agreement, such person shall not be entitled to any
relief or exemption from tax provided by the Agreement.
Article 5
PERMANENT ESTABLISHMENT
1.
For the purposes of this Agreement, the term
“permanent establishment” means a fixed place of businessthrough which the business of an enterprise is wholly or
partly carried on.
2.
The term “permanent establishment” includes
especially:(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 installation
project constitutes a permanent establishment only if it
lasts more than twelve months.
4.
Notwithstanding the preceding provisions of this
Article, the term “permanent establishment” shall be deemed
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(a)the use of facilities solely for the purpose ofstorage or display of goods or merchandise
belonging to the enterprise;(b)

the maintenance of a stock of goods ormerchandise belonging to the enterprise solely
for the purpose of storage or display;(c)the maintenance of a stock of goods ormerchandise belonging to the enterprise solely
for 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;(e)the maintenance of a fixed place of businesssolely for the purpose of carrying on, for theenterprise, any activity not listed insubparagraphs (a) to (d), provided that thisactivity has a preparatory or auxiliary
character; or(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 ofbusiness resulting from this combination is of apreparatory or auxiliary character.

5.
Paragraph 4 shall not apply to a fixed place ofbusiness that is used or maintained by an enterprise if thesame enterprise or a closely related enterprise carries on
business activities at the same place or at another placein the same Contracting State and:(a)that place or other place constitutes a permanentestablishment for the enterprise or the closely
related enterprise under the provisions of this
Article; or(b)the overall activity resulting from the
combination of the activities carried on by thetwo enterprises at the same place, or by the same
enterprise or closely related enterprises at thetwo places, is not of a preparatory or auxiliary
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provided that the business activities carried on by the twoenterprises at the same place, or by the same enterprise or
closely related enterprises at the two places, constitutecomplementary functions that are part of a cohesive
business operation.
6.
Notwithstanding the provisions of paragraphs 1 and 2
but subject to the provisions of paragraph 7, where aperson is acting in a Contracting State on behalf of anenterprise and, in doing so, habitually concludes
contracts, or habitually plays the principal role leading
to the conclusion of contracts that are routinely concluded
without material modification by the enterprise, and thesecontracts are:(a)in the name of the enterprise; or(b)for the transfer of the ownership of, or for the
granting of the right to use, property owned bythat enterprise or that the enterprise has theright to use; or(c)for the provision of services by that enterprise,that enterprise shall be deemed to have a permanentestablishment in that Contracting State in respect of any
activities which that person undertakes for the enterprise,
unless the activities of such person are limited to thosementioned in paragraph 4 which, if exercised through afixed place of business (other than a fixed place ofbusiness to which paragraph 5 would apply), would not makethis fixed place of business a permanent establishment
under the provisions of paragraph 4.
7.
Paragraph 6 shall not apply where the person acting ina Contracting State on behalf of an enterprise of the other
Contracting State carries on business in the firstmentioned Contracting State as an independent agent andacts for the enterprise in the ordinary course of thatbusiness. Where, however, a person acts exclusively or
almost exclusively on behalf of one or more enterprises towhich it is closely related, that person shall not be
considered to be an independent agent within the meaning of
this paragraph with respect to any such enterprise.
8.
The fact that a company which is a resident of aContracting State controls or is controlled by a company
which is a resident of the other Contracting State, or
which 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.

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9.
For the purposes of this Article, a person orenterprise is closely related to an enterprise if, based on
all the relevant facts and circumstances, one has controlof the other or both are under the control of the same
persons or enterprises. In any case, a person orenterprise shall be considered to be closely related to an
enterprise if one possesses directly or indirectly morethan 50 per cent of the beneficial interest in the other(or, in the case of a company, more than 50 per cent of theaggregate vote and value of the company’s shares or of thebeneficial equity interest in the company) or if anotherperson or enterprise possesses directly or indirectly morethan 50 per cent of the beneficial interest (or, in thecase of a company, more than 50 per cent of the aggregate
vote and value of the company’s shares or of the beneficial
equity interest in the company) in the person and theenterprise or in the two enterprises.
Article 6
INCOME FROM IMMOVABLE PROPERTY
1.
Income derived by a resident of a Contracting State
from immovable property (including income from agriculture
or forestry) situated in the other Contracting State may betaxed in that other Contracting State.
2.
The term “immovable property” shall have the meaning
which it has under the law of the Contracting State inwhich the property in question is situated. The term shallin any case include property accessory to immovable
property, livestock and equipment used in agriculture andforestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable
property and rights to variable or fixed payments as
consideration for the working of, or the right to work,
mineral deposits, sources and other natural resources;
ships and aircraft shall not be regarded as immovable
property.
3.
The provisions of paragraph 1 shall apply to income
derived from the direct use, letting, or use in any otherform of immovable property.
4.
The provisions of paragraphs 1 and 3 shall also apply
to the income from immovable property of an enterprise.

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Article 7
BUSINESS PROFITS
1.
Profits of an enterprise of a Contracting State shallbe taxable only in that Contracting State unless theenterprise carries on business in the other Contracting
State through a permanent establishment situated therein.
If the enterprise carries on business as aforesaid, theprofits that are attributable to the permanentestablishment in accordance with the provisions ofparagraph 2 may be taxed in that other Contracting State.
2.
For the purposes of this Article and Article 22, theprofits that are attributable in each Contracting State to
the permanent establishment referred to in paragraph 1 are
the profits it might be expected to make, in particular inits dealings with other parts of the enterprise, if it werea separate and independent enterprise engaged in the sameor similar activities under the same or similar conditions,taking into account the functions performed, assets used
and risks assumed by the enterprise through the permanentestablishment and through the other parts of theenterprise.
3.
Where, in accordance with paragraph 2, a Contracting
State adjusts the profits that are attributable to apermanent establishment of an enterprise of one of theContracting States and taxes accordingly profits of theenterprise that have been charged to tax in the other
Contracting State, that other Contracting State shall, tothe extent necessary to eliminate double taxation on these
profits, make an appropriate adjustment to the amount of
the tax charged therein on those profits. In determining
such adjustment, the competent authorities of theContracting States shall if necessary consult each other.
4.
Where profits include items of income which are dealt
with separately in other Articles of this Agreement, thenthe provisions of those Articles shall not be affected by
the provisions of this Article.
Article 8
INTERNATIONAL SHIPPING AND AIR TRANSPORT
1.
Profits of an enterprise of a Contracting State fromthe operation of ships or aircraft in international traffic
shall be taxable only in that Contracting State.

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2.
Notwithstanding the provisions of Article 2, anenterprise of a Contracting State shall be exempt, inrespect of its carrying on the operation of ships oraircraft in international traffic, from, in the case of anenterprise of Croatia, the enterprise tax of Japan and, inthe case of an enterprise of Japan, any tax similar to theenterprise tax of Japan which is imposed after the date ofsignature of this Agreement in Croatia.
3.
The provisions of paragraphs 1 and 2 shall also apply
to profits from the participation in a pool, a joint
business or an international operating agency.
Article 9
ASSOCIATED ENTERPRISES
1.

Where
(a)

an enterprise of a Contracting State participates
directly or indirectly in the management, control
or capital of an enterprise of the other
Contracting State, or(b)

the same persons participate directly or
indirectly in the management, control or capitalof an enterprise of a Contracting State and an
enterprise of the other Contracting State,

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 madebetween independent enterprises, then any profits which
would, 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 the profits ofan enterprise of that Contracting State - and taxes
accordingly - profits on which an enterprise of the other
Contracting State has been charged to tax in that other
Contracting State and the profits so included are profits
which would have accrued to the enterprise of the firstmentioned 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 tothe amount of the tax charged therein on those profits. In
determining such adjustment, due regard shall be had to theother provisions of this Agreement and the competentauthorities of the Contracting States shall if necessary
consult each other.

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Article 10
DIVIDENDS
1.
Dividends paid by a company which is a resident of aContracting State to a resident of the other Contracting
State may be taxed in that other Contracting State.
2.
However, dividends paid by a company which is a
resident of a Contracting State may also be taxed in thatContracting State according to the laws of that Contracting
State, but if the beneficial owner of the dividends is a
resident of the other Contracting State, the tax so charged
shall not exceed 5 per cent of the gross amount of thedividends.
3.
Notwithstanding the provisions of paragraph 2,
dividends paid by a company which is a resident of aContracting State shall be taxable only in the other
Contracting State if the beneficial owner of the dividends
is a resident of that other Contracting State and is acompany which has owned directly or indirectly at least 25
per cent of the voting power of the company paying thedividends throughout a 365 day period that includes thedate on which entitlement to the dividends is determined(for the purpose of computing that period, no account shallbe taken of changes of ownership that would directly result
from a corporate reorganisation, such as a merger ordivisive reorganisation, of the company that is thebeneficial owner of the dividends or that pays thedividends).
4.

(a)

A company, being a resident of a Contracting
State, shall not be entitled to a benefit thatwould otherwise be accorded under the provisionsof paragraph 3 unless such company is a qualified
person, as defined in subparagraph (b), at thetime when the benefit would otherwise beaccorded.

(b)

A company, being a resident of a Contracting
State, shall be a qualified person at a time whena benefit referred to in subparagraph (a) would
otherwise be accorded if:(i)at that time, the principal class of its
shares is regularly traded on one or more
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(ii)at that time and on at least half of thedays of a twelve month period that includes
that time, at least 50 per cent of its
shares are directly or indirectly owned by aperson or persons who is a resident of thatContracting State and is:(aa) a company which satisfies therequirement described in clause (i);(bb) an individual; or(cc) that Contracting State, a politicalsubdivision or local authority thereof,
the central bank of that Contracting
State, or an agency or instrumentalityof that Contracting State or politicalsubdivision or local authority.

(c)

If a company, being a resident of a Contracting
State, is not a qualified person, the competentauthority of the Contracting State in which abenefit is denied under subparagraph (a) may,nevertheless, grant a benefit referred to in thatsubparagraph, taking into account the object andpurpose of the Agreement, but only if suchcompany demonstrates to the satisfaction of suchcompetent authority that neither its
establishment, acquisition or maintenance, nor
the conduct of its operations, had as one of its
principal purposes the obtaining of such benefit.
The competent authority of the Contracting Stateto which a request has been made under thissubparagraph by a company, being a resident of
the other Contracting State, shall consult withthe competent authority of that other Contracting
State before either granting or denying therequest.

(d)

For the purposes of this paragraph:(i)the term “principal class of shares” means
the class or classes of shares of a company
which represents the majority of theaggregate vote and value of the company;(ii)

the term “recognised stock exchange” means:(aa) any stock exchange established andregulated as such under the laws ofeither Contracting State; and- 13 -

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(bb) any other stock exchange agreed upon by
the competent authorities of theContracting States.
5.
Notwithstanding the provisions of paragraphs 2 and 3,
dividends which are deductible in computing the taxable
income of the company paying the dividends in theContracting State of which that company is a resident may
be taxed in that Contracting State according to the laws ofthat Contracting State, but if the beneficial owner of thedividends is a resident of the other Contracting State, thetax so charged shall not exceed 10 per cent of the grossamount of the dividends.
6.
The provisions of paragraphs 2, 3 and 5 shall notaffect the taxation of the company in respect of the
profits out of which the dividends are paid.
7.
The term “dividends” as used in this Article means
income from shares or other rights, not being debt-claims,
participating in profits, as well as income from otherrights which is subjected to the same taxation treatment asincome from shares by the laws of the Contracting State ofwhich the company making the distribution is a resident.
8.
The provisions of paragraphs 1, 2, 3 and 5 shall not
apply if the beneficial owner of the dividends, being a
resident of a Contracting State, carries on business in theother Contracting State of which the company paying thedividends is a resident through a permanent establishment
situated therein and the holding in respect of which thedividends are paid is effectively connected with suchpermanent establishment. In such case the provisions ofArticle 7 shall apply.
9.
Where a company which is a resident of a Contracting
State derives profits or income from the other Contracting
State, that other Contracting State may not impose any tax
on the dividends paid by the company, except insofar as
such dividends are paid to a resident of that other
Contracting State or insofar as the holding in respect ofwhich the dividends are paid is effectively connected witha permanent establishment 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 insuch other Contracting State.

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Article 11
INTEREST
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, interest arising in a Contracting State may
also be taxed in that Contracting State according to thelaws of that Contracting State, but if the beneficial ownerof the interest is a resident of the other Contracting
State, the tax so charged shall not exceed 5 per cent of
the gross amount of the interest.
3.
Notwithstanding the provisions of paragraph 2,interest arising in a Contracting State shall be taxable
only in the other Contracting State if:(a)the interest is beneficially owned by that other
Contracting State, a political subdivision or
local authority thereof, the central bank of that
other Contracting State or any institution wholly
owned by that other Contracting State or apolitical subdivision or local authority thereof;or(b)

the interest is beneficially owned by a residentof that other Contracting State with respect to
debt-claims guaranteed, insured or indirectly
financed by that other Contracting State, apolitical subdivision or local authority thereof,
the central bank of that other Contracting Stateor any institution wholly owned by that other
Contracting State or a political subdivision or
local authority thereof.

4.
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 a right toparticipate in the debtor’s profits, and in particular,
income from government securities and income from bonds ordebentures, including premiums and prizes attaching to suchsecurities, bonds or debentures as well as other incomethat is subjected to the same taxation treatment as income
from money lent by the laws of the Contracting State inwhich the income arises. Income dealt with in Article 10
and penalty charges for late payment shall not, however, beregarded as interest for the purposes of this Article.

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5.
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 business in theother Contracting State in which the interest arises
through 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 Contracting
State when the payer is a resident of that Contracting
State. Where, however, the person paying the interest,
whether he is a resident of a Contracting State or not, hasin a Contracting State a permanent establishment inconnection with which the indebtedness on which theinterest is paid was incurred, and such interest is borneby such permanent establishment, then such interest shallbe deemed to arise in the Contracting State in which thepermanent establishment is situated.
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, having
regard 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 Agreement.
Article 12
ROYALTIES
1.
Royalties arising in a Contracting State and paid to aresident of the other Contracting State may be taxed inthat other Contracting State.
2.
However, royalties arising in a Contracting State may
also be taxed in that Contracting State according to thelaws of that Contracting State, but if the beneficial ownerof the royalties is a resident of the other Contracting
State, the tax so charged shall not exceed 5 per cent of
the gross amount of the royalties.

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3.
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 films,
or any patent, trade mark, design or model, plan, or secretformula or process, or for information concerningindustrial, commercial or scientific experience.
4.
The provisions of paragraphs 1 and 2 shall not apply
if the beneficial owner of the royalties, being a residentof a Contracting State, carries on business in the other
Contracting 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.
5.
Royalties shall be deemed to arise in a Contracting
State when the payer is a resident of that Contracting
State. Where, however, the person paying the royalties,
whether he is a resident of a Contracting State or not, hasin a Contracting State a permanent establishment inconnection with which the liability to pay the royalties
was incurred, and such royalties are borne by suchpermanent establishment, then such royalties shall bedeemed to arise in the Contracting State in which thepermanent establishment is situated.
6.
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 royalties, having
regard 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 according
to the laws of each Contracting State, due regard being had
to the other provisions of this Agreement.
Article 13
CAPITAL GAINS
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.

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2.
Gains from the alienation of any property, other thanimmovable property referred to in Article 6, forming partof the business property of a permanent establishment which
an enterprise of a Contracting State has in the other
Contracting State, including such gains from the alienationof such a permanent establishment (alone or with the wholeenterprise), may be taxed in that other Contracting State.
3.
Gains that an enterprise of a Contracting State that
operates ships or aircraft in international traffic derives
from the alienation of such ships or aircraft, or of any
property, other than immovable property referred to in
Article 6, pertaining to the operation of such ships oraircraft, shall be taxable only in that Contracting State.
4.
Gains derived by a resident of a Contracting State
from the alienation of shares of a company or comparable
interests, such as interests in a partnership or trust, may
be taxed in the other Contracting State if, at any time
during the 365 days preceding the alienation, these sharesor comparable interests derived at least 50 per cent of
their value directly or indirectly from immovable property,
as defined in Article 6, situated in that other Contracting
State, unless such shares or comparable interests aretraded on a recognised stock exchange specified in clause(ii) of subparagraph (d) of paragraph 4 of Article 10 andthe resident and persons related to that resident own in
the aggregate 5 per cent or less of the class of suchshares or comparable interests.
5.
Gains from the alienation of any property, other thanthat referred to in paragraphs 1, 2, 3 and 4, shall betaxable only in the Contracting State of which thealienator is a resident.
Article 14
INCOME 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 employment
shall be taxable only in that Contracting State unless theemployment is exercised in the other Contracting State. If
the employment is so exercised, such remuneration as isderived therefrom may be taxed in that other Contracting
State.
2.
Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting Statein respect of an employment exercised in the other
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(a)the recipient is present in the other Contracting
State for a period or periods not exceeding in
the aggregate 183 days in any twelve month period
commencing or ending in the taxable year
concerned, and(b)

the remuneration is paid by, or on behalf of, anemployer who is not a resident of the other
Contracting State, and(c)the remuneration is not borne by a permanentestablishment which the employer has in the other
Contracting State.

3.
Notwithstanding the preceding provisions of this
Article, remuneration derived by a resident of aContracting State in respect of an employment, as a memberof the regular complement of a ship or aircraft, that is
exercised aboard a ship or aircraft operated ininternational traffic, other than aboard a ship or aircraft
operated solely within the other Contracting State, shallbe taxable only in the first-mentioned Contracting State.
Article 15
DIRECTORS’ FEES
Directors’ fees and other similar payments derived bya resident of a Contracting State in his capacity as amember of the board of directors, or of a similar organ, of
a company which is a resident of the other Contracting
State may be taxed in that other Contracting State.
Article 16
ENTERTAINERS AND SPORTSPERSONS
1.
Notwithstanding the provisions of Article 14, income
derived by a resident of a Contracting State as anentertainer, such as a theatre, motion picture, radio or
television artiste, or a musician, or as a sportsperson,from that resident’s personal activities as such exercisedin the other Contracting State, may be taxed in that other
Contracting State.
2.
Where income in respect of personal activities
exercised by an entertainer or a sportsperson acting as
such accrues not to the entertainer or sportsperson but toanother person, that income may, notwithstanding theprovisions of Article 14, be taxed in the Contracting Statein which the activities of the entertainer or sportsperson
are exercised.

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Article 17
PENSIONS
Subject to the provisions of paragraph 2 of Article
18, pensions and other similar remuneration beneficiallyowned by a resident of a Contracting State shall be taxable
only in that Contracting State.
Article 18
GOVERNMENT SERVICE
1.

2.

(a)

Salaries, wages and other similar remuneration
paid 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 thatContracting State.

(b)

However, such salaries, wages and other similar
remuneration shall be taxable only in the other
Contracting State if the services are rendered inthat other Contracting State and the individual
is a resident of that other Contracting State
who:
(i)

is a national of that other Contracting
State; or(ii)

did not become a resident of that other
Contracting State solely for the purpose of
rendering the services.

(a)

Notwithstanding the provisions of paragraph 1,
pensions and other similar remuneration paid by,or out of funds which are created by or to which
contributions are made by, a Contracting State ora political subdivision or local authority
thereof to an individual in respect of services
rendered to that Contracting State or politicalsubdivision or local authority shall be taxable
only in that Contracting State.

(b)

However, such pensions and other similar
remuneration shall be taxable only in the other
Contracting State if the individual is a residentof, and a national of, that other Contracting
State.

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3.
The provisions of Articles 14, 15, 16 and 17 shallapply to salaries, wages, pensions, and other similar
remuneration in respect of services rendered in connection
with a business carried on by a Contracting State or apolitical subdivision or local authority thereof.
Article 19
STUDENTS
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 present
in the first-mentioned Contracting State solely for the
purpose of his education or training receives for the
purpose of his maintenance, education or training shall not
be taxed in that Contracting State, provided that suchpayments arise from sources outside that Contracting State.
The exemption provided by this Article shall apply to abusiness apprentice only for a period not exceeding one
year from the date on which he first begins his training inthat Contracting State.
Article 20
SILENT PARTNERSHIP
Notwithstanding any other provisions of thisAgreement, any income derived by a silent partner who is a
resident of a Contracting State in respect of a silent
partnership (in the case of Croatia, “tajno društvo” and in
the case of Japan, “Tokumei Kumiai”) contract or anothersimilar contract may be taxed in the other Contracting
State according to the laws of that other Contracting
State, provided that such income arises in that other
Contracting State and is deductible in computing thetaxable income of the payer in that other Contracting
State.
Article 21
OTHER INCOME
1.
Items of income beneficially owned by a resident of aContracting State, wherever arising, not dealt with in theforegoing Articles of this Agreement shall be taxable onlyin that Contracting State.

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2.
The provisions of paragraph 1 shall not apply toincome, other than income from immovable property as
defined in paragraph 2 of Article 6, if the beneficial
owner of such income, being a resident of a Contracting
State, carries on business in the other Contracting Statethrough a permanent establishment situated therein and theright or property in respect of which the income is paid iseffectively connected with such permanent establishment.
In such case the provisions of Article 7 shall apply.
3.
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 income referred to inparagraph 1 exceeds the amount which would have been agreed
upon by the payer and the beneficial owner in the absenceof such relationship, the provisions of this Article shallapply only to the last-mentioned amount. In such case, theexcess part of the income shall remain taxable according to
the laws of each Contracting State, due regard being had tothe other provisions of this Agreement.
Article 22
ELIMINATION OF DOUBLE TAXATION
1.

(a)Where a resident of Croatia derives income which,in accordance with the provisions of thisAgreement, may be taxed in Japan, Croatia shallallow as a deduction from the tax on the incomeof that resident an amount equal to Japanese tax
paid in Japan. Such deduction shall not,however, exceed that part of Croatian tax ascomputed before the deduction is given, which is
attributable to the income which may be taxed inJapan.

(b)

Where in accordance with any provision of theAgreement income derived by a resident of Croatia
is exempt from tax in Croatia, Croatia may
nevertheless, in calculating the amount of tax on
the remaining income of such resident, take into
account the exempted income.

2.
Subject to the provisions of the laws of Japan
regarding the allowance as a credit against Japanese tax oftax payable in any country other than Japan, where aresident of Japan derives income from Croatia which may betaxed in Croatia in accordance with the provisions of thisAgreement, the amount of Croatian tax payable in respect ofthat income shall be allowed as a credit against theJapanese tax imposed on that resident. The amount ofcredit, however, shall not exceed the amount of theJapanese tax which is appropriate to that income.

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Article 23
NON-DISCRIMINATION
1.
Nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or
any requirement connected therewith, which is other or moreburdensome than the taxation and connected requirements towhich nationals of that other Contracting State in the same
circumstances, in particular with respect to residence, areor may be subjected. The provisions of this paragraphshall, notwithstanding the provisions of Article 1, also
apply to persons who are not 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. The provisions of this paragraph shallnot be construed as obliging a Contracting State to grant
to residents of the other Contracting State any personal
allowances, reliefs and reductions 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 7 of Article 11, paragraph 6 of Article 12 orparagraph 3 of Article 21 apply, interest, royalties andother disbursements paid by an enterprise of a Contracting
State 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 if
they had been paid to a resident of the first-mentioned
Contracting State.
4.
Enterprises of a Contracting State, the capital ofwhich is wholly or partly owned or controlled, directly or
indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the firstmentioned Contracting State to any taxation or any
requirement connected therewith which is other or moreburdensome than the taxation and connected requirements towhich other similar enterprises of the first-mentioned
Contracting State are or may be subjected.
5.
The provisions of this Article shall, notwithstanding
the 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 24
MUTUAL AGREEMENT PROCEDURE
1.
Where a person considers that the actions of one orboth of the Contracting States result or will result for
him in taxation not in accordance with the provisions of
this Agreement, he may, irrespective of the remedies
provided 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 must
be presented within three years from the first notificationof the action resulting in taxation not in accordance withthe provisions of the Agreement.
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 Agreement. Any agreement reachedshall be implemented notwithstanding any time limits in thedomestic law of the Contracting States.
3.
The competent authorities of the Contracting Statesshall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation orapplication of this Agreement. They may also consult
together for the elimination of double taxation in cases
not provided for in the Agreement.
4.
The competent authorities of the Contracting States
may communicate with each other directly, including througha joint commission consisting of themselves or theirrepresentatives, for the purpose of reaching an agreementin the sense of the preceding paragraphs of this Article.
Article 25
EXCHANGE OF INFORMATION
1.
The competent authorities of the Contracting Statesshall exchange such information as is foreseeably relevant
for carrying out the provisions of this Agreement or to theadministration or enforcement of the domestic laws
concerning taxes of every kind and description imposed onbehalf of the Contracting States, or of their politicalsubdivisions or local authorities, insofar as the taxation
thereunder is not contrary to the Agreement. The exchange
of information is not restricted by Articles 1 and 2.

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2.
Any information received under paragraph 1 by aContracting State shall be treated as secret in the samemanner as information obtained under the domestic laws ofthat Contracting State and shall be disclosed only topersons or authorities (including courts and administrative
bodies) 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 persons
or authorities shall use the information only for such
purposes. They may disclose the information in public
court proceedings or in judicial decisions.
Notwithstanding the foregoing, information received by aContracting State may be used for other purposes when suchinformation may be used for such other purposes under thelaws of both Contracting States and the competent authorityof the Contracting State supplying the information
authorises such use.
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 obtainable
under the laws or in the normal course of theadministration 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;(d)to obtain or provide information that would
reveal confidential communications between aclient and an attorney, solicitor or otheradmitted legal representative where such
communications are:(i)

produced for the purposes of seeking orproviding legal advice; or(ii)produced for the purposes of use in existingor contemplated legal proceedings.

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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 Contracting
State may not need such information for its own tax
purposes. The obligation contained in the preceding
sentence is subject to the limitations of paragraph 3 but
in no case shall such limitations be construed to permit aContracting State to 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 is heldby a bank, other financial institution, nominee or person
acting in an agency or a fiduciary capacity or because it
relates to ownership interests in a person.
Article 26
ASSISTANCE IN THE COLLECTION OF TAXES
1.
The Contracting States shall lend assistance to eachother in the collection of revenue claims. This assistanceis not restricted by Articles 1 and 2. The competentauthorities of the Contracting States may by mutual
agreement settle the mode of application of this Article.
2.
The term “revenue claim” as used in this Article means
an amount owed in respect of the following taxes, insofar
as the taxation thereunder is not contrary to thisAgreement or any other instrument to which the Contracting
States are parties, as well as interest, administrative
penalties and costs of collection or conservancy related tosuch amount:(a)in the case of Croatia:(i)the taxes referred to in subparagraph (a) ofparagraph 3 of Article 2;(ii)

the value added tax;(iii)

the inheritance and gifts tax;(iv)

the real estate transfer tax; and(v)

the tax on holiday houses;- 26 -

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(b)in the case of Japan:(i)the taxes referred to in clauses (i) to (iv)of subparagraph (b) of paragraph 3 ofArticle 2;(ii)

the special corporation tax forreconstruction;(iii)

the consumption tax;(iv)

the local consumption tax;(v)

the inheritance tax; and(vi)

the gift tax;(c)

any other tax as may be agreed upon from time totime between the Governments of the Contracting
States through diplomatic channels;(d)any identical or substantially similar taxes thatare imposed after the date of signature of theAgreement in addition to, or in place of, thetaxes covered by subparagraph (a), (b) or (c).

3.
When a revenue claim of a Contracting State isenforceable under the laws of that Contracting State and is
owed by a person who, at that time, cannot, under the lawsof that Contracting State, prevent its collection, thatrevenue claim shall, at the request of the competentauthority of that Contracting State, be accepted for
purposes of collection by the competent authority of theother Contracting State. That revenue claim shall becollected by that other Contracting State in accordancewith the provisions of its laws applicable to theenforcement and collection of its own taxes as if therevenue claim were a revenue claim of that other
Contracting State that met the conditions allowing that
other Contracting State to make a request under thisparagraph.

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4.
When a revenue claim of a Contracting State is a claim
in respect of which that Contracting State may, under its
law, take measures of conservancy with a view to ensure its
collection, that revenue claim shall, at the request of thecompetent authority of that Contracting State, be acceptedfor purposes of taking measures of conservancy by thecompetent authority of the other Contracting State. Thatother Contracting State shall take measures of conservancy
in respect of that revenue claim in accordance with theprovisions of its laws as if the revenue claim were arevenue claim of that other Contracting State even if, at
the time when such measures are applied, the revenue claim
is not enforceable in the first-mentioned Contracting Stateor is owed by a person who has a right to prevent its
collection.
5.
Notwithstanding the provisions of paragraphs 3 and 4,
a revenue claim accepted by the competent authority of aContracting State for purposes of paragraph 3 or 4 shallnot, in that Contracting State, be subject to the time
limits or accorded any priority applicable to a revenue
claim under the laws of that Contracting State by reason of
its nature as such. In addition, a revenue claim acceptedby the competent authority of a Contracting State for the
purposes of paragraph 3 or 4 shall not, in that Contracting
State, have any priority applicable to that revenue claim
under the laws of the other Contracting State.
6.
Acts carried out by a Contracting State in thecollection of a revenue claim accepted by the competentauthority of that Contracting State for purposes ofparagraph 3 or 4 which if they were carried out by theother Contracting State would have the effect of suspending
or interrupting the time limits applicable to the revenue
claim in accordance with the laws of that other Contracting
State shall have such effect under the laws of that other
Contracting State. The competent authority of the firstmentioned Contracting State shall inform the competentauthority of the other Contracting State of having carriedout such acts.
7.
Proceedings with respect to the existence, validity or
the amount of a revenue claim of a Contracting State shallnot be brought before the courts or administrative bodiesof the other Contracting State.

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8.
Where, at any time after a request has been made by
the competent authority of a Contracting State underparagraph 3 or 4 and before the other Contracting State hascollected and remitted the relevant revenue claim to thefirst-mentioned Contracting State, the relevant revenue
claim ceases to be(a)in the case of a request under paragraph 3, arevenue claim of the first-mentioned Contracting
State that is enforceable under the laws of thatContracting State and is owed by a person who, atthat time, cannot, under the laws of thatContracting State, prevent its collection, or(b)

in the case of a request under paragraph 4, arevenue claim of the first-mentioned Contracting
State in respect of which that Contracting State
may, under its laws, take measures of conservancy
with a view to ensure its collection

the competent authority of the first-mentioned Contracting
State shall promptly notify the competent authority of theother Contracting State of that fact and, at the option of
the competent authority of the other Contracting State, thecompetent authority of the first-mentioned Contracting
State shall either suspend or withdraw its request.
9.
In no case shall the provisions of this Article beconstrued 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 carry out measures which would be contrary to
public policy;(c)

to provide assistance if the other Contracting
State has not pursued all reasonable measures ofcollection or conservancy, as the case may be,available under its laws or administrative
practice;(d)to provide assistance in those cases where theadministrative burden for that Contracting Stateis clearly disproportionate to the benefit to be
derived by the other Contracting State.

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Article 27
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS
Nothing in this Agreement shall affect the fiscal
privileges of members of diplomatic missions or consular
posts under the general rules of international law or under
the provisions of special agreements.
Article 28
ENTITLEMENT TO BENEFITS
1.

(a)Where:(i)an enterprise of a Contracting State derives
income from the other Contracting State andthe first-mentioned Contracting State treatssuch income as attributable to a permanentestablishment of the enterprise situated ina third jurisdiction; and(ii)

the profits attributable to that permanentestablishment are exempt from tax in thefirst-mentioned Contracting State,

the benefits under this Agreement shall not apply
to any item of income on which the tax in thethird jurisdiction is less than 60 per cent of
the tax that would be imposed in the firstmentioned Contracting State on that item ofincome if that permanent establishment weresituated in the first-mentioned Contracting
State. In such a case, any income to which theprovisions of this paragraph apply shall remaintaxable according to the domestic law of theother Contracting State, notwithstanding anyother provisions of the Agreement.
(b)

The provisions of subparagraph (a) shall not
apply if the income derived from the other
Contracting State described in that subparagraphemanates from, or is incidental to, the active
conduct of a business carried on through thepermanent establishment (other than the businessof making, managing or simply holding investments
for the enterprise’s own account, unless these
activities are banking, insurance or securities
activities carried on by a bank, insurance
enterprise or registered securities dealer,respectively).

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(c)If the benefits under the Agreement are denied
pursuant to the provisions of subparagraph (a)with respect to an item of income derived by aresident of a Contracting State, the competentauthority of the other Contracting State may,nevertheless, grant these benefits with respect
to that item of income if, in response to arequest by such resident, such competentauthority determines that granting such benefits
is justified in light of the reasons such
resident did not satisfy the requirements of
subparagraphs (a) and (b) (such as the existenceof losses). The competent authority of theContracting State to which a request has been
made under the preceding sentence by a residentof the other Contracting State shall consult withthe competent authority of that other Contracting
State before either granting or denying therequest.

2.
Notwithstanding the other provisions of thisAgreement, a benefit under the Agreement shall not be
granted in respect of an item of income if it is reasonable
to conclude, having regard to all relevant facts andcircumstances, that obtaining that benefit was one of theprincipal purposes of any arrangement or transaction that
resulted directly or indirectly in that benefit, unless it
is established that granting that benefit in thesecircumstances would be in accordance with the object andpurpose of the relevant provisions of the Agreement.
Article 29
HEADINGS
The headings of the Articles of this Agreement are
inserted for convenience of reference only and shall notaffect the interpretation of the Agreement.
Article 30
ENTRY INTO FORCE
1.
Each of the Contracting States shall send in writing
and through diplomatic channels to the other Contracting
State the notification confirming that its internal
procedures necessary for the entry into force of thisAgreement have been completed. The Agreement shall enter
into force on the thirtieth day after the date of receiptof the latter notification.

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2.

This Agreement shall have effect:(a)with respect to taxes levied on the basis of ataxable year, for taxes for any taxable years
beginning on or after 1 January in the calendar
year next following that in which the Agreement
enters into force; and(b)with respect to taxes levied not on the basis ofa taxable year, for taxes levied on or after 1
January in the calendar year next following thatin which the Agreement enters into force.

3.
Notwithstanding the provisions of paragraph 2, theprovisions of Articles 25 and 26 shall have effect from thedate of entry into force of this Agreement without regard
to the date on which the taxes are levied or the taxable
year to which the taxes relate.
Article 31
TERMINATIONThis Agreement shall remain in force until terminatedby a Contracting State. Either Contracting State may
terminate the Agreement by giving notice of termination
through diplomatic channels to the other Contracting Stateat least six months before the end of any calendar year
beginning after expiry of five years from the date of entry
into force of the Agreement. In such event, the Agreement
shall cease to have effect:(a)with respect to taxes levied on the basis of ataxable year, for taxes for any taxable years
beginning on or after 1 January in the calendar
year next following that in which the notice isgiven; and(b)with respect to taxes levied not on the basis ofa taxable year, for taxes levied on or after 1
January in the calendar year next following thatin which the notice is given.

IN WITNESS WHEREOF the undersigned, being duly
authorised thereto, have signed this Agreement.

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DONE in duplicate at Zagreb this nineteenth day ofOctober, 2018 in the English language.

For Japan:

For the Republic of Croatia:

Kenji Yamada

Z. Marić- 33 -

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