CONVENTION BETWEENJAPAN AND THE KINGDOM OF THE NETHERLANDSFOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION WITH RESPECTTO TAXES ON INCOME

Japan and the Kingdom of the Netherlands,
Desiring to conclude a new Convention for the
avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income,Have agreed as follows:
Article 1
PERSONS COVEREDThis Convention shall apply to persons who areresidents of one or both of the Contracting States.
Article 2
TAXES COVERED1.
This Convention 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.
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 andtaxes on the total amounts of wages or salaries paid byenterprises.
3.
The existing taxes to which this Convention shallapply are:a)in the case of Japan:(i)

the income tax (Shotokuzei);(ii)

the corporation tax (Hojinzei); and(iii)

the local inhabitant taxes (Juminzei)(hereinafter referred to as “Japanese tax”); andb)in the case of the Netherlands:

1

(i)

the income tax (de inkomstenbelasting);(ii)

the wages tax (de loonbelasting);(iii)

the company tax (de vennootschapsbelasting),
including the Government share in the net
profits of the exploitation of natural
resources levied pursuant to the Mining Act(Mijnbouwwet); and(iv)

the dividend tax (de dividendbelasting)(hereinafter referred to as “Netherlands tax”).
4.
This Convention shall apply also to any identical or
substantially similar taxes that are imposed after the dateof signature of the Convention in addition to, or in placeof, the existing taxes. The competent authorities of theContracting States shall notify each other of any
significant changes that have been made in their taxation
laws, within a reasonable period of time after suchchanges.
Article 3
GENERAL DEFINITIONS
1.
For the purposes of this Convention, unless thecontext otherwise requires:a)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;b)

the term “the Netherlands” means the part of theKingdom of the Netherlands that is situated inEurope, including its territorial sea and any
area beyond the territorial sea within which the
Netherlands, in accordance with internationallaw, exercises jurisdiction or sovereign rights;c)the terms “a Contracting State” and “the other
Contracting State” mean Japan or the Netherlands,
as the context requires;2d)the term “tax” means Japanese tax or Netherlands
tax, as the context requires;e)the term “person” includes an individual, acompany and any other body of persons;f)the term “company” means any body corporate or
any entity that is treated as a body corporate
for tax purposes;g)the term “enterprise” applies to the carrying onof any business;h)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;i)the term “international traffic” means any
transport by a ship or aircraft operated by anenterprise of a Contracting State, except when
the ship or aircraft is operated solely between
places in the other Contracting State;j)the term “competent authority” means:

k)

(i)

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

(ii)

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

the term “national” means:(i)in the case of Japan, any individual
possessing the nationality of Japan, any
juridical person created or organised under
the laws of Japan and any organisation
without juridical personality treated forthe purposes of Japanese tax as a juridical
person created or organised under the lawsof Japan; and(ii)

in the case of the Netherlands, any
individual possessing the nationality of theNetherlands and any legal person,
partnership or association deriving its
status as such from the laws in force in the
Netherlands;3l)the term “business” includes the performance ofprofessional services and of other activities ofan independent character; andm)the term “pension fund” means any person that:(i)is established and regulated as such under
the laws of a Contracting State;(ii)

is operated principally to administer orprovide old age, disability or survivor’s
pensions, retirement benefits or othersimilar remuneration or to earn income forthe benefit of other pension funds; and(iii)

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

2.
As regards the application of this Convention at any
time by a Contracting State, any term not defined thereinshall, unless the context otherwise requires, have themeaning that it has at that time under the laws of thatContracting State for the purposes of the taxes to which
the Convention applies, any meaning under the applicable
tax laws of that Contracting State prevailing over ameaning given to the term under other laws of thatContracting State.
Article 4
RESIDENT1.
For the purposes of this Convention, the term
“resident of a Contracting State” means any person who,
under the laws of that Contracting State, is liable to tax
therein by reason of his domicile, residence, place of heador main office, place of management or any other criterionof a similar nature, and also includes:a)that Contracting State and any politicalsubdivision or local authority thereof;b)a pension fund established and regulated as such
under the laws of that Contracting State; andc)a person established and operated in thatContracting State principally for a religious,
charitable, educational, scientific, artistic,
cultural or public purpose, only if all or a partof its income is exempt from tax under the lawsof that Contracting State.

4This term, however, does not include any person who isliable to tax in that Contracting State in respect only of
income from sources in that Contracting State.
2.
Where by reason of the provisions of paragraph 1 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
to be a resident only of the Contracting State ofwhich he is a national;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, then it shall be deemed to be aresident only of the Contracting State in which its placeof head or main office is situated.
4.
Where, pursuant to any provisions of this Convention,a Contracting State reduces the rate of tax on, or exempts
from tax, an item of income of a resident of the other
Contracting State and under the laws in force in that other
Contracting State the resident is subject to tax by that
other Contracting State only on that part of such item ofincome which is remitted to or received in that other
Contracting State, then the reduction or exemption shallapply only to so much of such item of income as is remitted
to or received in that other Contracting State.

55.

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

treated as the income of the beneficiaries,
members or participants of that entity under
the tax laws of that 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 resident ofthat other Contracting State, to the extent thatsuch beneficiaries, members or participants areresidents of that other Contracting State andsatisfy any other conditions specified in theConvention, without regard to whether the income
is treated as the income of such beneficiaries,
members or participants under the tax laws of thefirst-mentioned Contracting State;b)an item of income:(i)derived from a Contracting State through anentity 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 a resident ofthat other Contracting State, without regard towhether the income is treated as the income ofthe entity under the tax laws of the firstmentioned Contracting State, if such entity is a
resident of that other Contracting State andsatisfies any other conditions specified in theConvention;c)an item of income:(i)derived from a Contracting State through anentity that is organised in a state otherthan the Contracting States; and

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(ii)

treated as the income of the beneficiaries,
members or participants of that entity under
the tax laws of the other Contracting Stateand under the tax laws of the state where
the entity is organised;shall be eligible for the benefits of theConvention that would be granted if it weredirectly derived by a beneficiary, member orparticipant of that entity who is a resident ofthat other Contracting State, to the extent thatsuch beneficiaries, members or participants areresidents of that other Contracting State andsatisfy any other conditions specified in theConvention, without regard to whether the income
is treated as the income of such beneficiaries,
members or participants under the tax laws of thefirst-mentioned Contracting State, provided thatthe state where the entity is organised has
concluded with the first-mentioned Contracting
State a convention which contains provisions for
effective exchange of information on tax matters;d)an item of income:(i)derived from a Contracting State through anentity that is organised in a state otherthan the Contracting States; 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 theConvention; ande)an item of income:(i)derived from a Contracting State through anentity that is organised in that 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 theConvention.

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Article 5
PERMANENT ESTABLISHMENT
1.
For the purposes of this Convention, 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; andf)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
not to include:a)the use of facilities solely for the purpose ofstorage, display or delivery of goods ormerchandise belonging to the enterprise;b)

the maintenance of a stock of goods ormerchandise belonging to the enterprise solely
for the purpose of storage, display or delivery;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;8e)the maintenance of a fixed place of businesssolely for the purpose of carrying on, for theenterprise, any other activity of a preparatory
or auxiliary character;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.
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 6 apply - isacting on behalf of an enterprise and has, and habitually
exercises, in a Contracting State an authority to conclude
contracts in the name of the enterprise, that enterpriseshall be deemed to have a permanent establishment in thatContracting State in respect of any activities which that
person undertakes for the enterprise, unless the activities
of such person are limited to those mentioned in paragraph
4 which, if exercised through a fixed place of business,would not make this fixed place of business a permanentestablishment under the provisions of that paragraph.
6.
An enterprise shall not be deemed to have a permanentestablishment in a Contracting State merely because it
carries on business in that Contracting State through a
broker, general commission agent or any other agent of an
independent status, provided that such persons are acting
in the ordinary course of their business.
7.
The fact that a company which is a resident of aContracting State controls or is controlled by a 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.
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.

92.
The term “immovable property” shall have the meaning
which it has under the laws 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.
Article 7
BUSINESS PROFITS
1.
The profits of an enterprise of a Contracting State
shall be 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 of the enterprise may be taxed in that other
Contracting State but only so much of them as is
attributable to that permanent establishment.
2.
Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on business inthe other Contracting State through a permanentestablishment situated therein, there shall in eachContracting State be attributed to that permanentestablishment the profits which it might be expected tomake if it were a distinct and separate enterprise engaged
in the same or similar activities under the same or similar
conditions and dealing wholly independently with theenterprise of which it is a permanent establishment.
3.
In determining the profits of a permanentestablishment, there shall be allowed as deductions
expenses which are incurred for the purposes of thepermanent establishment, including executive and generaladministrative expenses so incurred, whether in theContracting State in which the permanent establishment issituated or elsewhere.

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4.
Insofar as it has been customary in a Contracting
State to determine the profits to be attributed to apermanent establishment on the basis of an apportionment of
the total profits of the enterprise to its various parts,
nothing in paragraph 2 shall preclude that Contracting
State from determining the profits to be taxed by such anapportionment as may be customary; the method ofapportionment adopted shall, however, be such that theresult shall be in accordance with the principles containedin this Article.
5.
No profits shall be attributed to a permanentestablishment by reason of the mere purchase by thatpermanent establishment of goods or merchandise for theenterprise.
6.
For the purposes of the preceding paragraphs of this
Article, the profits to be attributed to the permanentestablishment shall be determined by the same method year
by year unless there is good and sufficient reason to thecontrary.
7.
Where profits include items of income which are dealt
with separately in other Articles of this Convention, thenthe provisions of those Articles shall not be affected by
the provisions of this Article.
Article 8
SHIPPING AND AIR TRANSPORT
1.
Profits from the operation of ships or aircraft ininternational traffic carried on by an enterprise of aContracting State shall be taxable only in that Contracting
State.
2.
Notwithstanding the provisions of Article 2, where an
enterprise of a Contracting State carries on the operationof ships or aircraft in international traffic, thatenterprise, if an enterprise of the Netherlands, shall be
exempt from the enterprise tax of Japan, and, if anenterprise of Japan, shall be exempt from any tax similar
to the enterprise tax of Japan which may hereafter be
imposed in the Netherlands.
3.
The provisions of the preceding paragraphs of this
Article shall also apply to profits from the participation
in a pool, a joint business or an international operating
agency.

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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, orb)

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 accordance withthe provisions of paragraph 1, in the profits of anenterprise of that Contracting State - and taxes
accordingly - profits on which an enterprise of the other
Contracting State has been charged to tax in that other
Contracting State and where the competent authorities of
the Contracting States agree that all or part of the
profits so included are profits which would have accrued tothe enterprise of the first-mentioned Contracting State if
the conditions made between the two enterprises had beenthose which would have been made between independent
enterprises, then that other Contracting State shall makean appropriate adjustment to the amount of the tax charged
therein on those agreed profits. In determining suchadjustment, due regard shall be had to the other provisionsof this Convention and the competent authorities of theContracting States shall if necessary consult each other.
3.
Notwithstanding the provisions of paragraph 1, aContracting State shall not change the profits of anenterprise of that Contracting State in the circumstancesreferred to in that paragraph after seven years from theend of the taxable year in which the profits that would be
subject to such change would, but for the conditions
referred to in that paragraph, have accrued to thatenterprise. The provisions of this paragraph shall not
apply in the case of fraud or wilful default.

12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, such dividends may also be taxed in theContracting State of which the company paying the dividends
is a resident and 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:a)5 per cent of the gross amount of the dividends
if the beneficial owner is a company that has
owned, directly or indirectly, shares
representing at least 10 per cent of the voting
power of the company paying the dividends for theperiod of six months ending on the date on which
entitlement to the dividends is determined; orb)

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

3.
Notwithstanding the provisions of paragraph 2, such
dividends shall not be taxed in the Contracting State ofwhich the company paying the dividends is a resident if thebeneficial owner of the dividends is a resident of theother Contracting State and is either:a)a company that has owned, directly or indirectly,
shares representing at least 50 per cent of thevoting power of the company paying the dividends
for the period of six months ending on the dateon which entitlement to the dividends isdetermined; orb)a pension fund, provided that such dividends are
not derived from the carrying on of a business,directly or indirectly, by such pension fund.

4.
The provisions of paragraphs 2 and 3 shall not affectthe taxation of the company in respect of the profits outof which the dividends are paid.
5.
The provisions of subparagraph a) of paragraph 2 andsubparagraph a) of paragraph 3 shall not apply in the caseof dividends paid by a company which is entitled to a
deduction for dividends paid to its beneficiaries incomputing its taxable income in Japan.

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6.
The term “dividends” as used in this Article means
income from shares, “jouissance” shares or “jouissance”
rights, mining shares, founders’ shares or other rights,
not being debt-claims, participating in profits, as well as
income which is subjected to the same taxation treatment asincome from shares by the tax laws of the Contracting Stateof which the company making the distribution is a resident.
7.
The provisions of paragraphs 1, 2, 3 and 10 shall 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.
8.
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.
9.
A resident of a Contracting State shall not be
considered the beneficial owner of dividends paid by aresident of the other Contracting State in respect ofpreferred shares or other similar interests if suchpreferred shares or other similar interests would not havebeen established or acquired unless a person:a)that is not entitled to benefits with respect todividends paid by a resident of that other
Contracting State which are equivalent to, or
more favourable than, those available under thisConvention to a resident of the first-mentioned
Contracting State; andb)that is not a resident of either Contracting
State;

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

1410. Notwithstanding the provisions of paragraphs 1, 2 and8, dividends paid by a company whose capital is divided
into shares and which, under the laws of a Contracting
State, is a resident of that Contracting State, to anindividual who is a resident of the other Contracting Statemay be taxed in the first-mentioned Contracting State inaccordance with the laws of the first-mentioned Contracting
State, if that individual - either alone or with his or her
spouse or one of their relatives by blood or marriage inthe direct line - directly or indirectly, owns at least 5
per cent of a particular class of shares in that company.
This provision shall apply only if the individual to whom
the dividends are paid was a resident of the firstmentioned Contracting State at any time or the entire time
during the last ten years preceding the year in which thedividends are paid and provided that, at the time he or she
became a resident of the other Contracting State, theabove-mentioned conditions regarding share ownership in thesaid company were satisfied and only insofar as part of theassessment that has been issued in connection with theabove-mentioned share ownership and with his or her
emigration is still outstanding under the laws of thefirst-mentioned Contracting State.
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, such interest may also be taxed in theContracting State in which it arises and according to thelaws of that Contracting State, but if the beneficial ownerof the interest is a resident of the other Contracting
State, the tax so charged shall not exceed 10 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 theGovernment of that other Contracting State, apolitical subdivision or local authority thereof,or the central bank of that other Contracting
State or any institution owned by that
Government;

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b)

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

an insurance company;(iii)

a securities company; or(iv)

any other enterprise, provided that in thethree taxable years preceding the taxable
year in which the interest is paid, theenterprise derives more than 50 per cent of
its liabilities from the issuance of bondsin the financial markets or from taking
deposits at interest, and more than 50 per
cent of the assets of the enterprise consistof debt-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 a pension
fund that is a resident of that other Contracting
State, provided that such interest is not derived
from the carrying on of a business, directly or
indirectly, by such pension fund; ore)the interest is beneficially owned by a residentof that other Contracting State and paid withrespect to indebtedness arising as a consequenceof the sale on credit by a resident of that other
Contracting State of any equipment, merchandiseor service.

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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, and all other income thatis subjected to the same taxation treatment as income frommoney lent by the tax laws of the Contracting State inwhich the income arises. Income dealt with in Article 10
shall not be regarded as interest for the purposes of thisConvention.
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 such person is a resident of a Contracting State ornot, has in a Contracting State or a state other than theContracting States, a permanent establishment in connection
with which the indebtedness on which the interest is paid
were incurred, and such interest is borne by such permanentestablishment, then:a)if the permanent establishment is situated in aContracting State, such interest shall be deemed
to arise in that Contracting State; andb)

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

7.
Where, by reason of a special relationship between thepayer and the beneficial owner or between both of them andsome other person, the amount of the interest, 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 Convention.

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8.
A resident of a Contracting State shall not be
considered the beneficial owner of interest arising in theother Contracting State in respect of a debt-claim if suchdebt-claim would not have been established unless a person:a)that is not entitled to benefits with respect tointerest arising in the other Contracting State
which are equivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned Contracting
State; andb)that is not a resident of either Contracting
State;

owned an equivalent debt-claim against the first-mentioned
resident.
Article 12
ROYALTIES
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 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
and films or tapes for radio or television broadcasting,
any patent, trade mark, design or model, plan, or secretformula or process, or for information concerningindustrial, commercial or scientific experience.
3.
The provisions of paragraph 1 shall not apply if thebeneficial owner of the royalties, being a resident of aContracting State, carries on business in the 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.

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4.
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 Convention.
5.
A resident of a Contracting State shall not be
considered the beneficial owner of royalties arising in theother Contracting State in respect of the use of the rightor property if such royalties would not have been paid tothe resident unless the resident paid royalties in respectof the use of the same right or property to a person:a)that is not entitled to benefits with respect toroyalties arising in the other Contracting State
which are equivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned Contracting
State; andb)that is not a resident of either Contracting
State.
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.
2.
Gains derived by a resident of a Contracting State
from the alienation of shares in a company or of interests
in a partnership or 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 indirectlyfrom immovable property referred to in Article 6 andsituated in that other Contracting State, unless therelevant class of the shares or the interest is traded on arecognised stock exchange specified in subparagraph c) of
paragraph 8 of Article 21 and the resident and persons
related or connected to that resident own in the aggregate
5 per cent or less of that class of the shares or theinterests.

19

3.

a)

Where
(i)

a Contracting State (including, for thispurpose in the case of Japan, the Deposit
Insurance Corporation of Japan) provides,
pursuant to the laws of that Contracting
State concerning failure resolution
involving imminent insolvency of financial
institutions, substantial financial
assistance to a financial institution thatis a resident of that Contracting State, and(ii)a resident of the other Contracting Stateacquires shares in the financial institution
from the first-mentioned Contracting State,

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

The provisions of subparagraph a) shall not apply
if the resident of that other Contracting Stateacquired any shares in the financial institution
from the first-mentioned Contracting State before
the entry into force of this Convention or
pursuant to a binding contract entered into
before the entry into force of the Convention.

4.
Gains from the alienation of any property, other thanimmovable property, forming part of the business property
of a permanent establishment which an enterprise of aContracting State has in the other Contracting State,including such gains from the alienation of such apermanent establishment (alone or with the wholeenterprise), may be taxed in that other Contracting State.
5.
Gains derived by a resident of a Contracting State
from the alienation of ships or aircraft operated by that
resident in international traffic or any property, otherthan immovable property, pertaining to the operation ofsuch ships or aircraft shall be taxable only in thatContracting State.
6.
Gains from the alienation of any property other thanthat referred to in the preceding paragraphs of this
Article shall be taxable only in the Contracting State ofwhich the alienator is a resident.

20

7.
Notwithstanding the provisions of paragraph 6, gains
derived from the alienation of shares in or “jouissance”
rights or debt-claims on a company whose capital is divided
into shares and which, under the laws of a Contracting
State, is a resident of that Contracting State or from thealienation of part of the rights attached to the said
shares, “jouissance” rights or debt-claims by an individual
who is a resident of the other Contracting State may betaxed in the first-mentioned Contracting State inaccordance with the laws of the first-mentioned Contracting
State and with their interpretation, including theinterpretation of the term “alienation”, if that individual- either alone or with his or her spouse or one of theirrelatives by blood or marriage in the direct line directly or indirectly, owns at least 5 per cent of aparticular class of shares in that company. This provision
shall apply only if the individual who derives the gains
was a resident of the first-mentioned Contracting State at
any time or the entire time during the last ten years
preceding the year in which the gains are derived andprovided that, at the time he or she became a resident of
the other Contracting State, the above-mentioned conditions
regarding share ownership in the said company weresatisfied and only insofar as part of the assessment thathas been issued in connection with the above-mentioned
share ownership and with his or her emigration is still
outstanding under the laws of the first-mentioned
Contracting State.
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
Contracting State shall be taxable only in the firstmentioned Contracting State if: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,

21

b)

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

3.
Notwithstanding the provisions of the preceding
paragraphs of this Article, remuneration derived in respectof an employment exercised aboard a ship or aircraft
operated in international traffic by an enterprise of aContracting State may be taxed in that Contracting State.
Article 15
DIRECTORS’ FEES
Directors’ fees and other payments derived by aresident of a Contracting State in his capacity as a memberof the board of directors of a company which is a residentof the other Contracting State may be taxed in that other
Contracting State.
Article 16
ENTERTAINERS AND SPORTSPERSONS
1.
Notwithstanding the provisions of Articles 7 and 14,
income derived by an individual who is a resident of aContracting State as an entertainer, such as a theatre,
motion picture, radio or television artiste, or a musician,or as a sportsperson, from his personal activities as such
exercised in the other Contracting State, may be taxed inthat other Contracting State.
2.
Where income in respect of personal activities
exercised in a Contracting State by an individual in his
capacity as an entertainer or a sportsperson accrues not to
the individual himself but to another person who is a
resident of the other Contracting State, that income may,notwithstanding the provisions of Articles 7 and 14, be
taxed in the Contracting State in which the activities of
the individual are exercised.

22Article 17
PENSIONS AND ANNUITIES
1.
Subject to the provisions of paragraph 2 of Article
18, pensions and other similar remuneration, including
social security payments, beneficially owned by a residentof a Contracting State shall be taxable only in thatContracting State. However, such pensions and othersimilar remuneration, including social security payments,
may also be taxed in the other Contracting State if theyarise in that other Contracting State and they are notadequately subject to tax in the first-mentioned
Contracting State.
2.
Annuities derived and beneficially owned by anindividual who is a resident of a Contracting State shallbe taxable only in that Contracting State. However, suchannuities may also be taxed in the other Contracting Stateif they arise in that other Contracting State and they are
not adequately subject to tax in the first-mentioned
Contracting State. The term “annuities” as used in this
Article means a stated sum paid periodically at statedtimes during the life of the individual, or during a
specified or ascertainable period of time, under anobligation to make the payments in return for adequate andfull consideration in money or money’s worth.
3.
Lump sums in lieu of the right to receive a pension orother similar remuneration, or to receive an annuity, paid
to an individual who is a resident of a Contracting State
shall be taxable only in that Contracting State. However,such lump sums may also be taxed in the other Contracting
State if they arise in that other Contracting State.
Article 18
GOVERNMENT SERVICE
1.

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, in the discharge of functionsof a governmental nature, shall be taxable onlyin that Contracting 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:

23

2.

(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 to which contributions are madeor created by, a Contracting State or a politicalsubdivision or local authority thereof to anindividual in respect of services rendered tothat Contracting State or political subdivisionor local authority shall be taxable only in thatContracting 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.

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 the first-mentioned Contracting State, provided
that such payments are made to him from outside that firstmentioned Contracting State. The exemption provided bythis Article shall apply to a business apprentice only fora period not exceeding one year from the date he first
begins his training in the first-mentioned Contracting
State.

24

Article 20
OTHER INCOME
1.
Items of income beneficially owned by a resident of aContracting State, wherever arising, not dealt with in theforegoing Articles of this Convention (hereinafter referred
to as “other income” in this Article) shall be taxable onlyin that Contracting State.
2.
The provisions of paragraph 1 shall not apply to otherincome, other than income from immovable property as
defined in paragraph 2 of Article 6, if the beneficial
owner of such other income, being a resident of aContracting State, carries on business in the other
Contracting State through a permanent establishment
situated therein and the right or property in respect ofwhich the other income is paid is effectively connectedwith such permanent establishment. In such case theprovisions of Article 7 shall apply.
3.
Where, by reason of a special relationship between theresident referred to in paragraph 1 and the payer or
between both of them and some other person, the amount ofother income exceeds the amount which would have been
agreed upon between them in the absence of such
relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In such case, theexcess part of the other income shall remain taxable
according to the laws of each Contracting State, due regard
being had to the other provisions of this Convention.
4.
A resident of a Contracting State shall not be
considered the beneficial owner of other income arising in
the other Contracting State in respect of the right orproperty if such other income would not have been paid tothe resident unless the resident paid other income inrespect of the same right or property to a person:a)that is not entitled to benefits with respect toother income arising in the other Contracting
State which are equivalent to, or more favourable
than, those available under this Convention to aresident of the first-mentioned Contracting
State; andb)that is not a resident of either Contracting
State.

25

Article 21
LIMITATION ON BENEFITS
1.
Except as otherwise provided in this Article, aresident of a Contracting State that derives income fromthe other Contracting State described in paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article 12, 13 or
20 shall be entitled to the benefits granted for a taxable
year by the provisions of those paragraphs or Articles only
if such resident is a qualified person as defined inparagraph 2 and satisfies any other specified conditions in
those 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 is either:a)an individual;b)

the Government of a Contracting State, any
political subdivision or local authority thereof,
the Bank of Japan, the Central Bank of theNetherlands or a person that is owned, directly
or indirectly, by the Government of a Contracting
State or a political subdivision or local
authority thereof;c)a company, if the principal class of its sharesis listed or registered on a recognised stock
exchange and is regularly traded on one or more
recognised stock exchanges, provided that, if theshares are listed or registered on a recognised
stock exchange specified in clause (iii) or (iv)of subparagraph c) of paragraph 8, the primaryplace of management and control of the company isin the Contracting State of which it is a
resident;d)a person that is either:(i)a person as 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:(aa) as of the end of the prior taxable year
more than 50 per cent of the person’s
beneficiaries, members or participants
are individuals who are residents ofeither Contracting State; or26

(bb) more than 75 per cent of thecontributions made to the person isderived from residents of either
Contracting State which are qualified
persons; or
(ii)

e)

a bank, an insurance company or a securities
company that is established and regulated assuch under the laws of the Contracting Stateof which it is a resident; ora person other than an individual, if residentsof either Contracting State that are qualified
persons by reason of subparagraph a), b), c) ord) of this paragraph own, directly or indirectly,
shares or other beneficial interests representing
at least 50 per cent of the voting power of theperson.

3.
Notwithstanding that a company that is a resident of aContracting State may not be a qualified person, thatcompany shall be entitled to the benefits granted by theprovisions of paragraph 3 of Article 10, paragraph 3 ofArticle 11 or Article 12, 13 or 20 with respect to an itemof income described in those paragraphs or Articles derived
from the other Contracting State if that company satisfies
any other specified conditions in those paragraphs or
Articles for the obtaining of such benefits and shares
representing at least 75 per cent of the voting power ofthat company are owned, directly or indirectly, by seven or
fewer persons who are equivalent beneficiaries.
4.
Where the provisions of subparagraph e) of paragraph 2
or paragraph 3 apply:a)in respect of taxation by withholding at source,a resident of a Contracting State shall beconsidered to satisfy the conditions described inthat subparagraph or paragraph for the taxable
year in which the payment of an item of income ismade if such resident satisfies those conditions
during the twelve month period preceding the dateof the payment or, in the case of dividends, thedate on which entitlement to the dividends isdetermined; and

27

5.

b)

for all other cases, a resident of a Contracting
State shall be considered to satisfy theconditions described in that subparagraph orparagraph for the taxable year in which the itemof income is derived if such resident satisfies
those conditions on at least half the days of thetaxable year.

a)Notwithstanding that a resident of a Contracting
State may not be a qualified person, that
resident shall be entitled to the benefits
granted by the provisions of paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article
12, 13 or 20 with respect to an item of income
described in those paragraphs or Articles derived
from the other Contracting State if:

b)

(i)

that resident is carrying on business in thefirst-mentioned Contracting State (otherthan the business of making or managing
investments for the resident’s own account,unless the business is banking, insurance or
securities business carried on by a bank,insurance company or securities company);(ii)

the item of income derived from that other
Contracting State is derived in connection
with, or is incidental to, that business;
and

(iii)

that resident satisfies any other specified
conditions in those paragraphs or Articles
for the obtaining of such benefits.

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

28

6.

c)

In determining whether a person is carrying on
business in a Contracting State undersubparagraph a), the business conducted by apartnership in which that person is a partner andthe business conducted by persons connected tosuch person shall be deemed to be conducted bysuch person. A person shall be connected toanother if one owns, directly or indirectly, atleast 50 per cent of the beneficial interest in
the other (or, in the case of a company, shares
representing at least 50 per cent of the voting
power of the company) or a third person owns,
directly or indirectly, at least 50 per cent of
the beneficial interest (or, in the case of acompany, shares representing at least 50 per centof the voting power of the company) in each
person. In any case, a person shall beconsidered to be connected to another if, on thebasis of all the facts and circumstances, one has
control of the other or both are under thecontrol of the same person or persons.

a)Notwithstanding that a resident of a Contracting
State may not be a qualified person, that
resident shall be entitled to the benefits
granted by the provisions of paragraph 3 ofArticle 10, paragraph 3 of Article 11 or Article
12, 13 or 20 with respect to an item of income
described in those paragraphs or Articles derived
from the other Contracting State if:

b)

(i)

that resident functions as a headquarters
company for a multinational corporate group;(ii)

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

that resident satisfies any other specified
conditions in those paragraphs or Articles
for the obtaining of such benefits.

A resident of a Contracting State shall beconsidered a headquarters company for a
multinational corporate group for the purpose of
subparagraph a) only if:

29

c)

(i)

that resident provides a substantial portionof the overall supervision andadministration of the group or provides
financing for the group;(ii)

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

the business carried on in any one country
other than that Contracting State generateless than 50 per cent of the gross income of
the group;(iv)

no more than 50 per cent of its gross income
is derived from the other Contracting State;(v)that resident has, and exercises,
independent discretionary authority to carryout the functions referred to in clause (i);
and

(vi)

that resident is subject to the same income
taxation rules in that Contracting State aspersons described in paragraph 5.

For the purpose of subparagraph b), a resident ofa Contracting State shall be deemed 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 isderived if the resident satisfies each of thosegross income requirements when averaging thegross income of the three taxable years precedingthat taxable year.

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

30

8.

For the purposes of this Article:a)the term “principal class of shares” means theclass or classes of shares of a company which in
the aggregate represent a majority of the voting
power of the company;b)

the term “shares” shall include depository
receipts of shares or trust certificates ofshares;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) ofJapan;(ii)

any regulated market established in the
Netherlands subject to regulation by the
Authority for the Financial Markets (or its
successor) under a license as meant inparagraph 1 of Article 5:26 of the Act on
Financial Supervision (or its successor) of
the Netherlands;(iii)

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

any other stock exchange which the competentauthorities of the Contracting States agree
to recognise for the purposes of this
Article;the term “equivalent beneficiary” means:(i)a resident of a state that has a convention
for the avoidance of double taxation and theprevention of fiscal evasion between thatstate and the Contracting State from which
the benefits of this Convention are claimed
such that:31

(aa) that convention contains provisions for
effective exchange of information;(bb) that resident is a qualified person
under the limitation on benefits
provisions in that convention or, when
there are no such provisions in thatconvention, would be a qualified person
when that convention is read as
including provisions corresponding toparagraph 2; and(cc) with respect to an item of income
referred to in paragraph 3 of Article
10, paragraph 3 of Article 11 or
Article 12, 13 or 20 that resident
would be entitled under that convention
to a rate of tax with respect to theparticular class of income for which
the benefits are being claimed under
this Convention that is at least as low
as the rate applicable under thisConvention; or(ii)

a qualified person by reason of subparagrapha), b), c) or d) of paragraph 2;e)the term “associated enterprises” means
enterprises which have a relationship with eachother as described in subparagraph a) or b) ofparagraph 1 of Article 9; andf)the term “gross income” means the total revenues
derived by an enterprise from its business, lessthe direct costs of obtaining such revenues.
Article 22
ELIMINATION OF DOUBLE TAXATION

1.
Subject to the provisions of the laws of Japan
regarding the allowance as a credit against the Japanese
tax of tax payable in any country other than Japan, where aresident of Japan derives income from the Netherlands which
may be taxed in the Netherlands in accordance with theprovisions of this Convention, the amount of theNetherlands tax payable in respect of that income shall beallowed as a credit against the Japanese tax imposed onthat resident. The amount of credit, however, shall not
exceed that part of the Japanese tax which is appropriate
to that income.

32

2.
Where the income derived from the Netherlands isdividends paid by a company which is a resident of theNetherlands to a company which is a resident of Japan andwhich has owned at least 10 per cent either of the voting
shares issued by the company paying the dividends, or of
the total shares issued by that company, during the periodof six months immediately before the day when the
obligation to pay dividends is confirmed, such dividends
shall be excluded from the basis upon which the Japanese
tax is imposed. Such exclusion shall be subject to theprovisions, other than the provisions with regard toownership requirements of shares, of the laws of Japan
regarding the exclusion of dividends from the basis uponwhich the Japanese tax is imposed.
3.
The Netherlands, when imposing tax on its residents,
may include in the basis upon which such taxes are imposed
the items of income which, according to the provisions of
this Convention, may be taxed or shall be taxable only inJapan.
4.
However, where a resident of the Netherlands derives
items of income which according to paragraphs 1, 3 and 4 of
Article 6, paragraph 1 of Article 7, paragraph 7 of Article
10, paragraph 5 of Article 11, paragraph 3 of Article 12,
paragraphs 1, 2, 3 and 4 of Article 13, paragraphs 1 and 3
of Article 14, paragraphs 1 and 2 of Article 17,
subparagraph a) of paragraph 1 and subparagraph a) ofparagraph 2 of Article 18 and paragraph 2 of Article 20 may
be taxed or shall be taxable only in Japan and are includedin the basis referred to in paragraph 3, the Netherlands
shall exempt such items of income by allowing a reductionof its tax. This reduction shall be computed in conformity
with the provisions of the Netherlands law for the
avoidance of double taxation. For that purpose the said
items of income shall be deemed to be included in theamount of the items of income which are exempt from
Netherlands tax under those provisions.

33

5.
Further, the Netherlands shall allow a deduction fromthe Netherlands tax so computed for the items of income
which according to paragraphs 2 and 10 of Article 10,paragraph 2 of Article 11, paragraph 7 of Article 13,
Article 15, paragraphs 1 and 2 of Article 16 and paragraph
3 of Article 17 may be taxed in Japan to the extent thatthese items are included in the basis referred to inparagraph 3. The amount of the deduction shall be equal to
the tax paid in Japan on these items of income, but shall,in case the provisions of the Netherlands law for the
avoidance of double taxation provide so, not exceed theamount of the deduction which would be allowed if the items
of income so included were the sole items of income forwhich the Netherlands gives a reduction under theprovisions of the Netherlands law for the avoidance of
double taxation.
This paragraph shall not restrict allowance now orhereafter accorded by the provisions of the Netherlands law
for the avoidance of double taxation, but only as far as
the calculation of the amount of the deduction of
Netherlands tax is concerned with respect to theaggregation of income from more than one country and thecarry forward of the tax paid in Japan on the said items ofincome to subsequent years.
6.
Notwithstanding the provisions of paragraph 4, theNetherlands shall allow a deduction from the Netherlands
tax for the tax paid in Japan on items of income whichaccording to paragraph 1 of Article 7, paragraph 7 ofArticle 10, paragraph 5 of Article 11, paragraph 3 ofArticle 12 and paragraph 2 of Article 20 may be taxed inJapan to the extent that these items are included in thebasis referred to in paragraph 3, insofar as the
Netherlands under the provisions of the Netherlands law for
the avoidance of double taxation allows a deduction fromthe Netherlands tax of the tax levied in another country onsuch items of income. For the computation of thisdeduction the provisions of paragraph 5 of this Article
shall apply accordingly.
7.
For the purposes of the preceding paragraphs of this
Article, income beneficially owned by a resident of aContracting State which may be taxed or shall be taxable
only in the other Contracting State in accordance with thisConvention shall be deemed to arise from sources in that
other Contracting State.

34

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. This provision shall, 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. This provision shall not be construed as
obliging a Contracting State to grant to residents of theother 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 4 of Article 12 orparagraph 3 of Article 20 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.

35

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 Convention, 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 Convention.
2.
The competent authority shall endeavour, if theobjection appears to it to be justified and if it is notitself able to arrive at a satisfactory solution, toresolve the case by mutual agreement with the competentauthority of the other Contracting State, with a view tothe avoidance of taxation which is not in accordance withthe provisions of this Convention. Any agreement reachedshall be implemented notwithstanding any time limits in thedomestic law of the Contracting States.
3.
The competent authorities of the Contracting Statesshall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation orapplication of this Convention. In particular thecompetent authorities of the Contracting States may agree:a)to the same attribution of income, deductions,credits, or allowances of an enterprise of aContracting State to its permanent establishment
situated in the other Contracting State;b)to the same allocation of income, deductions,credits, or allowances between persons;c)to the settlement of conflicting application of
the Convention, including conflicts regarding:(i)the characterisation of particular items ofincome;(ii)

the characterisation of persons;

36

d)

(iii)

the application of source rules with respect
to particular items of income; and(iv)

the meaning of any term used in theConvention; andto advance pricing arrangements.

They may also consult together for the elimination of
double taxation in cases not provided for in theConvention.
4.
The competent authorities of the Contracting States
may communicate with each other directly, including througha joint commission consisting of themselves and theirrepresentatives, for the purpose of reaching an agreementin the sense of the preceding paragraphs of this Article.
5.

Where,
a)under paragraph 1, a person has presented a caseto the competent authority of a Contracting Stateon the basis that the actions of one or both of
the Contracting States have resulted for that
person in taxation not in accordance with theprovisions of this Convention, andb)the competent authorities are unable to reach an
agreement to resolve that case pursuant toparagraph 2 within two years from thepresentation of the case to the competentauthority of the other Contracting State,

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

37

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 Convention or to
the administration 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 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 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.
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 (ordre public).

38

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.
Each of the Contracting States shall endeavour tocollect such taxes imposed by the other Contracting State
as will ensure that any exemption or reduced rate of tax
granted under this Convention by that other Contracting
State shall not be enjoyed by persons not entitled to such
benefits. The Contracting State making such collections
shall be responsible to the other Contracting State for thesums thus collected.
2.
In no case shall the provisions of paragraph 1 beconstrued so as to impose upon either of the Contracting
States endeavouring to collect the taxes the obligation tocarry out administrative measures at variance with the laws
and administrative practice of that Contracting State or
which would be contrary to the public policy (ordre public)of that Contracting State.
Article 27
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS
Nothing in this Convention 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.

39

Article 28
TERRITORIAL EXTENSION
1.
This Convention may be extended, either in its
entirety or with any necessary modifications, to the partsof the Kingdom of the Netherlands which are not situated inEurope. Any such extension shall take effect from suchdate and shall be subject to such modifications andconditions, including conditions as to termination, as may
be specified and agreed in notes to be exchanged throughdiplomatic channels.
2.
Unless otherwise agreed, the termination of thisConvention shall not also terminate any extension of theConvention to any part of the Kingdom of the Netherlands towhich it has been extended under this Article.
Article 29
HEADINGS
The headings of the Articles of this Convention are
inserted for convenience of reference only and shall notaffect the interpretation of the Convention.
Article 30
ENTRY INTO FORCE
1.
This Convention shall be approved in accordance withthe legal procedures of each of the Contracting States andshall enter into force on the thirtieth day after the dateof exchange of diplomatic notes indicating such approval.
2.

This Convention shall be applicable:a)in the case of Japan:(i)with respect to taxes withheld at source,
for amounts taxable on or after 1 January inthe calendar year next following that inwhich the Convention enters into force;(ii)

with respect to taxes on income which are
not withheld at source, as regards income
for any taxable year beginning on or after 1
January in the calendar year next followingthat in which the Convention enters into
force; and40

(iii)b)with respect to other taxes, as regards
taxes for any taxable year beginning on orafter 1 January in the calendar year next
following that in which the Convention
enters into force; andin the case of the Netherlands:(i)with respect to taxes withheld at source,
for amounts taxable on or after 1 January inthe calendar year next following that inwhich the Convention enters into force;(ii)

with respect to taxes on income which are
not withheld at source, as regards income
for any taxable year and period beginning on
or after 1 January in the calendar year next
following that in which the Convention
enters into force; and(iii)

with respect to other taxes, as regards
taxes for any taxable year and period
beginning on or after 1 January in thecalendar year next following that in which
the Convention enters into force.

3.
The Convention between the Government of Japan and theGovernment of the Kingdom of the Netherlands for the
Avoidance of Double Taxation with respect to Taxes on
Income, with Protocol, signed at The Hague on 3 March,
1970, as amended by the Protocol signed at The Hague on 4
March, 1992 (hereinafter in this Article referred to as“the prior Convention”) shall cease to be applicable fromthe date upon which this Convention applies in respect of
the taxes to which the Convention applies in accordancewith the provisions of paragraph 2 of this Article.
4.
Notwithstanding the provisions of paragraph 3, where
any person entitled to benefits under the prior Convention
would have been entitled to greater benefits thereunderthan those under this Convention, the prior Convention
shall, at the election of such person, continue to apply in
its entirety for the period of twelve months from the dateon which the provisions of this Convention otherwise would
apply under paragraph 2.
5.
The prior Convention shall terminate on the last dateon which it applies in accordance with the provisions of
the preceding paragraphs of this Article.

41Article 31
TERMINATIONThis Convention shall remain in force until terminatedby a Contracting State. Either Contracting State may
terminate the Convention, through diplomatic channels, bygiving notice of termination at least six months before theend of any calendar year beginning after the expiry of five
years from the date of entry into force of the Convention.
In such event, the Convention shall cease to have effect:a)b)in the case of Japan:(i)with respect to taxes withheld at source,
for amounts taxable on or after 1 January inthe calendar year next following that inwhich the notice is given;(ii)

with respect to taxes on income which are
not withheld at source, as regards income
for any taxable year beginning on or after 1
January in the calendar year next followingthat in which the notice is given; and(iii)

with respect to other taxes, as regards
taxes for any taxable year beginning on orafter 1 January in the calendar year next
following that in which the notice is given;andin the case of the Netherlands:(i)with respect to taxes withheld at source,
for amounts taxable on or after 1 January inthe calendar year next following that inwhich the notice is given;(ii)

with respect to taxes on income which are
not withheld at source, as regards income
for any taxable year and period beginning on
or after 1 January in the calendar year next
following that in which the notice is given;
and

(iii)

with respect to other taxes, as regards
taxes for any taxable year and period
beginning on or after 1 January in thecalendar year next following that in which
the notice is given.

42

IN WITNESS WHEREOF the undersigned, being duly
authorised thereto by their respective Governments, havesigned this Convention.
DONE at Tokyo this twenty-fifth day of August, 2010,
in duplicate, in the English language.

For Japan:

For the Kingdomof the Netherlands:

Koichi Takemasa

Philip De Heer

43

Protocol

At the signing today of the Convention between Japanand the Kingdom of the Netherlands for the Avoidance ofDouble Taxation and the Prevention of Fiscal Evasion withrespect to Taxes on Income (hereinafter referred to as “theConvention”), Japan and the Kingdom of the Netherlands haveagreed upon the following provisions, which shall form an
integral part of the Convention.
1.
With reference to clause (iii) of subparagraph m) of
paragraph 1 of Article 3 of the Convention, it isunderstood that a pension fund shall be treated as exempt
from tax on income derived with respect to the activities
described in clause (ii) of that subparagraph even though
it is subject to the tax stipulated in Articles 8 or 10-2of the Corporation Tax Law (Law No. 34 of 1965) of Japan orparagraph 1 of Article 20 of its supplementary provisions.
2.
With reference to Articles 6 and 13 of the Convention,rights to the exploration and exploitation of natural
resources shall be regarded as immovable property situatedin the Contracting State to whose seabed - and subsoil
thereof - these rights apply. Furthermore, theaforementioned rights include rights to interests in, or
benefits from assets that arise from, that exploration or
exploitation.
3.
With reference to Article 7 of the Convention, it isunderstood that in the case of profits from survey, supply,
installation or construction activities, only so much ofthem will be attributable to a permanent establishment as
results from the actual performance of such activity bythat permanent establishment.
4.
With reference to Article 9 of the Convention, it isunderstood that the fact that the enterprises that have arelationship with each other as described in subparagrapha) or b) of paragraph 1 of that Article have concluded
arrangements among them to share the costs and risks ofdeveloping, producing or obtaining assets, services, orrights, and to determine the nature and extent of theinterests of each participant in those assets, services, orrights, shall not of itself satisfy the conditions as meant
in paragraph 1 of that Article.

44

5.
With reference to Articles 10 and 13 of theConvention, the Netherlands treats income received inconnection with the whole or partial winding-up of acompany or a purchase of own shares by a company as
dividends as referred to in Article 10 of the Convention
and not as capital gains as referred to in Article 13 of
the Convention.
6.
With reference to paragraph 3 of Article 11 of theConvention, the terms “the central 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 the capitalof which is owned by the Government of Japanas may be agreed upon from time to time
between the Governments of the Contracting
States through an exchange of diplomatic
notes; andin the case of the Netherlands:(i)the Central Bank of the Netherlands (DeNederlandsche Bank NV);(ii)

the Netherlands Development Finance Company(de Nederlandse Financierings-Maatschappij
voor Ontwikkelingslanden NV);(iii)

the Netherlands Investment Bank forDeveloping Countries (de Nederlandse
Investeringsbank voor OntwikkelingslandenNV); and(iv)

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

45

7.
With reference to Article 15 of the Convention, wherea company is a resident of the Netherlands, the term“members of the board of directors” includes both a“bestuurder” and a “commissaris”. The terms “bestuurder”
and “commissaris” mean respectively persons who are charged
with the general management of the company and persons whoare charged with the supervision thereof.
8.
With reference to Articles 17 and 18 of theConvention, it is understood that whether and to what
extent a pension or other similar remuneration falls under
Article 17 or under Article 18 of the Convention isdetermined by the nature (private or governmental) during
the period or periods in which the entitlement to suchpension or other similar remuneration was built up.
9.
Nothing in the Convention shall prevent Japan from
imposing tax at source, in accordance with its laws, on any
income and gains derived by a person pursuant to a sleeping
partnership (Tokumei Kumiai) contract or other similar
contract.
10. With reference to subparagraph c) of paragraph 2 ofArticle 21 of the Convention, the shares in the principal
class of shares of a company are considered to be regularly
traded on one or more recognised stock exchanges in a
taxable year if the aggregate number of the shares in thatclass traded on such stock exchange or exchanges during thetwelve months ending on the day before the beginning ofthat taxable year is at least 6 per cent of the average
number of the shares outstanding in that class during thattwelve-month period.
11. With reference to subparagraph c) of paragraph 2 ofArticle 21 of the Convention, the “primary place ofmanagement and control” of a company will be in theContracting State of which it is a resident only if
executive officers and senior management employees exercise
day-to-day responsibility for the strategic, financial andoperational policy decision making for the company(including its direct and indirect subsidiaries) more inthat Contracting State than in any other state and thestaff of such persons conduct the day-to-day activities
necessary for preparing and making those decisions more inthat Contracting State than in any other state.
12. With reference to paragraph 5 of Article 24 of theConvention:

46

a)

The competent authorities shall by mutual
agreement establish a procedure in order toensure that an arbitration decision will be
implemented within two years from a request forarbitration as referred to in paragraph 5 of
Article 24 of the Convention unless actions orinaction of a person directly affected by thecase presented pursuant to that paragraph hinder
the resolution of the case or unless thecompetent authorities and that person agree
otherwise.

b)

An arbitration panel shall be established inaccordance with the following rules:(i)

An arbitration panel shall consist of threearbitrators with expertise or experience ininternational tax matters.

(ii)

Each competent authority shall appoint one
arbitrator. The two arbitrators appointed
by the competent authorities shall appoint
the third arbitrator who serves as the chairof the arbitration panel in accordance withthe procedures agreed by the competentauthorities.

(iii)

All arbitrators shall not be employees of
the tax authorities of the Contracting
States, nor have had dealt with the casepresented pursuant to paragraph 1 of Article
24 of the Convention in any capacity.

(iv)

The competent authorities shall ensure that
all arbitrators and their staff agree, instatements sent to each competent authority,
prior to their acting in an arbitration
proceeding, to abide by and be subject tothe same confidentiality and non-disclosure
obligations described in paragraph 2 ofArticle 25 of the Convention and in theapplicable domestic laws of the Contracting
States.

47

(v)Each competent authority shall bear the costof its appointed arbitrator and its own
expenses. The cost of the chair of anarbitration panel and other expenses
associated with the conduct of theproceedings shall be borne by the competentauthorities in equal shares.

c)

The competent authorities shall provide theinformation necessary for the arbitration
decision to all arbitrators and their staff
without undue delay.

d)An arbitration decision shall be treated asfollows:e)(i)

An arbitration decision has no formal
precedential value.

(ii)

An arbitration decision shall be final,
unless that decision is found to be
unenforceable by the courts of one of theContracting States due to a violation ofparagraph 5 of Article 24 of the Convention,of this paragraph or of any procedural rule
determined in accordance with subparagrapha) of this paragraph that may reasonably
have affected the decision. If the decision
is found to be unenforceable due to theviolation, the decision shall be considered
not to have been made.

Where, at any time after a request forarbitration has been made and before thearbitration panel has delivered a decision to thecompetent authorities and the person who made therequest for arbitration, the competentauthorities have solved all the unresolved issues
submitted to the arbitration, the case shall beconsidered as resolved pursuant to paragraph 2 ofArticle 24 of the Convention and no arbitration
decision shall be provided.

48

f)

The provisions of paragraph 5 of Article 24 of
the Convention and this paragraph shall apply
mutatis mutandis to a case presented pursuant toparagraph 1 of Article 26 of the Convention
between the Government of Japan and theGovernment of the Kingdom of the Netherlands for
the Avoidance of Double Taxation with respect toTaxes on Income, signed at The Hague on 3 March,
1970, as amended by the Protocol signed at The
Hague on 4 March, 1992 (hereinafter referred toas “the prior Convention”), unless the competentauthorities agree that, on the basis of special
reasons, the case is not a case which theprovisions of paragraph 5 of Article 24 of theConvention and this paragraph shall apply mutatis
mutandis to. However, where the competentauthority of a Contracting State, before theentry into force of the Convention, has presented
to the competent authority of the other
Contracting State the case presented pursuant toparagraph 1 of Article 26 of the priorConvention, the term “the presentation of thecases to the competent authority of the other
Contracting State” as referred to in subparagraphb) of paragraph 5 of Article 24 of the Convention
shall be replaced with “the entry into force of
the Convention” for the purpose of applying thissubparagraph.

13. With reference to paragraphs 3 and 5 of Article 25 of
the Convention, a Contracting State may decline to supply
information relating to confidential communications between
attorneys, solicitors or other admitted legal
representatives in their role as such and their clients tothe extent that the communications are protected fromdisclosure under the domestic laws of that Contracting
State.
IN WITNESS WHEREOF the undersigned, being duly
authorised thereto by their respective Governments, havesigned this Protocol.
DONE at Tokyo this twenty-fifth day of August,2010, in
duplicate, in the English language.

For Japan:

For the Kingdomof the Netherlands:

Koichi Takemasa

Philip De Heer49