(Unofficial Translation)
Guidance regarding the Commencement of Applicationof the New Tax Convention between Japan and the United States
June 2004
National Tax Agency
In Japan, the provision with respect to taxes withheld at source in paragraph 2 of Article 30 of theConvention between the Government of Japan and the Government of the United States for theAvoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on
Income (“the Convention”), entered into force on March 30, 2004, for amounts (such as dividends,interest, and royalties) to be paid before, on or after July 1, 2004, provides for the commencementof application of the Convention as indicated in Attachment 1.
In the United States, the commencement of application is as indicated in Attachment 2, which wasprepared by the U.S. Internal Revenue Service.

NoteParagraph 2 of Article 30 of the Convention states:
2.

This Convention shall be applicable:(a)in Japan:(i)with respect to taxes withheld at source:(aa)
for amounts taxable on or after July 1 of the calendar year in which
the Convention enters into force, if the Convention enters into force before
April 1 of a calendar year; or(bb)

(ii)
(b)

...

. . . ; andin the United States:(i)with respect to taxes withheld at source:(aa)
for amounts paid or credited on or after July 1 of the calendar year inwhich the Convention enters into force, if the Convention enters into force
before April 1 of a calendar year; or(bb)

(ii)

...

....

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(Unofficial Translation)
Attachment 1
Commencement of Application of the New Japan-U.S. Income Tax Convention in Japan(With respect to Taxes Withheld at Source regarding Investment Income )National Tax Agency
The Convention shall be applicable with respect to taxes withheld at source for amounts taxable onor after July 1, 2004. Therefore, the Convention is applicable to the amount of investment income(dividends, interest, and royalties) “due to be received” on or after that date.
Specifically, the date on which an amount is due to be received for purposes of the Convention is asfollows:Dividends
The date of the shareholders’ meeting where dividends are declared. (In Japan acompany’s ordinary shareholders’ meeting is held within three months after the end of thefiscal year in accordance with the Commercial Code.)
As for interim dividends, the date of the resolution by the board of directors. If aneffective date is specified regarding the resolution, that effective date (which must be a datewithin three months after the date determined in the company’s articles of incorporation).
Interest and Royalties
If the date of payment is stipulated in a contract, that date; if not, the date on which theinterest or royalties are actually paid.
Examples:Dividends
1.
Japanese Company A has a fiscal year that ends on March 31, 2004. At a shareholders’meeting on June 25, 2004, Company A declares dividends. Company A pays the dividends on July5, 2004.
These dividends are taxable on June 25, 2004.
Interest
2.
Japanese Company B has an obligation to pay to a financial institution interest on adebt-claim. The interest is payable in quarterly installments due at the end of each quarter. Inaccordance with the terms of the debt-claim, the interest is paid on June 30, 2004.
This interest is taxable on June 30, 2004.

23.
Japanese Company C has an obligation to pay to a financial institution interest on adebt-claim. The interest is payable in installments three times a year, due at the end of April,
August, and December. In accordance with the terms of the debt-claim, the interest is paid on
August 31, 2004.
This interest is taxable on August 31, 2004.
Royalties
4.
Japanese Company D has an obligation to pay royalties to U.S. Company E. Pursuant to alicense agreement, the royalties are determined based on sales over six- month periods ending June
30 and December 31, and are payable within 15 days of the end of each six- month period. In
accordance with the terms of the license, royalties are paid on July 5, 2004.
These royalties are taxable on July 5, 2004.
5.
Japanese Company F has an obligation to pay royalties to U.S. Company G. Pursuant to alicense agreement, the royalties are determined based on sales over six- month periods ending March
31 and September 30 and are payable within 15 days of the end of each six- month period. In
accordance with the terms of the license, royalties are paid on October 5, 2004.
These royalties are taxable on October 5, 2004.

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Attachment 2
Commencement of Application of the New U.S.-Japan Income Tax Convention inthe United States(With respect to Taxes Withheld at Source regarding Investment Income )Internal Revenue Service
The Convention shall be applicable with respect to taxes withheld at source for amounts paid or
credited on or after July 1, 2004. Therefore, the Convention is applicable to the amount ofinvestment income (dividends, interest, and royalties) paid or, where amounts are credited, creditedon or after that date.
Specifically, the date on which an amount is paid or credited for the purposes of the Convention is
as follows:
Dividends
In the case of all dividends (including interim dividends), amounts are paid or credited on
the date on which they are paid or, where amounts are credited, on the date on which they
are credited.
Interest and Royalties
In the case of interest or royalties, amounts are paid or credited on the date on which they
are paid or, where amounts are credited, on the date on which they are credited. When an
amount is paid (for example in the case where an amount required to be paid by contract ona specified date actually is paid on a later date) shall be determined on the basis of UnitedStates tax law.
Examples:Dividends
1.
U.S. Company A has a fiscal year that ends on March 31, 2004. At a shareholders’ meetingon June 25, 2004, Company A declares dividends. Company A pays the dividends on July 5, 2004.
These dividends are paid or credited on July 5, 2004.
Interest
2.
U.S. Company B has an obligation to pay to a financial institution interest on a debt-claim.
The interest is payable in quarterly installments due at the end of each quarter. In accordance withthe terms of the debt-claim, the interest is paid on June 30, 2004.
This interest is paid or credited on June 30, 2004.

43.
U.S. Company C has an obligation to pay to a financial institution interest on a debt-claim.
The interest is payable in installments three times a year, due at the end of April, August, andDecember. In accordance with the terms of the debt-claim, the interest is paid on August 31, 2004.
This interest is paid or credited on August 31, 2004.
Royalties
4.
U.S. Company D has an obligation to pay royalties to Japanese Company E. Pursuant to alicense agreement, the royalties are determined based on sales over six- month periods ending June
30 and December 31, and are payable within 15 days of the end of each six- month period. In
accordance with the terms of the license, royalties are paid on July 5, 2004.
These royalties are paid or credited on July 5, 2004.
5.
U.S. Company F has an obligation to pay royalties to Japanese Company G. Pursuant to alicense agreement, the royalties are determined based on sales over six- month periods ending March
31 and September 30 and are payable within 15 days of the end of each six- month period. In
accordance with the terms of the license, royalties are paid on October 5, 2004.
These royalties are paid or credited on October 5, 2004.

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