PROTOCOLAMENDING THE CONVENTIONBETWEEN THE GOVERNMENT OF JAPANAND THE GOVERNMENT OF THE UNITED STATES OF AMERICA
FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME

PROTOCOLAMENDING THE CONVENTIONBETWEEN THE GOVERNMENT OF JAPANAND THE GOVERNMENT OF THE UNITED STATES OF AMERICA
FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME
The Government of Japan and the Government of theUnited States of America,
Desiring to amend the Convention between the
Government of Japan and the Government of the United Statesof America for the Avoidance of Double Taxation and thePrevention of Fiscal Evasion with respect to Taxes on
Income signed at Washington on 6 November 2003 (hereinafterreferred to as “the Convention”) and the Protocol, whichforms an integral part of the Convention, signed at
Washington on 6 November 2003 (hereinafter referred to as“the Protocol of 2003”),
Have agreed as follows:
ARTICLE I
Paragraph 5 of Article 1 of the Convention shall bedeleted and replaced by the following:“5.
The provisions of paragraph 4 shall not affectthe benefits conferred by a Contracting State underparagraphs 2 and 3 of Article 9, paragraph 3 ofArticle 17, and Articles 18, 19, 23, 24, 25 and 28,
but in the case of benefits conferred by the UnitedStates under Articles 18 and 19 only if theindividuals claiming the benefits are neither citizens
of, nor have been lawfully admitted for permanent
residence in, the United States.”
ARTICLE II
Paragraph 4 of Article 4 of the Convention shall bedeleted and replaced by the following:“4.
Where by reason of the provisions of paragraph 1
a person other than an individual is a resident ofboth Contracting States, such person shall not be
considered a resident of either Contracting State forthe purposes of its claiming any benefits provided bythis Convention.”- 1 -ARTICLE III
1.
Subparagraph (a) of paragraph 3 of Article 10 of theConvention shall be amended by deleting the terms “morethan 50 percent” and replacing them with the terms “atleast 50 percent”, and deleting the words “twelve months”
and replacing them with the words “six months”.
2.
Paragraph 9 of Article 10 of the Convention shall beamended by deleting the terms “or 2” everywhere they appear
within the paragraph.
ARTICLE IV
Article 11 of the Convention shall be deleted andreplaced by the following:“ARTICLE 11
1.
Interest arising in a Contracting State andbeneficially owned by a resident of the other
Contracting State may be taxed only in that other
Contracting State.
2.

Notwithstanding the provisions of paragraph 1:(a)interest arising in a Contracting State thatis determined by reference to receipts,
sales, income, profits or other cash flow ofthe debtor or a related person, to any
change in the value of any property of the
debtor or a related person or to any
dividend, partnership distribution orsimilar payment made by the debtor or a
related person, or any other interest
similar to such interest arising in aContracting State, may be taxed in theContracting State in which it arises, andaccording to the laws of that Contracting
State, but if the beneficial owner of theinterest is a resident of the other
Contracting State, the tax so charged shallnot exceed 10 percent of the gross amount of
the interest; and

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(b)

a Contracting State may tax, in accordancewith its domestic law, interest paid withrespect to the ownership interests in an
entity used for the securitization of realestate mortgages or other assets, to theextent that the amount of interest paid
exceeds the return on comparable debt
instruments as specified by the law of thatContracting State.

3.
Interest shall be deemed to arise in aContracting State when the payor is a resident of thatContracting State. Where, however, the person paying
the interest, whether such person is a resident of aContracting State or not, has in a state other thanthat of which such person is a resident a permanentestablishment in connection with which theindebtedness on which the interest is paid wasincurred, and such interest is borne by such permanentestablishment, then:(a)if the permanent establishment is situatedin a Contracting State, such interest shallbe deemed to arise in that Contracting
State, and(b)

if the permanent establishment is situatedin a state other than the Contracting
States, such interest shall not be deemed toarise in either Contracting State.

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 aright to participate in the debtor’s profits, and inparticular, income from government securities andincome from bonds or debentures, including premiums
and prizes attaching to such securities, bonds ordebentures, and all other income that is subjected tothe same taxation treatment as income from money lentby the tax laws of the Contracting State in which theincome arises. Income dealt with in Article 10 shallnot be regarded as interest for the purposes of thisConvention.

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5.
The provisions of paragraphs 1 and 2 shall not
apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on businessin the other Contracting State in which the interest
arises, through a permanent establishment situatedtherein and the debt-claim in respect of which theinterest is paid is effectively connected with suchpermanent establishment. In such case the provisionsof Article 7 shall apply.
6.
Where, by reason of a special relationshipbetween the payor and the beneficial owner or between
both of them and some other person, the amount of theinterest, having regard to the debt-claim for which itis paid, exceeds the amount which would have been
agreed upon by the payor and the beneficial owner in
the absence of such relationship, the provisions of
this Article shall apply only to the last-mentioned
amount. In such case, the excess part of the payment
may be taxed in the Contracting State in which itarises at a rate not to exceed 5 percent of the grossamount of the excess.
7.
A resident of a Contracting State shall not be
considered the beneficial owner of interest in respectof a debt-claim if such debt-claim would not have been
established unless a person:(a)that is not entitled to benefits withrespect to interest arising in the other
Contracting State which are equivalent to,or more favorable than, those available
under this Convention to a resident of thefirst-mentioned Contracting State; and(b)that is not a resident of either Contracting
State;

held an equivalent debt-claim against thefirst-mentioned resident.”
ARTICLE V
1.
Paragraph 2 of Article 13 of the Convention shall bedeleted and replaced by the following:“2.
For the purposes of this Article the term “realproperty situated in the other Contracting State”
shall include:(a)real property referred to in Article 6;

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(b)

where that other Contracting State is Japan,
shares or interests in a company,
partnership or trust deriving the value of
its property directly or indirectly
principally from real property referred toin Article 6 and situated in Japan; and(c)where that other Contracting State is theUnited States, a United States real property
interest.”

2.
Paragraph 4 of Article 13 of the Convention shall bedeleted and replaced by the following:“4.
Notwithstanding the provisions of paragraph 3,
gains from the alienation of any property, other thanreal 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.”ARTICLE VI
Article 15 of the Convention shall be deleted andreplaced by the following:“ARTICLE 15
Directors’ fees and other similar payments
derived by a resident of a Contracting State in his
capacity as a member of the board of directors of acompany which is a resident of the other Contracting
State may be taxed in that other Contracting State.”
ARTICLE VII
Article 20 of the Convention shall be deleted andreplaced by the following:“ARTICLE 20 (Deleted)”
ARTICLE VIII
Clause (i) of subparagraph (b) of paragraph 5 of
Article 22 of the Convention shall be amended by deleting
the words “the Securities and Exchange Law” and replacing
them with the words “the Financial Instruments and Exchange
Law”.

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ARTICLE IXParagraph 1 of Article 23 of the Convention shall bedeleted and replaced by the following:
“1.

(a)

Subject to the provisions of the laws ofJapan regarding the allowance as a credit
against the Japanese tax of tax payable inany country other than Japan, where aresident of Japan derives income from theUnited States which may be taxed in the
United States in accordance with theprovisions of this Convention, the amount of
the United States tax payable in respect ofthat income shall be allowed as a credit
against the Japanese tax imposed on that
resident. The amount of credit, however,shall not exceed the amount of the Japanese
tax which is appropriate to that income.
For the purposes of the preceding provisionsof this subparagraph, income beneficiallyowned by a resident of Japan which may betaxed in the United States in accordancewith the Convention shall be deemed to arise
from sources in the United States.

(b)

Subject to the provisions, other than theprovisions with regard to ownership
requirements of shares, of the laws of Japan
regarding the exclusion of dividends fromthe basis upon which the Japanese tax is
imposed, where the income derived from theUnited States is dividends paid by a company
which is a resident of the United States to
a company which is a resident of Japan andhas owned at least 10 percent of the total
shares issued by that company, during theperiod of six months immediately before theday when the obligation to pay dividends is
confirmed, such dividends shall be excluded
from the basis upon which the Japanese tax
is imposed.”
ARTICLE X

1.
Paragraph 3 of Article 24 of the Convention shall beamended by deleting the words “paragraph 8 of Article 11”
and replacing them with the words “paragraph 6 of Article
11”.
2.
Paragraph 5 of Article 24 of the Convention shall beamended by deleting the words “or paragraph 10 of Article
11”.

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ARTICLE XI
Article 25 of the Convention shall be amended byadding the following after paragraph 4:“5.
Where, pursuant to this Article, a person haspresented a case to the competent authority of theContracting State of which he is a resident or, if hiscase comes under paragraph 1 of Article 24, to that of
the Contracting State of which he is a national, on
the basis that the actions of one or both of theContracting States have resulted for that person intaxation not in accordance with the provisions of thisConvention, and the competent authorities of theContracting States are unable to reach an agreement toresolve that case, the case shall be resolved througharbitration conducted in the manner prescribed by, andsubject to the requirements of, this paragraph,paragraphs 6 and 7, and any rules or procedures agreed
upon by the competent authorities of both Contracting
States pursuant to subparagraph (i) of paragraph 7,if:(a)the presenter of the case has submitted awritten request to the relevant competentauthority for resolution of the case througharbitration; and(b)

all concerned persons and their authorized
representatives or agents have provided
written statements not to disclose to any
person (except other concerned persons) any
information received during the course of
the arbitration proceeding from thecompetent authorities of either Contracting
State or the arbitration panel, other thanthe determination of such panel.

6.
Notwithstanding the provisions of paragraph 5, acase shall not be submitted to arbitration if:(a)a decision with respect to such case has
already been rendered by a court oradministrative tribunal of either
Contracting State;(b)the competent authorities of bothContracting States have agreed that the caseis not suitable for resolution througharbitration and have notified the presenterof the case of such agreement no later than
two years after the commencement date; or

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(c)

the case is the subject only of theprovisions set forth in the final sentenceof paragraph 3.

7.
For the purposes of paragraphs 5, 6 and thisparagraph, the following rules and definitions shallapply:(a)

The term “concerned person” means thepresenter of a case to a competent authority
for consideration under this Article and allother persons, if any, whose tax liability
to either Contracting State may be directly
affected by a mutual agreement arising fromthat consideration.

(b)

The “commencement date” for a case is theearliest date on which the informationnecessary to undertake substantive
consideration for a mutual agreement has
been received by the competent authorities
of both Contracting States.

(c)

An arbitration proceeding pursuant to this
Article with respect to a case (other than acase described in subparagraph (d)) shallbegin on the later of:

(d)

(i)

two years after the commencement dateof that case, unless the competentauthorities of both Contracting States
have agreed to a different date andnotified the presenter of the case ofsuch agreement; and(ii)

the earliest date upon which therequirements of subparagraphs (a) and(b) of paragraph 5 have been satisfied.

An arbitration proceeding pursuant to this
Article with respect to a case that is the
subject of a request for an advance pricing
arrangement, shall begin on the later of:

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(i)

six months after an official
notification has been issued by the tax
authority of either Contracting Stateof a correction of, or an intent toadjust, the pricing of a transaction ortransfer covered by a request for anadvance pricing arrangement regarding a
concerned person, unless the competentauthorities of both Contracting States
have agreed to a different date andnotified the presenter of the case ofsuch agreement; and(ii)

the earliest date upon which therequirements of subparagraphs (a) and(b) of paragraph 5 have been satisfied.

However, in no event shall the arbitration
proceeding begin any earlier than two years
after the date on which the informationnecessary to undertake substantive
consideration for a mutual agreement on theadvance pricing arrangement has been
received by the competent authorities ofboth Contracting States.
(e)Unless the presenter of the case does not
accept the determination of the arbitration
panel, such determination shall constitute a
resolution by mutual agreement of the entire
case under this Article at the time it istimely accepted by the presenter and shallbe binding on both Contracting States. The
resolution resulting from the determinationof the arbitration panel shall be
implemented notwithstanding any time limits
or procedural limitations in the law of theContracting States, except such limitations
as apply for the purposes of giving effectto such a resolution.

(f)

For the purposes of an arbitration
proceeding under paragraph 5 and thisparagraph, the members of the arbitration
panel and their staff shall be considered tobe “persons or authorities” to whom
information may be disclosed under Article
26.

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(g)

No information relating to an arbitration
proceeding (including the determination of
the arbitration panel) may be disclosed by
the competent authorities of the Contracting
States, except as permitted by thisConvention and the laws of the Contracting
States. In addition, all material preparedin the course of, or relating to, an
arbitration proceeding shall be considered
to be information exchanged between thecompetent authorities of the Contracting
States pursuant to Article 26.

(h)

The competent authorities of bothContracting States shall ensure that all
members of the arbitration panel and theirstaff agree in written statements sent toeach of the competent authorities of theContracting States not to disclose any
information relating to an arbitration
proceeding (including the determination of
the arbitration panel), and to abide by andbe subject to the confidentiality andnondisclosure provisions of Article 26 andsimilar provisions of relevant laws of theContracting States. Such statements shallalso include their acceptance to serve on
the arbitration panel. Notwithstanding theprovisions of this subparagraph, the membersof the arbitration panel or their staff
shall disclose the determination of thearbitration panel to the competentauthorities of both Contracting States.

(i)

The competent authorities of bothContracting States shall agree in writing,
before the date that the first arbitration
proceeding commences, on time periods andprocedures that are consistent withparagraphs 5, 6 and this paragraph for:(i)

notifying the presenter of the case ofa modified date for the beginning of anarbitration proceeding under clause (i)of subparagraph (c) and clause (i) of
subparagraph (d);- 10 -

(ii)the appropriate application ofarbitration in the context of advancepricing arrangements, including rules
concerning the date on which anarbitration proceeding shall begin withrespect to such arrangements;(iii)

obtaining the nondisclosure statements
required by subparagraph (b) ofparagraph 5 and subparagraph (h) of
this paragraph from each concerned
person, authorized representative oragent, and member of the arbitration
panel (including their staff);(iv)

the appointment of the members of thearbitration panel;(v)

the submission of proposed resolutions,
position papers, and reply submissions
by the competent authorities of theContracting States to the arbitration
panel;(vi)

the submission by the presenter of thecase of a paper setting forth thepresenter’s views and analysis of thecase for consideration by thearbitration panel;(vii)

the delivery by the arbitration panelof its determination to the competentauthorities of both Contracting States;(viii)

the acceptance or rejection by thepresenter of the case of thedetermination of the arbitration panel;
and

(ix)

the adoption by the arbitration panelof any additional procedures necessary
for the conduct of its business.

The competent authorities of both Contracting
States may agree in writing on such other rules andprocedures as may be necessary for the effective andtimely implementation of the provisions of paragraphs
5, 6 and this paragraph.”- 11 -ARTICLE XIIArticle 26 of the Convention shall be deleted andreplaced by the following:“ARTICLE 26
1.
The competent authorities of the Contracting
States shall exchange such information as isforeseeably relevant for carrying out the provisionsof this Convention or to the administration or
enforcement of the domestic laws concerning taxes ofevery kind and description imposed on behalf of theContracting States, insofar as the taxation thereunder
is not contrary to the Convention. The exchange of
information is not restricted by paragraph 1 of
Article 1 and Article 2. If specifically requested by
the competent authority of a Contracting State, thecompetent authority of the other Contracting State
shall provide information under this Article in theform of authenticated copies of original documents(including books, papers, statements, records,
accounts, and writings).
2.
Any information received under paragraph 1 by aContracting State shall be treated as secret in thesame manner as information obtained under the laws ofthat Contracting State and shall be disclosed only topersons or authorities (including courts andadministrative bodies) involved in the assessment,collection or administration of, the enforcement orprosecution in respect of, or the determination of
appeals in relation to, the taxes referred to inparagraph 1, or the oversight of such functions. Suchpersons or authorities shall use the information only
for such purposes. They may disclose the informationin 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 the obligation:(a)

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

to supply information which is not
obtainable under the laws or in the normal
course of the administration of that or of
the other Contracting State;- 12 -

(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; or(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 inexisting or contemplated legal
proceedings.

4.
If information is requested by a Contracting
State in accordance with this Article, the other
Contracting State shall use its information gathering
measures to obtain the requested information, eventhough that other Contracting State may not need suchinformation for its own tax purposes. The obligation
contained in the preceding sentence is subject to thelimitations of paragraph 3 but in no case shall such
limitations be construed to permit a Contracting Stateto decline to supply information solely because it has
no domestic interest in such information.
5.
In no case shall the provisions of paragraph 3 beconstrued to permit a Contracting State to decline tosupply information solely because the information isheld by a bank, other financial institution, nominee
or person acting in an agency or a fiduciary capacity
or because it relates to ownership interests in aperson.”ARTICLE XIII
Article 27 of the Convention shall be deleted andreplaced by the following:- 13 -

“ARTICLE 27
1.
Subject to the provisions of this Article, theContracting States shall lend assistance to each otherin the collection of taxes, insofar as the taxation is
not contrary to this Convention or any other agreement
to which the Contracting States are parties, together
with interest, costs of collection, additions to suchtaxes, and civil or administrative penalties related
to such taxes (hereinafter referred to in this Article
as a “revenue claim”). This assistance is not
restricted by paragraph 1 of Article 1 and Article 2.
Any assistance provided by a Contracting State shallbe only to the extent allowable under the law of thatContracting State.
2.
The assistance under paragraph 1 shall be lent
only in the collection of the following revenue
claims:(a)(b)

a revenue claim in respect of a company:(i)the determination of which is not
eligible to be resolved by mutual
agreement procedure pursuant to Article
25;

(ii)

the determination of which has beenmutually agreed upon pursuant to
Article 25; or(iii)

with respect to the determination ofwhich the company has terminated themutual agreement procedure;a revenue claim in respect of an individual.
However, if the individual is a national of
the Contracting State from which assistanceis requested (hereinafter referred to as the“requested State”) at the time theapplication for assistance is received,
assistance shall be lent only for revenue
claims with respect to which the individual
or a person acting on behalf of theindividual:(i)

has filed a fraudulent tax return or afraudulent claim for refund;(ii)

has willfully failed to file a tax
return to evade taxes; or- 14 -

(iii)

has transferred assets into therequested State to avoid collection of
the revenue claim.

3.
Notwithstanding the provisions of paragraph 2,
the assistance under paragraph 1 shall be lent in thecollection of revenue claims that is necessary toensure that any exemption or reduced rate of tax
granted under this Convention shall not be enjoyed bypersons not entitled thereto, provided that therequested State agrees with such determination of
improper granting of benefits.
4.
The provisions of this Article shall only apply
to revenue claims in respect of the taxes covered by
Article 2 and in addition, the following taxes:
(a)

(b)

in the case of Japan:(i)the consumption tax;(ii)

the inheritance tax; and(iii)

the gift tax;

in the case of the United States:(i)the Federal estate and gift taxes;(ii)

the Federal excise tax on insurance
policies issued by foreign insurers;(iii)

the Federal excise taxes imposed withrespect to private foundations; and(iv)

the Federal taxes related to employment
and self-employment.

5.
An application for assistance in the collectionof a revenue claim, other than the collection of arevenue claim described in paragraph 3, shall include
a certification by the competent authority of theContracting State applying for such assistance(hereinafter referred to as the “applicant State”)
that, under the laws of the applicant State, therevenue claim has been finally determined. For the
purposes of this Article, a revenue claim is finallydetermined when the applicant State has the rightunder its domestic law to collect the revenue claim
and all applicable administrative and judicial rightsof the taxpayer to dispute or appeal the revenue claim
have lapsed or been exhausted.

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6.
When an application for assistance by theapplicant State has been accepted for collection by
the requested State pursuant to the provisions of this
Article, the revenue claim of the applicant State
shall be treated, to the extent necessary forcollection under the laws of the requested State, asassessed under the laws of the requested State (as of
the time the application is received), and shall becollected by the requested State as though suchrevenue claim were the requested State’s own revenue
claim in accordance with the laws applicable to thecollection of the requested State’s own revenue
claims.
7.
Notwithstanding the provisions of paragraph 6,
acts of collection carried out by the requested Statein pursuance of an application for assistance, which,according to the laws of the applicant State, would
have the effect of suspending or interrupting theperiod of limitation on the collection of a revenue
claim in the applicant State if carried out by theapplicant State, shall also have this effect withrespect to the revenue claim under the laws of theapplicant State. The requested State shall inform theapplicant State about such acts.
8.
A revenue claim with respect to which assistanceis being lent by the requested State shall not, inthat Contracting State, be subject to the time limits,or accorded any priority, applicable to a revenue
claim under the laws of that Contracting State byreason of its nature as such.
9.
Nothing in this Article shall be construed as
creating or providing any rights of administrative or
judicial review by the requested State of theapplicant State’s finally determined revenue claim,irrespective of any such rights that may be available
under the laws of either Contracting State.
10. If, at any time pending execution of an
application for assistance under this Article, theapplicant State loses the right under its domestic law
to collect the revenue claim or otherwise terminatescollection, the competent authority of the applicant
State shall promptly withdraw the application forassistance in collection and the requested State shallcease all measures of collection of the revenue claim.

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11. If, at any time pending execution of an
application for assistance under this Article, theapplicant State suspends collection of the revenue
claim according to the laws of the applicant State,
the competent authority of the applicant State shallpromptly notify the competent authority of therequested State of that fact, and the competentauthority of the applicant State shall either suspend
or withdraw its request at the option of the competentauthority of the requested State and the requested
State shall suspend or cease all measures ofcollection of the revenue claim accordingly.
12. Amounts collected by the requested State pursuant
to this Article shall be remitted to the competentauthority of the applicant State.
13. Unless the competent authorities of bothContracting States otherwise agree, the ordinary costs
incurred in providing assistance in collection shallbe borne by the requested State and any extraordinary
costs so incurred shall be borne by the applicant
State.
14. In no case shall the provisions of this Article
be construed so as to impose on the requested Statethe obligation to carry out:(a)administrative measures at variance with thelaws and administrative practices of therequested State or of the applicant State;or(b)measures which would be contrary to public
policy.

15. In no case shall the provisions of this Article
be construed so as to impose on the requested State an
obligation to accept an application of the applicant
State:(a)if the applicant State has not pursued all
appropriate measures to collect the revenue
claim that is the subject of the application
for assistance available under its laws oradministrative practices; or(b)

if the administrative burden for therequested State is substantiallydisproportionate to the benefit to be
derived by the applicant State.

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16. Before assistance is lent under the provisions of
this Article, other than under paragraph 3, thecompetent authorities of both Contracting States shallagree upon the mode of application of this Article,
including an agreement to ensure comparable levels of
assistance to each of the Contracting States. In
particular, the competent authorities of bothContracting States shall agree on a limit to thenumber of applications for assistance that aContracting State may make in a particular year, as
well as a minimum monetary threshold for a revenue
claim for which assistance is sought, and procedural
rules related to the remittance of amounts collectedpursuant to the provisions of this Article.”
ARTICLE XIV
1.
Subparagraph (a) of paragraph 1 of the Protocol of2003 shall be amended by deleting the words “United States
excise tax” and replacing them with the words “Federal
excise tax,” and subparagraph (b) of that paragraph shallbe amended by deleting the words “United States excise tax”
and replacing them with the words “Federal excise taxes”.
2.
Paragraph 9 of the Protocol of 2003 shall be deleted
and replaced by the following:“9.

(Deleted)”

3.
The Protocol of 2003 shall be amended by adding thefollowing after paragraph 13:“14. With reference to paragraphs 5, 6 and 7 ofArticle 25 of the Convention:(a)

It is understood that taxation shall beconsidered to have resulted for the purposeof paragraph 5 of Article 25 of theConvention from the actions of one or bothof the Contracting States as soon as tax has
been paid, assessed or otherwise determined(for example, a notification of correction,
determination or deficiency of a tax
liability has been issued), or in cases
where the taxpayer is officially notified by
the tax authorities that they intend to tax
him on a certain element of income (forexample, a notice of proposed adjustment has
been issued).

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(b)The arbitration panel shall consist of three
individual members. The members appointed
shall not be employees nor have been
employees within the twelve-month periodprior to the date on which the arbitration
proceeding begins, of the tax
administration, the Treasury Department, or
the Ministry of Finance of the Contracting
State which identifies them. Each competentauthority of the Contracting States shallselect one member of the arbitration panel.
In the event that the competent authority ofa Contracting State fails to make suchselection in the manner and within the time
periods agreed by the competent authorities
of both Contracting States pursuant to
subparagraph (i) of paragraph 7 of Article
25 of the Convention, the competentauthority of the other Contracting State
shall select a second member of thearbitration panel. The two members so
selected shall select a third member, whoshall serve as Chair of the arbitration
panel. If the two initial members of thearbitration panel fail to select the third
member in the manner and within the time
periods agreed by the competent authorities
of both Contracting States pursuant to
subparagraph (i) of paragraph 7 of Article
25 of the Convention, these members shall bedismissed, and each competent authority of
the Contracting States shall select a newmember of the arbitration panel. The Chair
shall not be a national or lawful permanent
resident of either Contracting State.
Furthermore, the members appointed shall nothave any prior involvement with the specificmatters at issue in the arbitration
proceeding for which they are being
considered as members of the arbitration
panel.

(c)

If at any time before the arbitration paneldelivers a determination to the competentauthorities of the Contracting States:(i)the competent authorities of theContracting States reach a mutual
agreement to resolve the case pursuant
to Article 25 of the Convention;(ii)

the presenter of the case withdraws therequest for arbitration;- 19 -

(iii)

a decision concerning the case isrendered by a court or administrative
tribunal of one of the Contracting
States during the arbitration
proceeding; or(iv)

if any concerned person or theirauthorized representatives or agents
willfully violates the written
nondisclosure statement required bysubparagraph (b) of paragraph 5 of
Article 25 of the Convention, and thecompetent authorities of bothContracting States agree that such
violation should result in thetermination of the arbitration
proceeding;the mutual agreement procedure, including
the arbitration proceeding, with respect tothe case shall terminate.
(d)

The competent authority of each of theContracting States shall be permitted tosubmit a proposed resolution addressing eachadjustment or similar issue raised in thecase. Such proposed resolution shall be a
resolution of the entire case, and shallreflect, without modification, all mattersin the case previously agreed between thecompetent authorities of both Contracting
States. Such proposed resolution shall belimited to a disposition of specificmonetary amounts (for example, of income,profit, gain or expense) or, where
specified, the maximum rate of tax charged
pursuant to the Convention, for eachadjustment or similar issue in the case,
based on the application of the Convention
to the case. The competent authority ofeach of the Contracting States shall also be
permitted to submit a position paper forconsideration by the arbitration panel.

(e)Notwithstanding the provisions of
subparagraph (d), in the case of anarbitration proceeding concerning:- 20 -

(i)the taxation of an individual withrespect to whom the competentauthorities of the Contracting States
have been unable to reach an agreement
regarding the Contracting State ofwhich the individual is a resident;(ii)

the taxation of the business profits ofan enterprise with respect to which thecompetent authorities of theContracting States have been unable toreach an agreement on whether apermanent establishment exists; or(iii)such other issues the determination ofwhich are contingent on resolution ofsimilar threshold questions;the competent authorities of the Contracting
States may submit proposed resolutions
separately addressing the relevant thresholdquestions as described in clause (i), (ii)or (iii) above (for example, the question ofwhether a permanent establishment exists),
and the contingent determinations (forexample, the determination of the amount of
profit attributable to such permanentestablishment).
(f)

Where an arbitration proceeding concerns acase comprising multiple adjustments orsimilar issues each requiring a dispositionof specific monetary amounts (for example,
of income, profit, gains or expense) or
where specified, the maximum rate of tax
charged pursuant to the Convention, theproposed resolution may propose a separate
disposition for each adjustment or similar
issue.

(g)

Each of the competent authorities of theContracting States shall receive theproposed resolution and position paper
submitted by the other competent authority,and shall be permitted to submit a reply
submission to the arbitration panel. Eachof the competent authorities of theContracting States shall also receive thereply submission of the other competentauthority.

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(h)The presenter of the case shall be permitted
to submit for consideration by thearbitration panel a paper setting forth its
analysis and views of the case. Suchsubmission shall not include any information
not previously provided to the competentauthorities during the mutual agreement
procedure and shall be made available to thecompetent authorities of both Contracting
States.

(i)

The arbitration panel shall deliver adetermination in writing to the competentauthorities of the Contracting States. The
determination of the arbitration panel shallbe limited to one of the proposed
resolutions submitted by the competentauthorities of the Contracting States foreach adjustment or similar issue and any
threshold questions, and shall not include arationale or any other explanation of thedetermination. The determination of thearbitration panel shall have no precedential
value with respect to the application of theConvention in any other case.

(j)

Unless the competent authorities of bothContracting States agree to a longer time
period, the presenter of the case shall have
45 days after receiving the determination of
the arbitration panel to notify, in writing,the competent authority of the Contracting
State to whom the case was presented, of his
acceptance of the determination. If thepresenter of the case fails to so advise therelevant competent authority, thedetermination shall be considered not to be
accepted. In addition, in the event thecase is pending in litigation or appeal, thedetermination of the arbitration panel shallbe considered not to be accepted by thepresenter of the case if any concerned
person who is a party to the litigation orappeal does not advise, within the same timeframe described above, the relevant court oradministrative tribunal of its intention towithdraw from consideration all issues
resolved in the arbitration proceeding.
Where the determination of the arbitration
panel is not accepted, the case will not be
eligible for any further consideration by
the competent authorities.

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(k)The fees and expenses of the members of thearbitration panel, as well as any costs
incurred in connection with the proceedingby the Contracting States, shall be borne
equitably by the Contracting States.

15. With reference to paragraph 5 of Article 27 of
the Convention:(a)

For the purposes of evaluating the final
determination of a revenue claim:(i)in the case of the United States, any
administrative or judicial rights
available to the taxpayer in connection
with the revenue claim that arise after
the collection of the revenue claim;(ii)

in the case of Japan, the right to takeaction pursuant to Article 36 of the
Administrative Case Litigation Act (Law
No. 139 of 1962) of Japan;

shall not be taken into account.
(b)

A Contracting State may suspend assistanceif it determines that the actions of theother Contracting State have resulted in an
imbalance in the levels of assistance
between the Contracting States contemplated
in Article 27 of the Convention. In suchcase, the Contracting States shall enter
into consultations with a view to restoring
comparable levels of assistance consistent
with paragraph 16 of Article 27 of theConvention.”
ARTICLE XV

1.
This Protocol shall be subject to ratification, andthe instruments of ratification shall be exchanged as soon
as possible. It shall enter into force on the date of theexchange of instruments of ratification.

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2.

This Protocol shall have effect:(a)in respect of taxes withheld at source, foramounts paid or credited on or after the firstday of the third month next following the date on
which the Protocol enters into force;(b)

in respect of other taxes, for taxable years
beginning on or after the first day of January
next following the date on which the Protocol
enters into force;

3.
Notwithstanding the provisions of paragraph 2, theprovisions of paragraphs 5, 6 and 7 of Article 25 of theConvention, as amended by Article XI of this Protocol,
shall have effect with respect to:(a)Cases that are under consideration by thecompetent authorities as of the date on which
this Protocol enters into force. For such cases,
the commencement date shall be the date on which
this Protocol enters into force.

(b)

Cases that come under consideration after thedate on which this Protocol enters into force.

4.
Notwithstanding the provisions of paragraph 2, theprovisions of Article 26 of the Convention, as amended by
Article XII of this Protocol, and Article 27 of theConvention, as amended by Article XIII of this Protocol,
shall have effect from the date of entry into force of thisProtocol.
5.
Notwithstanding the entry into force of this Protocol,
an individual who is entitled to the benefits of Article 20of the Convention at the time of the entry into force of
this Protocol shall continue to be entitled to such
benefits until such time as the individual would haveceased to be entitled to such benefits if this Protocol had
not entered into force.
6.
This Protocol shall remain in effect as long as theConvention remains in force.

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IN WITNESS WHEREOF the undersigned, being duly
authorized thereto by their respective Governments, havesigned this Protocol.
DONE in duplicate at Washington this twenty-fourth
day of January, 2013, in the Japanese and English
languages, each text being equally authentic.

FOR THE GOVERNMENT OF
JAPAN:FOR THE GOVERNMENT OF
THE UNITED STATES OF AMERICA:
Neal S. Wolin

佐々江賢一郎- 25 -