dtc agreement between switzerland and japan

8/7/2019 DTC agreement between Switzerland and Japan

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PROTOCOLAMENDING THE CONVENTION

BETWEEN JAPAN AND SWITZERLANDFOR THE AVOIDANCE OF DOUBLE TAXATION

WITH RESPECT TO TAXES ON INCOME

The Government of Japan and the Swiss Federal Council,

Desiring to amend the Convention between Japan andSwitzerland for the Avoidance of Double Taxation withrespect to Taxes on Income signed at Tokyo on 19 January1971 (hereinafter referred to as the Convention),

Have agreed as follows:

Article 1

1. Subparagraph (a) of paragraph 1 of Article 3 of theConvention shall be deleted and replaced by the following:

(a) the term Japan, when used in ageographical sense, means all the territoryof Japan, including its territorial sea, inwhich the laws relating to Japanese tax arein force, and all the area beyond itsterritorial sea, including the seabed andsubsoil thereof, over which Japan hassovereign rights in accordance withinternational law and in which the laws

relating to Japanese tax are in force;

2. Subparagraph (h) of paragraph 1 of Article 3 of theConvention shall be deleted and replaced by the following:

(h) the term international traffic means anytransport by a ship or aircraft operated byan enterprise of a Contracting State, exceptwhen the ship or aircraft is operated solelybetween places in the other ContractingState;

3. The following new subparagraphs shall be insertedimmediately after subparagraph (h) of paragraph 1 ofArticle 3 of the Convention.

(i) the term national means:


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(i) in the case of Japan, any individualpossessing the nationality of Japan,any juridical person created ororganised under the laws of Japan andany organisation without juridicalpersonality treated for the purposes of

Japanese tax as a juridical personcreated or organised under the laws ofJapan; and

(ii) in the case of Switzerland, all Swisscitizens and all legal persons,partnerships and associations derivingtheir status as such from the laws inforce in Switzerland;

(j) the term competent authority means:

(i) in the case of Japan, the Minister ofFinance or his authorisedrepresentative; and

(ii) in the case of Switzerland, theDirector of the Federal TaxAdministration or his authorisedrepresentative; and

(k) the term pension fund or pension schememeans any person that:

(i) is established under the laws of a

Contracting State;

(ii) is operated principally to administeror provide pensions, retirementbenefits or other similar remunerationor to earn income for the benefit ofother pension funds or pension schemes;and

(iii) is exempt from tax in that ContractingState with respect to income derivedfrom the activities described in clause

(ii).

Article 2

1. Paragraphs 1 and 2 of Article 4 of the Conventionshall be deleted and replaced by the following:


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1. For the purposes of this Convention, the termresident of a Contracting State means any personwho, under the laws of that Contracting State, isliable to tax therein by reason of his domicile,residence, place of head or main office, place ofmanagement or any other criterion of a similar nature,

and also includes:

(a) that Contracting State and any politicalsubdivision or local authority thereof;

(b) a pension fund or pension scheme establishedunder the laws of that Contracting State;and

(c) an organisation established under the lawsof that Contracting State and operatedexclusively for a religious, charitable,

educational, scientific, artistic, sportive,cultural or public purpose (or for more thanone of those purposes), only if all or partof its income may be exempt from tax underthe laws of that Contracting State.

This term, however, does not include any personwho is liable to tax in that Contracting State inrespect only of income from sources in thatContracting State.

2. Where by reason of the provisions of paragraph 1an individual is a resident of both Contracting

States, then his status shall be determined asfollows:

(a) he shall be deemed to be a resident only ofthe Contracting State in which he has apermanent home available to him; if he has apermanent home available to him in bothContracting States, he shall be deemed to bea resident only of the Contracting Statewith which his personal and economicrelations are closer (centre of vitalinterests);

(b) if the Contracting State in which he has hiscentre of vital interests cannot bedetermined, or if he has not a permanenthome available to him in either ContractingState, he shall be deemed to be a residentonly of the Contracting State in which hehas an habitual abode;


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(c) if he has an habitual abode in bothContracting States or in neither of them, heshall be deemed to be a resident only of theContracting State of which he is a national;

(d) if he is a national of both Contracting

States or of neither of them, the competentauthorities of the Contracting States shallsettle the question by mutual agreement.

2. The following new paragraphs shall be insertedimmediately after paragraph 3 of Article 4 of theConvention:

4. Where, pursuant to any provisions of thisConvention, a Contracting State reduces the rate oftax on, or exempts from tax, income of a resident ofthe other Contracting State and under the laws in

force in that other Contracting State the resident issubjected to tax by that other Contracting State onlyon that part of such income which is remitted to orreceived in that other Contracting State, then thereduction or exemption shall apply only to so much ofsuch income as is remitted to or received in thatother Contracting State.

5. For the purposes of applying this Convention:

(a) an item of income:

(i) derived from a Contracting State

through an entity that is organised inthe other Contracting State, and

(ii) treated as the income of thebeneficiaries, members or participantsof that entity under the tax laws ofthat other Contracting State,

shall be eligible for the benefits of theConvention that would be granted if it weredirectly derived by a beneficiary, member orparticipant of that entity who is a resident

of that other Contracting State, to theextent that such beneficiaries, members orparticipants are residents of that otherContracting State and satisfy any otherconditions specified in the Convention,without regard to whether the income istreated as the income of such beneficiaries,members or participants under the tax lawsof the first-mentioned Contracting State;


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(b) an item of income:

(i) derived from a Contracting Statethrough an entity that is organised inthe other Contracting State, and

(ii) treated as the income of that entityunder the tax laws of that otherContracting State,

shall be eligible for the benefits of theConvention that would be granted to aresident of that other Contracting State,without regard to whether the income istreated as the income of that entity underthe tax laws of the first-mentionedContracting State, if such entity is aresident of that other Contracting State and

satisfies any other conditions specified inthe Convention;

(c) an item of income:

(i) derived from a Contracting Statethrough an entity that is organised inthat Contracting State, and

(ii) treated as the income of that entityunder the tax laws of the otherContracting State,

shall not be eligible for the benefits ofthe Convention.

Article 3

1. Paragraph 3 of Article 5 of the Convention shall beamended by replacing the period at the end of subparagraph(e) with a semicolon and by adding the following:

(f) the maintenance of a fixed place of businesssolely for any combination of activitiesmentioned in subparagraphs (a) to (e),

provided that the overall activity of thefixed place of business resulting from thiscombination is of a preparatory or auxiliarycharacter.

2. Paragraphs 4 and 5 of Article 5 of the Conventionshall be deleted and replaced by the following:


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4. Notwithstanding the provisions of paragraphs 1and 2, where a person - other than an agent of anindependent status to whom the provisions of paragraph5 apply - is acting on behalf of an enterprise andhas, and habitually exercises, in a Contracting Statean authority to conclude contracts in the name of the

enterprise, that enterprise shall be deemed to have apermanent establishment in that Contracting State inrespect of any activities which that person undertakesfor the enterprise, unless the activities of suchperson are limited to those mentioned in paragraph 3which, if exercised through a fixed place of business,would not make this fixed place of business apermanent establishment under the provisions of thatparagraph.

3. Paragraphs 6 and 7 of Article 5 of the Conventionshall be renumbered as paragraphs 5 and 6 respectively.

Article 4

Paragraph 1 of Article 6 of the Convention shall bedeleted and replaced by the following:

1. Income derived by a resident of a ContractingState from immovable property (including income fromagriculture or forestry) situated in the otherContracting State may be taxed in that otherContracting State.

Article 5

Article 9 of the Convention shall be deleted andreplaced by the following:

Article 9

1. Where

(a) an enterprise of a Contracting Stateparticipates directly or indirectly in themanagement, control or capital of anenterprise of the other Contracting State,

or

(b) the same persons participate directly orindirectly in the management, control orcapital of an enterprise of a ContractingState and an enterprise of the otherContracting State,


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and in either case conditions are made or imposedbetween the two enterprises in their commercial orfinancial relations which differ from those whichwould be made between independent enterprises, thenany profits which would, but for those conditions,have accrued to one of the enterprises, but, by reason

of those conditions, have not so accrued, may beincluded in the profits of that enterprise and taxedaccordingly.

2. Where a Contracting State includes, in accordancewith the provisions of paragraph 1, in the profits ofan enterprise of that Contracting State - and taxesaccordingly - profits on which an enterprise of theother Contracting State has been charged to tax inthat other Contracting State and where the competentauthorities of the Contracting States agree, uponconsultation, that all or part of the profits so

included are profits which would have accrued to theenterprise of the first-mentioned Contracting State ifthe conditions made between the two enterprises hadbeen those which would have been made betweenindependent enterprises, then that other ContractingState shall make an appropriate adjustment to theamount of the tax charged therein on those agreedprofits. In determining such adjustment, due regardshall be had to the other provisions of thisConvention.

3. Notwithstanding the provisions of paragraph 1, aContracting State shall not change the profits of an

enterprise of that Contracting State in thecircumstances referred to in paragraph 1 after theexpiry of the time limits provided in its laws and, inany case, after seven years from the end of thetaxable year in which the profits which would besubject to such change would have accrued to thatenterprise. The provisions of this paragraph shallnot apply in the case of fraud or wilful default.

Article 6

Article 10 of the Convention shall be deleted and

replaced by the following:

Article 10

1. Dividends paid by a company which is a residentof a Contracting State to a resident of the otherContracting State may be taxed in that otherContracting State.


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2. However, such dividends may also be taxed in theContracting State of which the company paying thedividends is a resident and according to the laws ofthat Contracting State, but if the beneficial owner ofthe dividends is a resident of the other ContractingState, the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of thedividends if the beneficial owner is acompany that has owned, directly orindirectly, for the period of six monthsending on the date on which entitlement tothe dividends is determined, either:

(i) shares representing at least 10 percent of the voting power of the companypaying the dividends where such companyis a resident of Japan; or

(ii) shares representing at least 10 percent of the capital or of the votingpower of the company paying thedividends where such company is aresident of Switzerland;

(b) 10 per cent of the gross amount of thedividends in all other cases.

3. Notwithstanding the provisions of paragraph 2,dividends shall not be taxed in the Contracting Stateof which the company paying the dividends is a

resident if the beneficial owner of the dividends is aresident of the other Contracting State and is either:

(a) a company that has owned, directly orindirectly, for the period of six monthsending on the date on which entitlement tothe dividends is determined:

(i) shares representing at least 50 percent of the voting power of the companypaying the dividends where such companyis a resident of Japan; or

(ii) shares representing at least 50 percent of the capital or of the votingpower of the company paying thedividends where such company is aresident of Switzerland; or


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(b) a pension fund or pension scheme, providedthat such dividends are derived from theactivities described in clause (ii) ofsubparagraph (k) of paragraph 1 of Article3.

4. The provisions of paragraphs 2 and 3 shall notaffect the taxation of the company in respect of theprofits out of which the dividends are paid.

5. The term dividends as used in this Articlemeans income from shares or other rights, not beingdebt-claims, participating in profits, as well asincome which is subjected to the same taxationtreatment as income from shares by the tax laws of theContracting State of which the company making thedistribution is a resident.

6. The provisions of paragraphs 1, 2 and 3 shall notapply if the beneficial owner of the dividends, beinga resident of a Contracting State, carries on businessin the other Contracting State of which the companypaying the dividends is a resident through a permanentestablishment situated therein, or performs in thatother Contracting State independent personal servicesfrom a fixed base situated therein, and the holding inrespect of which the dividends are paid is effectivelyconnected with such permanent establishment or fixedbase. In such case the provisions of Article 7 or 14,as the case may be, shall apply.

7. Where a company which is a resident of aContracting State derives profits or income from theother Contracting State, that other Contracting Statemay not impose any tax on the dividends paid by thecompany, except insofar as such dividends are paid toa resident of that other Contracting State or insofaras the holding in respect of which the dividends arepaid is effectively connected with a permanentestablishment or a fixed base situated in that otherContracting State, nor subject the companysundistributed profits to a tax on the companysundistributed profits, even if the dividends paid or

the undistributed profits consist wholly or partly ofprofits or income arising in such other ContractingState.


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8. A resident of a Contracting State shall not beconsidered the beneficial owner of the dividends paidby a resident of the other Contracting State inrespect of shares or other similar interests if suchshares or other similar interests would not have beenestablished or acquired unless a person:

(a) that is not entitled to benefits withrespect to dividends paid by a resident ofthat other Contracting State which areequivalent to, or more favourable than,those available under this Convention to aresident of the first-mentioned ContractingState; and

(b) that is not a resident of either ContractingState;

owned equivalent shares or other similar interests inthe first-mentioned resident.

Article 7


Article 11

1. Interest arising in a Contracting State and paidto a resident of the other Contracting State may betaxed in that other Contracting State.

2. However, such interest may also be taxed in theContracting State in which it arises and according tothe laws of that Contracting State, but if thebeneficial owner of the interest is a resident of theother Contracting State, the tax so charged shall notexceed 10 per cent of the gross amount of theinterest.

3. Notwithstanding the provisions of paragraph 2,interest arising in a Contracting State shall betaxable only in the other Contracting State if:

(a) the interest is beneficially owned by theGovernment of that other Contracting State,a political subdivision or local authoritythereof, or the central bank of that otherContracting State or any institution ownedby that Government;


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(b) the interest is beneficially owned by aresident of that other Contracting Statewith respect to debt-claims guaranteed,insured or indirectly financed by theGovernment of that other Contracting State,a political subdivision or local authority

thereof, or the central bank of that otherContracting State or any institution ownedby that Government;

(c) the interest is beneficially owned by aresident of that other Contracting Statethat is either:

(i) a bank;

(ii) an insurance company;

(iii) a securities dealer; or

(iv) any other enterprise, provided that inthe three taxable years preceding thetaxable year in which the interest ispaid, the enterprise derives more than50 per cent of its liabilities from theissuance of bonds in the financialmarkets or from taking deposits atinterest, and more than 50 per cent ofthe assets of the enterprise consist ofdebt-claims against persons that do nothave with the enterprise a relationship

described in subparagraph (a) or (b) ofparagraph 1 of Article 9;

(d) the interest is beneficially owned by apension fund or pension scheme that is aresident of that other Contracting State,provided that such interest is derived fromthe activities described in clause (ii) ofsubparagraph (k) of paragraph 1 of Article3; or

(e) the interest is beneficially owned by a

resident of that other Contracting State andpaid with respect to indebtedness arising aspart of the sale on credit by a resident ofthat other Contracting State of equipment ormerchandise.


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4. For the purposes of paragraph 3, the terms thecentral bank and institution owned by thatGovernment mean:

(a) in the case of Japan:

(i) the Bank of Japan;

(ii) the Japan Finance Corporation;

(iii) the Japan International CooperationAgency;

(iv) the Nippon Export and InvestmentInsurance; and

(v) such other similar institution thecapital of which is owned by the

Government of Japan as may be agreedupon from time to time between theGovernments of the Contracting Statesthrough an exchange of diplomaticnotes;

(b) in the case of Switzerland:

(i) the Swiss National Bank;

(ii) the Swiss Insurance for Exports Risks;

(iii) the Swiss Accident Insurance Fund

(SUVA);

(iv) any institution covered by the FederalLaw on old-age and survivors'insurance, of 20 December 1946; and

(v) such other similar institution thecapital of which is owned by theGovernment of Switzerland as may beagreed upon from time to time betweenthe Governments of the ContractingStates through an exchange of

diplomatic notes.


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5. The term interest as used in this Article meansincome from debt-claims of every kind, whether or notsecured by mortgage and whether or not carrying aright to participate in the debtors 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.

6. The provisions of paragraphs 1, 2 and 3 shall notapply if the beneficial owner of the interest, being aresident of a Contracting State, carries on businessin the other Contracting State in which the interest

arises through a permanent establishment situatedtherein, or performs in that other Contracting Stateindependent personal services from a fixed basesituated therein, and the debt-claim in respect ofwhich the interest is paid is effectively connectedwith such permanent establishment or fixed base. Insuch case the provisions of Article 7 or 14, as thecase may be, shall apply.

7. Interest shall be deemed to arise in aContracting State when the payer is a resident of thatContracting State. Where, however, the person payingthe interest, whether he is a resident of a

Contracting State or not, has in a Contracting State apermanent establishment or a fixed base in connectionwith which the indebtedness on which the interest ispaid was incurred, and such interest is borne by suchpermanent establishment or fixed base, then suchinterest shall be deemed to arise in the ContractingState in which the permanent establishment or fixedbase is situated.

8. Where, by reason of a special relationshipbetween the payer and the beneficial owner or betweenboth of them and some other person, the amount of the

interest, having regard to the debt-claim for which itis paid, exceeds the amount which would have beenagreed upon by the payer and the beneficial owner inthe absence of such relationship, the provisions ofthis Article shall apply only to the last-mentionedamount. In such case, the excess part of the paymentsshall remain taxable according to the laws of eachContracting State, due regard being had to the otherprovisions of this Convention.


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9. A resident of a Contracting State shall not beconsidered the beneficial owner of the interestarising in the other Contracting State in respect of adebt-claim if such debt-claim would not have beenestablished unless a person:

(a) that is not entitled to benefits withrespect to the interest arising in the otherContracting State which are equivalent to,or more favourable than, those availableunder this Convention to a resident of thefirst-mentioned Contracting State; and

(b) that is not a resident of either ContractingState;

owned an equivalent debt-claim against the first-mentioned resident.

Article 8


Article 12

1. Royalties arising in a Contracting State andbeneficially owned by a resident of the otherContracting State shall be taxable only in that otherContracting State.

2. The term royalties as used in this Articlemeans payments of any kind received as a considerationfor the use of, or the right to use, any copyright ofliterary, artistic or scientific work includingcinematograph films and films or tapes for radio ortelevision broadcasting, any patent, trade mark,design or model, plan, or secret formula or process,or for information concerning industrial, commercialor scientific experience.

3. The provisions of paragraph 1 shall not apply ifthe beneficial owner of the royalties, being a

resident of a Contracting State, carries on businessin the other Contracting State in which the royaltiesarise through a permanent establishment situatedtherein, or performs in that other Contracting Stateindependent personal services from a fixed basesituated therein, and the right or property in respectof which the royalties are paid is effectivelyconnected with such permanent establishment or fixedbase. In such case the provisions of Article 7 or 14,as the case may be, shall apply.


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4. Where, by reason of a special relationshipbetween the payer and the beneficial owner or betweenboth of them and some other person, the amount of theroyalties, having regard to the use, right orinformation for which they are paid, exceeds theamount which would have been agreed upon by the payer

and the beneficial owner in the absence of suchrelationship, the provisions of this Article shallapply only to the last-mentioned amount. In suchcase, the excess part of the payments shall remaintaxable according to the laws of each ContractingState, due regard being had to the other provisions ofthis Convention.

5. A resident of a Contracting State shall not beconsidered the beneficial owner of the royaltiesarising in the other Contracting State in respect ofthe use of the right or property if such royalties

would not have been paid to the resident unless theresident paid royalties in respect of the use of thesame right or property to a person:

(a) that is not entitled to benefits withrespect to royalties arising in that otherContracting State which are equivalent to,or more favourable than, those availableunder this Convention to a resident of thefirst-mentioned Contracting State; and

(b) that is not a resident of either ContractingState.

Article 9


Article 13

1. Gains derived by a resident of a ContractingState from the alienation of immovable propertyreferred to in Article 6 and situated in the otherContracting State may be taxed in that other

Contracting State.

2. Gains derived by a resident of a ContractingState from the alienation of shares in a company or ofinterests in a trust may be taxed in the otherContracting State where the shares or the interestsderive at least 50 per cent of their value directly orindirectly from immovable property referred to inArticle 6 and situated in that other ContractingState.


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3. (a) Where

(i) a Contracting State (including, forthis purpose in the case of Japan, theDeposit Insurance Corporation of Japan)provides, pursuant to the laws

concerning failure resolution involvingimminent insolvency of financialinstitutions of that Contracting State,substantial financial assistance to afinancial institution that is aresident of that Contracting State, and

(ii) a resident of the other ContractingState acquires shares in the financialinstitution from the first-mentionedContracting State,

the first-mentioned Contracting State maytax gains derived by the resident of theother Contracting State from the alienationof such shares, provided that the alienationis made within five years from the firstdate on which such financial assistance wasprovided.

(b) The provisions of subparagraph (a) shall notapply if the resident of that otherContracting State acquired any shares in thefinancial institution from the first-mentioned Contracting State before the entry

into force of the provisions of thisparagraph or pursuant to a binding contractentered into before the entry into force ofthe provisions of this paragraph.

4. Gains from the alienation of any property, otherthan immovable property, forming part of the businessproperty of a permanent establishment which anenterprise of a Contracting State has in the otherContracting State or of any property, other thanimmovable property, pertaining to a fixed baseavailable to a resident of a Contracting State in the

other Contracting State for the purpose of performingindependent personal services, including such gainsfrom the alienation of such a permanent establishment(alone or with the whole enterprise) or of such afixed base, may be taxed in that other ContractingState.


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5. Gains derived by an enterprise of a ContractingState from the alienation of ships or aircraftoperated by that enterprise in international trafficor any property, other than immovable property,pertaining to the operation of such ships or aircraftshall be taxable only in that Contracting State.

6. Gains from the alienation of any property otherthan that referred to in the preceding paragraphs ofthis Article shall be taxable only in the ContractingState of which the alienator is a resident.

Article 10

In paragraph 1 of Article 15 of the Convention, thewords Articles 16, 18, 19 and 20 shall be replaced by thewords Articles 16, 18 and 19.

Article 11


Article 17

1. Notwithstanding the provisions of Articles 14 and15, income derived by a resident of a ContractingState as an entertainer, such as a theatre, motionpicture, radio or television artiste, or a musician,or as a sportsman, from his personal activities assuch exercised in the other Contracting State, may be

taxed in that other Contracting State.

2. Where income in respect of personal activitiesexercised by an entertainer or a sportsman in hiscapacity as such accrues not to the entertainer orsportsman himself but to another person, that incomemay, notwithstanding the provisions of Articles 7, 14and 15, be taxed in the Contracting State in which theactivities of the entertainer or sportsman areexercised.

Article 12


"Article 20 (Deleted)"


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Article 13

The following new Article shall be insertedimmediately after Article 21 of the Convention:

Article 21A

Notwithstanding any other provisions of thisConvention, any income and gains derived by a sleepingpartner in respect of a sleeping partnership (TokumeiKumiai) contract or other similar contract may betaxed in the Contracting State in which such incomeand gains arise and according to the laws of thatContracting State.

Article 14

Article 22 of the Convention shall be deleted and

replaced by the following:

Article 22

1. Items of income beneficially owned by a residentof a Contracting State, wherever arising, not dealtwith in the foregoing Articles of this Convention(hereinafter referred to as other income in thisArticle) shall be taxable only in that ContractingState.

2. The provisions of paragraph 1 shall not apply toother income, other than income from immovable

property as defined in paragraph 2 of Article 6, ifthe beneficial owner of such other income, being aresident of a Contracting State, carries on businessin the other Contracting State through a permanentestablishment situated therein, or performs in thatother Contracting State independent personal servicesfrom a fixed base situated therein, and the right orproperty in respect of which the other income is paidis effectively connected with such permanentestablishment or fixed base. In such case theprovisions of Article 7 or 14, as the case may be,shall apply.


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3. Where, by reason of a special relationshipbetween the resident referred to in paragraph 1 andthe payer or between both of them and some otherperson, the amount of other income exceeds the amountwhich would have been agreed upon between them 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 other incomeshall remain taxable according to the laws of eachContracting State, due regard being had to the otherprovisions of this Convention.

4. A resident of a Contracting State shall not beconsidered the beneficial owner of the other incomearising in the other Contracting State in respect ofthe right or property if such other income would nothave been paid to the resident unless the residentpaid other income in respect of the same right or

property to a person:

(a) that is not entitled to benefits withrespect to other income arising in thatother Contracting State which are equivalentto, or more favourable than, those availableunder this Convention to a resident of thefirst-mentioned Contracting State; and

(b) that is not a resident of either ContractingState.

Article 15


Article 22A

1. Except as otherwise provided in this Article, aresident of a Contracting State that derives incomedescribed in paragraph 3 of Article 10, subparagraph(c), (d) or (e) of paragraph 3 of Article 11, Article12, paragraph 6 of Article 13 or Article 22 from theother Contracting State shall be entitled to the

benefits granted for a taxable year by the provisionsof those subparagraphs, paragraphs or Articles only ifsuch resident is a qualified person as defined inparagraph 2 and satisfies any other specifiedconditions in those subparagraphs, paragraphs orArticles for the obtaining of such benefits.

2. A resident of a Contracting State is a qualifiedperson for a taxable year only if such resident iseither:


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(a) an individual;

(b) a qualified governmental entity;

(c) a company, if its principal class of sharesis listed or registered on a recognised

stock exchange specified in clause (i) or(ii) of subparagraph (c) of paragraph 8 andis regularly traded on one or morerecognised stock exchanges;

(d) a bank, an insurance company or a securitiesdealer that is established and regulated assuch under the laws of the Contracting Stateof which it is a resident;

(e) a person described in subparagraph (b) or(c) of paragraph 1 of Article 4, provided

that in the case of a person described insubparagraph (b) of that paragraph as of theend of the prior taxable year more than 50per cent of the persons beneficiaries,members or participants are individuals whoare residents of either Contracting State;or

(f) a person other than an individual, ifresidents of either Contracting State thatare qualified persons by reason ofsubparagraph (a), (b), (c), (d) or (e) ofthis paragraph own, directly or indirectly,

shares or other beneficial interestsrepresenting at least 50 per cent of thecapital or of the voting power of theperson.

3. Notwithstanding that a company that is a residentof a Contracting State may not be a qualified person,that resident shall be entitled to the benefitsgranted by the provisions of paragraph 3 of Article10, subparagraph (c), (d) or (e) of paragraph 3 ofArticle 11, Article 12, paragraph 6 of Article 13 orArticle 22 with respect to an item of income described

in those subparagraphs, paragraphs or Articles derivedfrom the other Contracting State if that residentsatisfies any other specified conditions in thosesubparagraphs, paragraphs or Articles for theobtaining of such benefits and shares representing atleast 75 per cent of the capital or of the votingpower of the company are owned, directly orindirectly, by seven or fewer persons who areequivalent beneficiaries.


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(b) A resident of a Contracting State shall beconsidered a headquarters company for amultinational corporate group for thepurposes of subparagraph (a) only if:

(i) that resident provides a substantial

portion of the overall supervision andadministration of the group or providesfinancing for the group;

(ii) the group consists of companies whichare resident in and are engaged in anactive trade or business in at leastfive countries, and the trade orbusiness activities carried on in eachof the five countries generate at least5 per cent of the gross income of thegroup;

(iii) the trade or business activitiescarried on in any one country otherthan that Contracting State generateless than 50 per cent of the grossincome of the group;

(iv) no more than 50 per cent of its grossincome is derived from the otherContracting State;

(v) that resident has, and exercises,independent discretionary authority to

carry out the functions referred to inclause (i); and

(vi) that resident is subject to the sameincome taxation rules in thatContracting State as persons describedin paragraph 6.

(c) For the purposes of subparagraph (b), aresident of a Contracting State shall bedeemed to satisfy the gross incomerequirements described in clause (ii), (iii)

or (iv) of that subparagraph for the taxableyear in which the item of income is derivedif that resident satisfies each of thosegross income requirements when averaging thegross income of the three taxable yearspreceding that taxable year.


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(c) In determining whether a person is carryingon business in a Contracting State undersubparagraph (a) of this paragraph, thebusiness conducted by a partnership in whichthat person is a partner and the businessconducted by persons connected to such

person shall be deemed to be conducted bysuch person. A person shall be connected toanother if that person owns, directly orindirectly, shares or beneficial interestsrepresenting at least 50 per cent of thecapital or of the voting power of the otherperson, or a third person owns, directly orindirectly, shares or beneficial interestsrepresenting at least 50 per cent of thecapital or of the voting power of eachperson. In any case, a person shall beconsidered to be connected to another if, on

the basis of all the facts andcircumstances, one has control of the otheror both are under the control of the sameperson or persons.

7. A resident of a Contracting State that is neithera qualified person nor entitled under paragraph 3, 5or 6 to the benefits granted by the provisions ofparagraph 3 of Article 10, subparagraph (c), (d) or(e) of paragraph 3 of Article 11, Article 12,paragraph 6 of Article 13 or Article 22 with respectto an item of income described in those subparagraphs,paragraphs or Articles shall, nevertheless, be granted

such benefits if the competent authority of the otherContracting State determines, in accordance with thelaws or administrative practice of that otherContracting State, that the establishment, acquisitionor maintenance of such resident and the conduct of theoperations of such resident are considered as nothaving the obtaining of such benefits as one of theprincipal purposes.

8. For the purposes of this Article:

(a) the term qualified governmental entity

means the Government of a Contracting State,any political subdivision or local authoritythereof, the Bank of Japan, the SwissNational Bank or a person a majority of thecapital of which is owned, directly orindirectly, by the Government of aContracting State or a political subdivisionor local authority thereof;


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(b) the term principal class of shares meansthe class or classes of shares of a companywhich represent a majority of the capital orof the voting power of the company;

(c) the term recognised stock exchange means:

(i) any stock exchange established by aFinancial Instruments Exchange or anapproved-type financial instrumentsfirms association under the FinancialInstruments and Exchange Law (Law No.25 of 1948) of Japan;

(ii) any Swiss stock exchange on whichregistered dealings in shares takeplace;

(iii) the London Stock Exchange, the IrishStock Exchange and the stock exchangesof Amsterdam, Brussels, Dsseldorf,Frankfurt, Hamburg, Johannesburg,Lisbon, Luxembourg, Madrid, Mexico,Milan, New York, Paris, Seoul,Singapore, Stockholm, Sydney, Torontoand Vienna, and the NASDAQ system;

(iv) any other stock exchange which thecompetent authorities of theContracting States agree to recognisefor the purposes of this Article;

(d) the term equivalent beneficiary means:

(i) a resident of a state that has aconvention for the avoidance of doubletaxation between that state and theContracting State from which thebenefits of this Convention are claimedsuch that:

(aa) that convention containsprovisions for effective exchange

of information;


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(bb) that resident is a qualifiedperson under the limitation onbenefits provisions in thatconvention or, where there are nosuch provisions in thatconvention, would be a qualified

person when that convention isread as including provisionscorresponding to paragraph 2; and

(cc) with respect to an item of incomereferred to in paragraph 3 ofArticle 10, subparagraph (c), (d)or (e) of paragraph 3 of Article11, Article 12, paragraph 6 ofArticle 13 or Article 22 thatresident would be entitled underthat convention to a rate of tax

with respect to the particularclass of income for which thebenefits are being claimed underthis Convention that is at leastas low as the rate applicableunder this Convention; or

(ii) a qualified person by reason ofsubparagraph (a), (b), (c), (d) or (e)of paragraph 2;

(e) the term gross income means the totalrevenues derived by an enterprise from its

business, less the direct costs of obtainingsuch revenues.

Article 16


Article 23

1. Subject to the provisions of the laws of Japanregarding the allowance as a credit against Japanese

tax of tax payable in any country other than Japan,where a resident of Japan derives income fromSwitzerland which may be taxed in Switzerland inaccordance with the provisions of this Convention, theamount of Swiss tax payable in respect of that incomeshall be allowed as a credit against the Japanese taximposed on that resident. The amount of credit,however, shall not exceed that part of the Japanesetax which is appropriate to that income.


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2. For the purposes of paragraph 1, incomebeneficially owned by a resident of Japan which may betaxed in Switzerland in accordance with the provisionsof this Convention shall be deemed to arise fromsources in Switzerland.

3. Where a resident of Switzerland derives incomewhich, in accordance with the provisions of thisConvention, may be taxed in Japan, Switzerland shall,subject to the provisions of paragraph 4 or 6, exemptsuch income from tax but may, in calculating tax onthe remaining income of that resident, apply the rateof tax which would have been applicable if theexempted income had not been so exempted. However,where that resident derives gains referred to in theprovisions of paragraph 2 of Article 13, suchexemption shall apply to such gains only if the amountof tax levied in Japan in accordance with the

provisions of that paragraph is demonstrated.

4. Where a resident of Switzerland derives dividendsor interest which, in accordance with the provisionsof Article 10 or 11, may be taxed in Japan,Switzerland shall allow, upon request, a relief tosuch resident. The relief may consist of:

(a) a deduction from the tax on the income ofthat resident of an amount equal to the taxlevied in Japan in accordance with theprovisions of Articles 10 and 11; suchdeduction shall not, however, exceed that

part of the Swiss income tax, as computedbefore the deduction is given, which isappropriate to the income which may be taxedin Japan, or

(b) a lump sum reduction of the Swiss taxdetermined by standardised formulae whichhave regard to the general principles of therelief referred to in subparagraph (a)above, or

(c) a partial exemption of such income from

Swiss tax, in any case consisting at leastof the deduction of the tax levied in Japanfrom the gross amount of income derived fromJapan.


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Switzerland shall determine the applicable reliefand regulate the procedure in accordance with theprovisions relating to the carrying out ofinternational conventions of the Swiss Confederationfor the avoidance of double taxation.

5. A company which is a resident of Switzerland andwhich derives dividends from a company which is aresident of Japan shall be entitled, for the purposesof Swiss tax with respect to such dividends, to thesame relief which would be granted to the company ifthe company paying the dividends were a resident ofSwitzerland.

6. Where a resident of Switzerland derives incomecovered by subparagraph (a) of paragraph 3 of Article13, Switzerland shall allow, upon request, a deductionfrom the Swiss tax on this income of an amount equal

to the tax levied in Japan, in accordance withparagraph 3 of Article 13; such deduction shall not,however, exceed that part of the Swiss income tax, ascomputed before the deduction is given, which isappropriate to the income which may be taxed inJapan.

Article 17

Paragraphs 2 and 3 of Article 24 of the Conventionshall be deleted and replaced by the following:

2. The taxation on a permanent establishment which

an enterprise of a Contracting State has in the otherContracting State shall not be less favourably leviedin that other Contracting State than the taxationlevied on enterprises of that other Contracting Statecarrying on the same activities. The provisions ofthis paragraph shall not be construed as obliging aContracting State to grant to residents of the otherContracting State any personal allowances, reliefs andreductions for taxation purposes on account of civilstatus or family responsibilities which it grants toits own residents.

3. Except where the provisions of paragraph 1 ofArticle 9, paragraph 8 of Article 11, paragraph 4 ofArticle 12, or paragraph 3 of Article 22 apply,interest, royalties and other disbursements paid by anenterprise of a Contracting State to a resident of theother Contracting State shall, for the purpose ofdetermining the taxable profits of such enterprise, bedeductible under the same conditions as if they hadbeen paid to a resident of the first-mentionedContracting State.


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Article 18

Paragraph 1 of Article 25 of the Convention shall bedeleted and replaced by the following:

1. Where a person considers that the actions of one

or both of the Contracting States result or willresult for him in taxation not in accordance with theprovisions of this Convention, he may, irrespective ofthe remedies provided by the domestic law of thoseContracting States, present his case to the competentauthority of the Contracting State of which he is aresident or, if his case comes under paragraph 1 ofArticle 24, to that of the Contracting State of whichhe is a national. The case must be presented withinthree years from the first notification of the actionresulting in taxation not in accordance with theprovisions of the Convention.

Article 19


Article 25A

1. The competent authorities of the ContractingStates shall exchange such information as isforeseeably relevant for carrying out the provisionsof this Convention or to the administration orenforcement of the domestic laws concerning taxes of

every kind and description imposed on behalf of theContracting States, or of their political subdivisionsor local authorities, insofar as the taxationthereunder is not contrary to the Convention. Theexchange of information is not restricted by Articles1 and 2.

2. Any information received under paragraph 1 by aContracting State shall be treated as secret in thesame manner as information obtained under the domesticlaws of that Contracting State and shall be disclosedonly to persons or authorities (including courts and

administrative bodies) concerned with the assessmentor collection of, the enforcement or prosecution inrespect of, or the determination of appeals inrelation to the taxes referred to in paragraph 1.Such persons or authorities shall use the informationonly for such purposes. They may disclose theinformation in public court proceedings or in judicialdecisions.


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3. In no case shall the provisions of paragraphs 1and 2 be construed so as to impose on a ContractingState the obligation:

(a) to carry out administrative measures atvariance with the laws and administrative

practice of that or of the other ContractingState;

(b) to supply information which is notobtainable under the laws or in the normalcourse of the administration of that or ofthe other Contracting State;

(c) to supply information which would discloseany trade, business, industrial, commercialor professional secret or trade process, orinformation the disclosure of which would be

contrary to public policy (ordre public).

4. If information is requested by a ContractingState in accordance with this Article, the otherContracting State shall use its information gatheringmeasures to obtain the requested information, eventhough that other Contracting State may not need suchinformation for its own tax purposes. The obligationcontained in the preceding sentence is subject to thelimitations of paragraph 3 but in no case shall suchlimitations be construed to permit a Contracting Stateto decline to supply information solely because it hasno 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, nomineeor person acting in an agency or a fiduciary capacityor because it relates to ownership interests in aperson. In order to obtain such information, the taxauthorities of that Contracting State, if necessary tocomply with its obligations under this paragraph,shall have the power to enforce the disclosure ofinformation covered by this paragraph, notwithstanding

the provisions of paragraph 3 or any contraryprovisions in its domestic laws.

Article 20



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Article 26

1. Nothing in this Convention shall affect thefiscal privileges of members of diplomatic missions orconsular posts under the general rules ofinternational law or under the provisions of special

agreements.

2. Notwithstanding the provisions of Article 4, anindividual who is a member of a diplomatic mission,consular post or permanent mission of a ContractingState which is situated in the other Contracting Stateor in a third State shall be deemed, for the purposesof this Convention, to be a resident of the sendingState if:

(a) in accordance with international law he isnot liable to tax in the receiving State in

respect of income from sources outside thatState, and

(b) he is liable in the sending State to thesame obligations in relation to tax on histotal income as are residents of that State.

3. The Convention shall not apply to internationalorganisations, to organs or officials thereof and topersons who are members of a diplomatic mission,consular post or permanent mission of a third State,being present in a Contracting State and not treatedin either Contracting State as residents in respect of

taxes on income.

Article 21

1. This Protocol amending the Convention (hereinafterreferred to as the Amending Protocol) shall be approvedin accordance with the legal procedures of each of theContracting States and shall enter into force on thethirtieth day after the date of exchange of diplomaticnotes indicating such approval.

2. The Amending Protocol shall be applicable:

(a) with respect to taxes withheld at source, foramounts taxable on or after 1 January in thecalendar year next following that in which theAmending Protocol enters into force;


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(b) with respect to taxes on income which are notwithheld at source, as regards income for anytaxable year beginning on or after 1 January inthe calendar year next following that in whichthe Amending Protocol enters into force; and

(c) with respect to other taxes, as regards taxes forany taxable year beginning on or after 1 Januaryin the calendar year next following that in whichthe Amending Protocol enters into force.

3. The exchange of information under the provisions ofArticle 25A of the Convention as amended by the AmendingProtocol shall be granted for taxable years beginning on orafter 1 January next following the date on which theAmending Protocol enters into force.

4. The Amending Protocol shall remain in effect as long

as the Convention remains in force.

IN WITNESS WHEREOF the undersigned, being dulyauthorised thereto by their respective Governments, havesigned the Amending Protocol.

DONE in duplicate at Berne this twenty-first day ofMay, 2010, in the Japanese, German and English languages,all texts being equally authoritative and, in the casethere is any divergence of interpretation between theJapanese and the German texts, the English text shallprevail.

For the Government of Japan: For the Swiss FederalCouncil:

Ichiro Komatsu Hans-Rudolf Merz


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(a) In no case shall the provisions of that Articlebe construed so as to impose on a ContractingState the obligation to supply information if theother Contracting State has not pursued allreasonable measures of obtaining such informationavailable under the laws and administrative

practice of that other Contracting State, exceptthose measures that would give rise todisproportionate difficulties.

(b) It is understood that the exchange of informationprovided for in that Article does not includemeasures aimed only at the simple collection ofpieces of evidence (fishing expeditions).

(c) It is understood that, where information isrequested by a Contracting State in accordancewith that Article, the competent authority of

that Contracting State shall provide thefollowing information to the competent authorityof the other Contracting State:

(i) information sufficient to identify theperson under examination (typically, nameand, to the extent known, address, accountnumber or similar identifying information);

(ii) the period of time with respect to therequested information;

(iii) a statement of the information sought

including its nature and the form in whichthe first-mentioned Contracting State wishesto receive the information from the otherContracting State;

(iv) the tax purpose for which the information issought; and

(v) the name and, to the extent known, theaddress of any person believed to be inpossession of the requested information.

(d) Although Article 25A of the Convention does notrestrict the possible methods for exchanginginformation, it shall not commit the ContractingStates to exchange information on an automatic ora spontaneous basis.


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(e) A Contracting State may decline to supplyinformation relating to confidentialcommunications between attorneys, solicitors orother admitted legal representatives in theirrole as such and their clients to the extent thatthe communications are protected from disclosure

under the domestic laws of that ContractingState.

(f) It is understood that, where information isrequested by a Contracting State in accordancewith that Article, the administrative proceduralrules regarding taxpayers rights provided for inthe other Contracting State remain applicable tothe extent that they do not prevent or undulydelay effective exchange of information.

This Protocol enters into force on the same date of

the entry into force of the Protocol amending theConvention between Japan and Switzerland for the Avoidanceof Double Taxation with respect to Taxes on Income signedon 19 January 1971.

IN WITNESS WHEREOF the undersigned, being dulyauthorised thereto by their respective Governments, havesigned this Protocol.

DONE in duplicate at Berne this twenty-first day ofMay, 2010, in the Japanese, German and English languages,all texts being equally authoritative and, in the casethere is any divergence of interpretation between the

Japanese and the German texts, the English text shallprevail.

For the Government of Japan: For the Swiss FederalCouncil:

Ichiro Komatsu Hans-Rudolf Merz

dtc agreement between switzerland and japan

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