SYNTHESISED TEXTOF THE MLI AND THE CONVENTIONBETWEEN JAPAN AND THE REPUBLIC OF BULGARIAFOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME
This document presents the synthesised text for the application of the Convention
between Japan and the Republic of Bulgaria for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on Income signed on March 7,
1991 (hereinafter referred to as “the Convention”), as modified by the Multilateral
Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion andProfit Shifting signed by Japan and Bulgaria on June 7, 2017 (hereinafter referred to as“the MLI”).
This document was prepared on the basis of the reservations and notifications
submitted to the Depositary (the Secretary-General of the Organisation for Economic
Co-operation and Development) by Japan on September 26, 2018 and by Bulgaria on
September 16, 2022 respectively.
The sole purpose of this document is to facilitate the understanding of the applicationof the MLI to the Convention and the document does not constitute a source of law.
The authentic texts of the Convention and the MLI are the only legal texts applicable.
The provisions of the MLI that are applicable with respect to the provisions of theConvention are included in boxes throughout this document in the context of therelevant provisions of the Convention.
In this document, changes to the text of the provisions of the MLI have been made toconform the terminology used in the MLI to the terminology used in the Convention(such as changes from “Covered Tax Agreement” to “Convention” and changes from“Contracting Jurisdiction” to “Contracting State”). Similarly, changes have been madeto parts of provisions of the MLI that describe existing provisions of the Convention
by replacing such descriptive language with the article and paragraph numbers or
language of the existing provisions. These changes are intended to increase thereadability of the document and are not intended to change the substance of theprovisions of the MLI.
Unless the context otherwise requires, references made to the provisions of theConvention will be understood as referring to the provisions of the Convention as
modified by the provisions of the MLI.

1

Entry into force and entry into effect of the MLI
The MLI enters into force for Japan on January 1, 2019 and for Bulgaria on January 1,
2023 and has effect as follows:
The provisions of the MLI shall have effect in each Contracting State with respect to
the Convention:(a) in Japan:(i) with respect to taxes withheld at source on amounts paid or credited to
non-residents, where the event giving rise to such taxes occurs on or afterJanuary 1, 2023; and(ii) with respect to all other taxes levied by Japan, for taxes levied withrespect to taxable periods beginning on or after July 1, 2023; and(b) in Bulgaria:(i) with respect to taxes withheld at source on amounts paid or credited to
non-residents, where the event giving rise to such taxes occurs on or afterJanuary 1, 2023; and(ii) with respect to all other taxes levied by Bulgaria, for taxes levied withrespect to taxable periods beginning on or after January 1, 2024.

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CONVENTIONBETWEEN JAPAN AND THE REPUBLIC OF BULGARIAFOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME

Japan and the Republic of Bulgaria,
Desiring to conclude a Convention for the avoidance of
double taxation and the prevention of fiscal evasion withrespect to taxes on income,The following preamble text described in paragraph 1 of Article 6 of the MLI replaces thepreamble language of the Convention referring to “Desiring to conclude a Convention
for the avoidance of double taxation and the prevention of fiscal evasion with respect totaxes on income,”:
Article 6 – Purpose of a Covered Tax Agreement
Intending to eliminate double taxation with respect tothe taxes covered by the Convention without creating
opportunities for non-taxation or reduced taxation throughtax evasion or avoidance (including through treaty-shopping
arrangements aimed at obtaining reliefs provided in theConvention for the indirect benefit of residents of third
jurisdictions),
Have agreed as follows:
Article 1
This Convention shall apply to persons who areresidents of one or both of the Contracting States.
Article 2
1.

This Convention shall apply to the following taxes:(a)in Japan:(i)

the income tax;(ii)

the corporation tax; and(iii)

the local inhabitant taxes(hereinafter referred to as “Japanese tax”);

3

(b)

in the Republic of Bulgaria:(i)the tax on the total income; and(ii)

the tax on the profit(hereinafter referred to as “Bulgarian tax”).
2.
This Convention shall also apply to any identical or
substantially similar taxes, whether national or local,
which are imposed after the date of signature of thisConvention in addition to, or in place of, those referred
to in paragraph 1. The competent authorities of theContracting States shall notify each other of any
substantial changes which have been made in theirrespective taxation laws within a reasonable period of timeafter such changes.
Article 31.
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 sea-bed and the subsoil thereof, over which
Japan has jurisdiction in accordance withinternational law and in which the laws relating
to Japanese tax are in force;(b)

the term “Bulgaria” means the Republic of
Bulgaria, and, when used in a geographical sense,means the territory of Bulgaria, including its
territorial sea, in which the laws relating to
Bulgarian tax are in force, and all the area
beyond its territorial sea, including the sea-bed
and the subsoil thereof, over which Bulgaria has
jurisdiction in accordance with its legislationand international law;(c)the terms “a Contracting State” and “the other
Contracting State” mean Japan or Bulgaria, as thecontext requires;(d)the term “tax” means Japanese tax or Bulgariantax, as the context requires;(e)the term “person” includes an individual, a legal
person or any entity treated as a legal person
for tax purposes (hereinafter referred to as “a4legal person”), and any other body of persons;(f)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;(g)the term “nationals” means all individuals
possessing the nationality of either Contracting
State and all legal persons created or organizedunder the laws of that Contracting State and allorganizations without legal personality treated
for the purposes of tax of that Contracting Stateas legal persons created or organized under thelaws of that Contracting State;(h)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; and(i)the term “competent authority” means:(i)in the case of Japan, the Minister ofFinance or his authorized representative;(ii)

in the case of Bulgaria, the Minister ofFinance or his authorized representative.

2.
As regards the application of this Convention by aContracting State, any term not defined therein shall,unless the context otherwise requires, have the meaning
which it has under the laws of that Contracting State
concerning the taxes to which this Convention applies.
Article 41.
For the purposes of this Convention, the term
“resident of a Contracting State” means:(a)in relation to Japan, any person who, under thelaws of Japan, is liable to tax therein by reasonof his domicile, residence, place of head or main
office or any other criterion of a similar
nature;(b)in relation to Bulgaria, any individual, otherthan a resident of a third state, who, under thelaws of Bulgaria, is liable to tax therein, as
well as any person other than an individual

5which, under the laws of Bulgaria, is liable totax therein by reason of the place of its head or
main office or its registration, but the term
does not include any person who is liable to tax
in Bulgaria in respect only of income fromsources therein.
2.
The term “a resident of a third state” as used in subparagraph (b) of paragraph 1 means an individual who istreated as a resident of that third state under the laws ofthat third state.
3.
Where by reason of the provisions of paragraph 1 an
individual is a resident of both Contracting States, thenthis case shall be determined in accordance with thefollowing rules:(a)

He shall be deemed to be a resident of theContracting State with which his personal andeconomic relations are closest (centre of vitalinterests);(b)

If the Contracting State in which he has his
centre of vital interests cannot be determined,
the competent authorities of the Contracting
States shall settle the question by mutual
agreement.

4.
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 of the Contracting State in which its head or main
office is situated.
Article 51.
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; and

6

(f)

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

3.
A building site or construction or installation
project constitutes a permanent establishment only if it
lasts more than six months.
4.
Notwithstanding the provisions of the preceding
paragraphs of this Article, the term “permanentestablishment” 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;(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)an installation project carried on by anenterprise of a Contracting State in connection
with the sale or lease of machinery or equipmentfrom that Contracting State to the other
Contracting State; and(g)the maintenance of a fixed place of businesssolely for any combination of activities
mentioned in sub-paragraphs (a) to (f), provided
that the overall activity of the fixed place ofbusiness resulting from this combination is of apreparatory or auxiliary character.

The following paragraph 2 of Article 13 of the MLI replaces paragraph 4 of Article 5 of
the Convention:

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Article 13 – Artificial Avoidance of Permanent Establishment Status through theSpecific Activity Exemptions
2.
Notwithstanding the provisions of Article 5 of theConvention, the term “permanent establishment” shall bedeemed not to include:a)i)the use of facilities solely for the purposeof storage, display or delivery of goods ormerchandise belonging to the enterprise;ii)

the maintenance of a stock of goods ormerchandise belonging to the enterprisesolely for the purpose of storage, display
or delivery;iii)

the maintenance of a stock of goods ormerchandise belonging to the enterprisesolely for the purpose of processing byanother enterprise;iv)

the maintenance of a fixed place of businesssolely for the purpose of purchasing goods
or merchandise or of collecting information,
for the enterprise;v)

an installation project carried on by anenterprise of a Contracting State inconnection with the sale or lease ofmachinery or equipment from that Contracting
State to the other Contracting State;b)the maintenance of a fixed place of businesssolely for the purpose of carrying on, for theenterprise, any activity not described insubparagraph a);c)the maintenance of a fixed place of businesssolely for any combination of activities
mentioned in subparagraphs a) and b),

provided that such activity or, in the case of subparagraphc), the overall activity of the fixed place of business, isof a preparatory 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 that

8

Contracting 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.

The following paragraphs 1 and 2 of Article 12 of the MLI replace paragraphs 5 and 6
of Article 5 of the Convention:
Article 12 – Artificial Avoidance of Permanent Establishment Status throughCommissionnaire Arrangements and Similar Strategies
1.
Notwithstanding the provisions of Article 5 of theConvention, but subject to paragraph 2, where a person isacting in a Contracting State on behalf of an enterpriseand, in doing so, habitually concludes contracts, or
habitually plays the principal role leading to theconclusion of contracts that are routinely concluded
without material modification by the enterprise, and thesecontracts are:a)in the name of the enterprise; orb)for the transfer of the ownership of, or forthe granting of the right to use, property
owned by that enterprise or that the enterprise
has the right to use; orc)for the provision of services by thatenterprise,that enterprise shall be deemed to have a permanentestablishment in that Contracting State in respect of any
activities which that person undertakes for the enterprise
unless these activities, if they were exercised by theenterprise through a fixed place of business of thatenterprise situated in that Contracting State, would notcause that fixed place of business to be deemed toconstitute a permanent establishment under the definitionof permanent establishment included in the provisions ofArticle 5 of the Convention.

9

2.
Paragraph 1 shall not apply where the person acting ina Contracting State on behalf of an enterprise of the other
Contracting State carries on business in the firstmentioned Contracting State as an independent agent andacts for the enterprise in the ordinary course of thatbusiness. Where, however, a person acts exclusively or
almost exclusively on behalf of one or more enterprises towhich it is closely related, that person shall not be
considered to be an independent agent within the meaning of
this paragraph with respect to any such enterprise.
7.
The fact that a legal person who is a resident of aContracting State controls or is controlled by a legal
person who is a resident of the other Contracting State, or
who carries on business in that other Contracting State(whether through a permanent establishment or otherwise),shall not of itself constitute either legal person apermanent establishment of the other.
The following paragraph 1 of Article 15 of the MLI applies to the Convention:
Article 15 – Definition of a Person Closely Related to an Enterprise1.
For the purposes of the provisions of Article 5 of theConvention, a person is closely related to an enterpriseif, based on all the relevant facts and circumstances, one
has control of the other or both are under the control ofthe same persons or enterprises. In any case, a person
shall be considered to be closely related to an enterprise
if one possesses directly or indirectly more than 50 per
cent of the beneficial interest in the other (or, in thecase of a company, more than 50 per cent of the aggregate
vote and value of the company’s shares or of the beneficial
equity interest in the company) or if another person
possesses directly or indirectly more than 50 per cent of
the beneficial interest (or, in the case of a company, morethan 50 per cent of the aggregate vote and value of thecompany’s shares or of the beneficial equity interest in
the company) in the person and the enterprise.
Article 6
1.
Income derived by a resident of a Contracting State
from immovable property situated in the other Contracting
State may be taxed in that other Contracting State.
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 shall10

in any case include property accessory to immovable
property, rights to which the provisions of general law
respecting immovable 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 andto income from immovable property used for the performanceof independent personal services.
Article 7
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.
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

11

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 provisions of the preceding
paragraphs of this Article, the profits to be attributed tothe permanent establishment shall be determined by the same
method year by year unless there is good and sufficientreason to the contrary.
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 81.
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.
In respect of the operation of ships or aircraft ininternational traffic carried on by an enterprise of aContracting State, that enterprise, if an enterprise of
Bulgaria, shall be exempt from the enterprise tax in Japan,
and, if an enterprise of Japan, shall be exempt from any
tax similar to the enterprise tax in Japan which may
hereafter be imposed in Bulgaria.
3.
The provisions of paragraphs 1 and 2 shall also apply
to profits from the participation in a pool, a joint
business or an international operating agency.
Article 9
1.

Where
(a)

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

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

12

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, upon consultation, that allor part of the profits so included are profits which would
have accrued to the enterprise of the first-mentioned
Contracting State if the conditions made between the twoenterprises had been those which would have been madebetween independent enterprises, then that other
Contracting State shall make an appropriate adjustment tothe amount of the tax charged therein on those agreed
profits. In determining such adjustment, due regard shallbe had to the other provisions of this Convention.

The following paragraph 1 of Article 17 of the MLI replaces paragraph 2 of Article 9 of
the Convention:
Article 17 – Corresponding Adjustments
1.
Where a Contracting State includes in the profits ofan enterprise of that Contracting State - and taxes
accordingly - profits on which an enterprise of the other
Contracting State has been charged to tax in that other
Contracting State and the profits so included are profits
which would have accrued to the enterprise of the firstmentioned Contracting State if the conditions made between
the two enterprises had been those which would have been
made between independent enterprises, then that other
Contracting State shall make an appropriate adjustment tothe amount of the tax charged therein on those profits. In
determining such adjustment, due regard shall be had to theother provisions of the Convention and the competentauthorities of the Contracting States shall if necessary
consult each other.

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Article 10
1.
Dividends paid by a legal person who is a resident ofa Contracting 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 legal person paying thedividends is a resident, and according to the laws of thatContracting State, but if the recipient is the beneficial
owner of the dividends the tax so charged shall not exceed:(a)10 per cent of the gross amount of the dividends
if the beneficial owner is a legal person who
owns at least 25 per cent of the voting shares ofthe legal person paying the dividends during theperiod of six months immediately before the endof the accounting period for which the
distribution of profits takes place;(b)

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

The provisions of this paragraph shall not affect the
taxation of the legal person in respect of the profits outof which the dividends are paid.
3.
The term “dividends” as used in this Article means
income from shares or other rights, not being debt-claims,
participating in profits, as well as income from othercorporate rights which is subjected to the same taxation
treatment as income from shares by the taxation laws of theContracting State of which the legal person making the
distribution is a resident.
4.
The provisions of paragraphs 1 and 2 shall not apply
if the beneficial owner of the dividends, being a residentof a Contracting State, carries on business in the other
Contracting State of which the legal person paying thedividends is a resident, through a permanent establishment
situated therein, or performs in that other Contracting
State independent personal services from a fixed basesituated therein, and the holding in respect of which thedividends are paid is effectively connected with suchpermanent establishment or fixed base. In such case theprovisions of Article 7 or Article 14, as the case may be,shall apply.
5.
Where a legal person who is a resident of aContracting 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 legal person,
except insofar as such dividends are paid to a resident of14

that other Contracting State or insofar as the holding inrespect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed basesituated in that other Contracting State, nor subject
undistributed profits of the legal person to a tax onundistributed profits of the legal person, even if thedividends paid or the undistributed profits consist whollyor partly of profits or income arising in that other
Contracting State.
Article 11
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 recipient is thebeneficial owner of the interest the tax so charged shallnot exceed 10 per cent of the gross amount of the interest.
3.
Notwithstanding the provisions of paragraph 2,interest arising in a Contracting State and derived by theGovernment of the other Contracting State, a local
authority thereof, the Central Bank of that other
Contracting State or any financial institution wholly ownedby that Government, or by any resident of the other
Contracting State with respect to debt-claims guaranteed,insured or indirectly financed by the Government of that
other Contracting State, a local authority thereof, theCentral Bank of that other Contracting State or any
financial institution wholly owned by that Government shallbe exempt from tax in the first-mentioned Contracting
State.
4.
For the purposes of paragraph 3, the terms “theCentral Bank” and “financial institution wholly owned by
the Government” mean:(a)in the case of Japan:(i)the Bank of Japan;(ii)

the Export-Import Bank of Japan;(iii)

the Overseas Economic Cooperation Fund;(iv)

the Japan International Cooperation Agency;
and

(v)

such other financial institution the capitalof which is wholly owned by the Government15

of Japan as may be agreed upon from time totime between the Governments of the two
Contracting States;(b)in the case of Bulgaria:(i)the Bulgarian National Bank;(ii)

the Bulgarian Foreign Trade Bank; and(iii)

such other financial institution the capitalof which is wholly owned by the Governmentof Bulgaria as may be agreed upon from time
to time between the Governments of the two
Contracting States.

5.
The term “interest” as used in this Article means
income from debt-claims of every kind, whether or notsecured by mortgage and whether or not carrying 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.
6.
The provisions of paragraphs 1, 2 and 3 shall not
apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on business in theother Contracting State in which the interest arises,
through a permanent establishment situated therein, or
performs in that other Contracting State independent
personal services from a fixed base situated therein, andthe debt-claim in respect of which the interest is paid iseffectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or
Article 14, as the case may be, shall apply.
7.
Interest shall be deemed to arise in a Contracting
State when the payer is that Contracting State itself, a
local authority thereof or a resident of that Contracting
State. Where, however, the person paying the interest,
whether he is a resident of a Contracting State or not, hasin a Contracting State a permanent establishment or a fixedbase in connection with which the indebtedness on which theinterest is paid was incurred, and such interest is borneby such permanent establishment or fixed base, then suchinterest shall be deemed to arise in the Contracting Statein which the permanent establishment or fixed base issituated.
8.
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 the16amount 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.
Article 12
1.
Royalties arising in a Contracting State and paid to aresident of the other Contracting State may be taxed inthat other Contracting State.
2.
However, such royalties may also be taxed in theContracting State in which they arise, and according to thelaws of that Contracting State, but if the recipient is thebeneficial owner of the royalties the tax so charged shallnot exceed 10 per cent of the gross amount of theroyalties.
3.
The term “royalties” as used in this Article means
payments of any kind received as a consideration for theuse of, or the right to use, any copyright of literary,artistic or scientific work including cinematograph films
and films or tapes for radio or television broadcasting,
any patent, trade mark, design or model, plan, secretformula or process, or for the use of, or the right to use,
industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientificexperience.
4.
Royalties shall be deemed to arise in a Contracting
State when the payer is that Contracting State itself, a
local authority thereof or a resident of that Contracting
State. Where, however, the person paying the royalties,
whether he is a resident of a Contracting State or not, hasin a Contracting State a permanent establishment or a fixedbase in connection with which the liability to pay theroyalties was incurred, and such royalties are borne bysuch permanent establishment or fixed base, then suchroyalties shall be deemed to arise in the Contracting Statein which the permanent establishment or fixed base issituated.
5.
The provisions of paragraphs 1, 2 and 4 of this
Article shall likewise apply to proceeds arising from thealienation of any copyright of literary, artistic orscientific work including cinematograph films and films ortapes for radio or television broadcasting, any patent,
trade mark, design or model, plan, or secret formula orprocess, except when the provisions of paragraph 2 ofArticle 13 are applicable to the gains to be derived from17

such proceeds.
6.
The provisions of paragraphs 1, 2 and 5 shall not
apply if the beneficial owner of the royalties or proceeds,
being a resident of a Contracting State, carries on
business in the other Contracting State in which theroyalties or proceeds arise, through a permanentestablishment situated therein, or performs in that other
Contracting State independent personal services from afixed base situated therein, and the right or property inrespect of which the royalties or proceeds are paid iseffectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or
Article 14, as the case may be, shall apply.
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 royalties or proceeds,
having regard to the use, right or information for which
they are paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in theabsence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In
such case, the excess part of the payments shall remaintaxable according to the laws of each Contracting State,
due regard being had to the other provisions of thisConvention.
Article 13
1.
Gains derived by a resident of a Contracting State
from the alienation of immovable property referred to in
Article 6 and situated in the other Contracting State may
be taxed in that other Contracting State.
2.
Gains 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 or ofany property, other than immovable property, pertaining toa fixed base available to a resident of a Contracting Statein the other Contracting State for the purpose of
performing independent personal services, including suchgains from the alienation of such a permanent establishment(alone or together with the whole enterprise) or of such afixed base, may be taxed in that other Contracting State.
3.
Gains derived by a resident of a Contracting State
from the alienation of ships or aircraft operated ininternational traffic and any property, other thanimmovable property, pertaining to the operation of suchships or aircraft shall be taxable only in that Contracting
State.

18

4.
Unless the provisions of paragraph 2 are applicable,
gains derived by a resident of a Contracting State from thealienation of shares of a legal person being a resident of
the other Contracting State may be taxed in that other
Contracting State.
5.
Gains derived by a resident of a Contracting State
from the alienation of any property other than thatreferred to in paragraph 5 of Article 12 and paragraphs 1
to 4 of this Article shall be taxable only in thatContracting State.
The following paragraph 4 of Article 9 of the MLI applies to the Convention:
Article 9 – Capital Gains from Alienation of Shares or Interests of Entities
Deriving their Value Principally from Immovable Property
4.
For purposes of the Convention, gains derived by aresident of a Contracting State from the alienation ofshares or comparable interests, such as interests in apartnership or trust, may be taxed in the other Contracting
State if, at any time during the 365 days preceding thealienation, these shares or comparable interests derived
more than 50 per cent of their value directly or indirectlyfrom immovable property situated in that other Contracting
State.

Article 14
1.
Income derived by a resident of a Contracting State inrespect of professional services or other activities of an
independent character shall be taxable only in thatContracting State unless he has a fixed base regularly
available to him in the other Contracting State for the
purpose of performing his activities. If he has such afixed base, the income may be taxed in that other
Contracting State but only so much of it as is attributable
to that fixed base.
2.
The term “professional services” includes especiallyindependent scientific, literary, artistic, educational orteaching activities as well as the independent activitiesof physicians, lawyers, engineers, architects, dentists andaccountants.
Article 15
1.

Subject to the provisions of Articles 16, 18, 19, 20

19

and 21, salaries, wages and other similar remuneration
derived by a resident of a Contracting State in respect ofan employment shall be taxable only in that Contracting
State unless the employment is exercised in the other
Contracting State. If the employment is so exercised, such
remuneration as is derived 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 that other
Contracting State for a period or periods notexceeding in the aggregate 183 days in thecalendar year concerned;(b)

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

3.
Notwithstanding the provisions of paragraphs 1 and 2,
remuneration in respect of an employment exercised aboard aship or aircraft operated in international traffic by anenterprise of a Contracting State may be taxed in thatContracting State.
Article 16
Directors’ fees and other similar payments derived bya resident of a Contracting State in his capacity as amember of the board of directors of a legal person who is a
resident of the other Contracting State may be taxed inthat other Contracting State.
Article 17
1.
Notwithstanding the provisions of Articles 14 and 15,
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, and amusician, or as an athlete, from his personal activities assuch exercised in the other Contracting State, may be taxed
in that other Contracting State.
Such income shall, however, be exempt from tax in that
other Contracting State if such activities are exercised by20

an individual, being a resident of the first-mentioned
Contracting State, pursuant to a special programme forcultural exchange agreed upon between the Governments ofthe two Contracting States.
2.
Where income in respect of personal activities
exercised in a Contracting State by an entertainer or anathlete in his capacity as such accrues not to theentertainer or athlete himself but to another person who isa resident of the other Contracting State, that income may,notwithstanding the provisions of Articles 7, 14 and 15, be
taxed in the first-mentioned Contracting State.
Such income shall, however, be exempt from tax in thatContracting State if such income is derived from theactivities exercised by an individual, being a resident of
the other Contracting State, pursuant to a special
programme for cultural exchange agreed upon between the
Governments of the two Contracting States and accrues toanother person who is a resident of that other Contracting
State.
Article 18
Subject to the provisions of paragraph 2 of Article
19, pensions and other similar remuneration paid to aresident of a Contracting State in consideration of past
employment shall be taxable only in that Contracting State.
Article 19
1.

2.

(a)

Remuneration, other than a pension, paid by aContracting State or a local authority thereof toan individual in respect of services rendered tothat Contracting State or local authority
thereof, in the discharge of functions of agovernmental nature, shall be taxable only inthat Contracting State.

(b)

However, such remuneration shall be taxable onlyin the other Contracting State if the services
are rendered in that other Contracting State andthe individual is a resident of that other
Contracting State who:

(a)

(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.

Any pension paid by, or out of funds to which

21

contributions are made by, a Contracting State ora local authority thereof to an individual inrespect of services rendered to that Contracting
State or local authority thereof shall be taxable
only in that Contracting State.
(b)

However, such pension shall be taxable only inthe other Contracting State if the individual isa resident of, and a national of, that other
Contracting State.

3.
The provisions of Articles 15, 16, 17 and 18 shallapply to remuneration and pensions in respect of services
rendered in connection with a business carried on by aContracting State or a local authority thereof.
Article 20
Payment 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 be
exempt from tax of the first-mentioned Contracting State,provided that such payments are made to him from outsidethat first-mentioned Contracting State. The same shallapply to remuneration which such student or businessapprentice derives from an employment which he exercises inthat first-mentioned Contracting State for a period notexceeding five taxable years from the date of his arrivalin order to obtain practical experience related to his
education or training or supplement his maintenance.
Article 21
1.
An individual who visits a Contracting State for aperiod not exceeding two years for the purpose of teachingor conducting research at a university, college, school orother accredited educational institution in thatContracting State, and who is, or immediately before such
visit was, a resident of the other Contracting State shallbe exempt from tax in the first-mentioned Contracting Stateon any remuneration for such teaching or research inrespect of which he is subject to tax in the other
Contracting State.
2.
The provisions of paragraph 1 shall not apply toincome from research if such research is undertaken
primarily for the private benefit of a specific person or
persons.

22

Article 22
1.
Items of income of a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articlesof this Convention shall be taxable only in thatContracting State.
2.
The provisions of paragraph 1 shall not apply toincome, other than income from immovable property as
defined in paragraph 2 of Article 6, if the recipient ofsuch income, being a resident of a Contracting State,carries on business in the other Contracting State througha permanent establishment situated therein, or performs inthat other Contracting State independent personal services
from a fixed base situated therein, and the right orproperty in respect of which the income is paid iseffectively connected with such permanent establishment or
fixed base. In such case the provisions of Article 7 or
Article 14, as the case may be, shall apply.
3.
Notwithstanding the provisions of paragraphs 1 and 2,
items of income of a resident of a Contracting State notdealt with in the foregoing Articles of this Convention andarising in the other Contracting State may be taxed in that
other Contracting State.
Article 23
1.
In Bulgaria, double taxation shall be eliminated asfollows:(a)

Where a resident of Bulgaria derives income
which, in accordance with the provisions of thisConvention may be taxed in Japan, Bulgaria shall,subject to the provisions of sub-paragraphs (b)and (c) of this paragraph, exempt such income
from tax.

The following paragraph 6 of Article 5 of the MLI replaces subparagraph (a) ofparagraph 1 of Article 23 of the Convention:
Article 5 – Application of Methods for Elimination of Double Taxation
6.

a)Where a resident of Bulgaria derives income which
may be taxed in Japan in accordance with theprovisions of the Convention (except to theextent that these provisions allow taxation by
Japan solely because the income is also income
derived by a resident of Japan), Bulgaria shallallow as a deduction from the tax on the incomeof that resident, an amount equal to the income

23tax paid in Japan.
Such deduction shall not, however, exceed thatpart of the income tax, as computed before thededuction is given, which is attributable to theincome which may be taxed in Japan.
b)

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

(b)

Where a resident of Bulgaria derives income
which, in accordance with the provisions ofArticles 11 and 12 may be taxed in Japan,
Bulgaria shall allow as a deduction from the tax
on the income of that resident an amount equal to
the tax paid in Japan. Such deduction shall not,however, exceed that part of the tax, as computed
before the deduction is given, which is
attributable to such income derived from Japan.

(c)Where in accordance with any provision of thisConvention income derived by a resident of
Bulgaria is exempt from tax in Bulgaria, Bulgariamay, nevertheless, in calculating the amount of
the tax on the remaining income of such resident,
take into account the exempted income.

2.
Subject to the laws of Japan regarding the allowance
as a credit against Japanese tax of tax payable in any
country other than Japan:(a)Where a resident of Japan derives income from
Bulgaria which may be taxed in Bulgaria in
accordance with the provisions of thisConvention, the amount of Bulgarian tax payable
in respect of that income shall be allowed as acredit against the Japanese tax imposed on that
resident. The amount of credit, however, shallnot exceed that part of the Japanese tax which isappropriate to that income.

(b)

Where the income derived from Bulgaria is a
dividend paid by a legal person who is a residentof Bulgaria to a legal person who is a residentof Japan and who owns not less than 25 per centeither of the voting shares of the legal person
paying the dividend, or of the total sharesissued by that legal person, the credit shall24

take into account the Bulgarian tax payable by
the legal person paying the dividend in respectof its income.
3.
For the purposes of the credit referred to in subparagraph (a) of paragraph 2 above, where an amount of tax
paid in Bulgaria on dividends or royalties to which theprovisions of paragraph 2 of Article 10 or paragraph 2 ofArticle 12, as the case may be, apply is less than 10 per
cent of the gross amount thereof, Bulgarian tax shall bedeemed to have been paid at the rate of 10 per cent of thegross amount of such dividends or royalties.
4.
For the purposes of the credit referred to inparagraph 2 above, the term “Bulgarian tax payable” shallbe deemed to include the amount of the Bulgarian tax which
would have been paid under the laws of Bulgaria if the
Bulgarian tax had not been reduced or exempted inaccordance with the special incentive measures designed topromote economic development in Bulgaria, provided that anagreement is made between the two Governments in respect of
the scope of the benefit accorded to the taxpayer by thesaid measures.
5.
The provisions of paragraphs 3 and 4 shall not apply
in respect of income derived by a resident of Japan in any
taxable year beginning on or after the first day of Januaryof 2002.
Article 24
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 are or 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 aContracting State to grant to residents of the other
Contracting State any personal allowances, reliefs andreductions for taxation purposes on account of civil status
or family responsibilities which it grants to its own

25residents.
3.
Except where the provisions of paragraph 1 of Article
9, paragraph 8 of Article 11, or paragraph 7 of Article 12,
apply, interest, royalties and other disbursements paid byan enterprise of a Contracting State to a resident of theother Contracting State shall, for the purpose ofdetermining the taxable profits of such enterprise, be
deductible under the same conditions as if they had been
paid to a resident of the first-mentioned Contracting
State.
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.
Article 25
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 laws 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 24, to that of theContracting State of which he is a national.

The following first sentence of paragraph 1 of Article 16 of the MLI replaces the first
sentence of paragraph 1 of Article 25 of the Convention:
Article 16 – Mutual Agreement Procedure
Where a person considers that the actions of one orboth of the Contracting States result or will result forthat person in taxation not in accordance with theprovisions of the Convention, that person may, irrespectiveof the remedies provided by the domestic law of thoseContracting States, present the case to the competentauthority of either Contracting State.

26

The case must be presented within three years from thefirst notification of the action resulting in taxation notin accordance with the provisions of this 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 not in accordance with theprovisions of this Convention. Any agreement reached shallbe implemented notwithstanding any time limits in thedomestic laws 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. They may also consult
together for the elimination of double taxation in cases
not provided for in this Convention.
4.
The competent authorities of the Contracting States
may communicate with each other directly for the purpose ofreaching an agreement in the sense of the preceding
paragraphs of this Article.
Article 26
1.
The competent authorities of the Contracting Statesshall exchange such information as is necessary forcarrying out the provisions of this Convention or of thedomestic laws of the Contracting States concerning taxes
covered by this Convention insofar as the taxation
thereunder is not contrary to the provisions of thisConvention, or for the prevention of fiscal evasion withrespect to such taxes. Any information so exchanged shallbe treated as secret and shall be disclosed only to persons
or authorities, including courts, involved in theassessment or collection of the taxes covered by thisConvention or the determination of appeals in relation
thereto.
2.
In no case shall the provisions of paragraph 1 beconstrued so as to impose on a Contracting State theobligation:(a)

to carry out administrative measures at variancewith the laws and the administrative practice ofthat or of the other Contracting State;(b)to supply information which is not obtainable
under the laws or in the normal course of the27

administration of that or of the other
Contracting State;(c)to supply information which would disclose any
trade, business, industrial, commercial or
professional secret or trade process, orinformation, the disclosure of which would becontrary to public policy (ordre public).
Article 27

Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under
the general rules of international law or under theprovisions of special agreements.
The following paragraph 1 of Article 7 of the MLI applies to the Convention:
Article 7 – Prevention of Treaty Abuse
1.
Notwithstanding any provisions of the Convention, abenefit under the Convention shall not be granted in
respect of an item of income if it is reasonable toconclude, having regard to all relevant facts andcircumstances, that obtaining that benefit was one of theprincipal purposes of any arrangement or transaction that
resulted directly or indirectly in that benefit, unless it
is established that granting that benefit in thesecircumstances would be in accordance with the object andpurpose of the relevant provisions of the Convention.
Article 28
1.
This Convention shall be ratified and the instrumentsof ratification shall be exchanged at Tokyo as soon as
possible.
2.
This Convention shall enter into force on thethirtieth day after the date of the exchange of instrumentsof ratification and shall have effect in both Contracting
States as regards income for any taxable year beginning on
or after the first day of January of the calendar year next
following that in which this Convention enters into force.
Article 29
This Convention shall continue in effect indefinitely
but either Contracting State may, on or before thethirtieth day of June of any calendar year beginning after

28

the expiration of a period of five years from the date ofits entry into force, give to the other Contracting State,through the diplomatic channel, written notice oftermination and, in such event, this Convention shall ceaseto have effect in both Contracting States as regards income
for any taxable year beginning on or after the first day ofJanuary of the calendar year next following that in which
the notice of termination is given.
IN WITNESS WHEREOF the undersigned, duly authorized
thereto, have signed this Convention.
DONE in duplicate at Sofia, this seventh day of March,
1991 in the English language.

For Japan:

For the Republic of Bulgaria:

Takashi Tajima

Ivan Kostov29