Protocol

At the signing today of the Convention between the Kingdom of the Netherlands and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as “the Convention”), the Kingdom of the Netherlands and Japan have agreed upon the following provisions, which shall form an integral part of the Convention.

• 1.With reference to clause (iii) of subparagraph m) of paragraph 1 of Article 3 of the Convention, it is understood that a pension fund shall be treated as exempt from tax on income derived with respect to the activities described in clause (ii) of that subparagraph even though it is subject to the tax stipulated in Articles 8 or 10-2 of the Corporation Tax Law (Law No. 34 of 1965) of Japan or paragraph 1 of Article 20 of its supplementary provisions.
• 2.With reference to Articles 6 and 13 of the Convention, rights to the exploration and exploitation of natural resources shall be regarded as immovable property situated in the Contracting State to whose seabed – and subsoil thereof – these rights apply. Furthermore, the aforementioned rights include rights to interests in, or benefits from assets that arise from, that exploration or exploitation.
• 3.With reference to Article 7 of the Convention, it is understood that in the case of profits from survey, supply, installation or construction activities, only so much of them will be attributable to a permanent establishment as results from the actual performance of such activity by that permanent establishment.
• 4.With reference to Article 9 of the Convention, it is understood that the fact that the enterprises that have a relationship with each other as described in subparagraph a) or b) of paragraph 1 of that Article have concluded arrangements among them to share the costs and risks of developing, producing or obtaining assets, services, or rights, and to determine the nature and extent of the interests of each participant in those assets, services, or rights, shall not of itself satisfy the conditions as meant in paragraph 1 of that Article.
• 5.With reference to Articles 10 and 13 of the Convention, the Netherlands treats income received in connection with the whole or partial winding-up of a company or a purchase of own shares by a company as dividends as referred to in Article 10 of the Convention and not as capital gains as referred to in Article 13 of the Convention.
• 6.With reference to paragraph 3 of Article 11 of the Convention, the terms “the central bank” and “institution owned by that Government” mean:
• a)in the case of Japan:
• (i)the Bank of Japan;
• (ii)the Japan Finance Corporation;
• (iii)the Japan International Cooperation Agency;
• (iv)the Nippon Export and Investment Insurance; and
• (v)such other similar institution the capital of which is owned by the Government of Japan as may be agreed upon from time to time between the Governments of the Contracting States through an exchange of diplomatic notes; and
• b)in the case of the Netherlands:
• (i)the Central Bank of the Netherlands (de Nederlandsche Bank NV);
• (ii)the Netherlands Development Finance Company (de Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV);
• (iii)the Netherlands Investment Bank for Developing Countries (de Nederlandse Investeringsbank voor Ontwikkelingslanden NV); and
• (iv)such other similar institution the capital of which is owned by the Government of the Netherlands as may be agreed upon from time to time between the Governments of the Contracting States through an exchange of diplomatic notes.
• 7.With reference to Article 15 of the Convention, where a company is a resident of the Netherlands, the term “members of the board of directors” includes both a “bestuurder” and a “commissaris” . The terms “bestuurder” and “commissaris” mean respectively persons who are charged with the general management of the company and persons who are charged with the supervision thereof.
• 8.With reference to Articles 17 and 18 of the Convention, it is understood that whether and to what extent a pension or other similar remuneration falls under Article 17 or under Article 18 of the Convention is determined by the nature (private or governmental) during the period or periods in which the entitlement to such pension or other similar remuneration was built up.
• 9.Nothing in the Convention shall prevent Japan from imposing tax at source, in accordance with its laws, on any income and gains derived by a person pursuant to a sleeping partnership (Tokumei Kumiai ) contract or other similar contract.
• 10.With reference to subparagraph c) of paragraph 2 of Article 21 of the Convention, the shares in the principal class of shares of a company are considered to be regularly traded on one or more recognised stock exchanges in a taxable year if the aggregate number of the shares in that class traded on such stock exchange or exchanges during the twelve months ending on the day before the beginning of that taxable year is at least 6 per cent of the average number of the shares outstanding in that class during that twelve-month period.
• 11.With reference to subparagraph c) of paragraph 2 of Article 21 of the Convention, the “primary place of management and control” of a company will be in the Contracting State of which it is a resident only if executive officers and senior management employees exercise day-to-day responsibility for the strategic, financial and operational policy decision making for the company (including its direct and indirect subsidiaries) more in that Contracting State than in any other state and the staff of such persons conduct the day-to-day activities necessary for preparing and making those decisions more in that Contracting State than in any other state.
• 12.With reference to paragraph 5 of Article 24 of the Convention:
• a)The competent authorities shall by mutual agreement establish a procedure in order to ensure that an arbitration decision will be implemented within two years from a request for arbitration as referred to in paragraph 5 of Article 24 of the Convention unless actions or inaction of a person directly affected by the case presented pursuant to that paragraph hinder the resolution of the case or unless the competent authorities and that person agree otherwise.
• b)An arbitration panel shall be established in accordance with the following rules:
• (i)An arbitration panel shall consist of three arbitrators with expertise or experience in international tax matters.
• (ii)Each competent authority shall appoint one arbitrator. The two arbitrators appointed by the competent authorities shall appoint the third arbitrator who serves as the chair of the arbitration panel in accordance with the procedures agreed by the competent authorities.
• (iii)All arbitrators shall not be employees of the tax authorities of the Contracting States, nor have had dealt with the case presented pursuant to paragraph 1 of Article 24 of the Convention in any capacity.
• (iv)The competent authorities shall ensure that all arbitrators and their staff agree, in statements sent to each competent authority, prior to their acting in an arbitration proceeding, to abide by and be subject to the same confidentiality and non-disclosure obligations described in paragraph 2 of Article 25 of the Convention and in the applicable domestic laws of the Contracting States.
• (v)Each competent authority shall bear the cost of its appointed arbitrator and its own expenses. The cost of the chair of an arbitration panel and other expenses associated with the conduct of the proceedings shall be borne by the competent authorities in equal shares.
• c)The competent authorities shall provide the information necessary for the arbitration decision to all arbitrators and their staff without undue delay.
• d)An arbitration decision shall be treated as follows:
• (i)An arbitration decision has no formal precedential value.
• (ii)An arbitration decision shall be final, unless that decision is found to be unenforceable by the courts of one of the Contracting States due to a violation of paragraph 5 of Article 24 of the Convention, of this paragraph or of any procedural rule determined in accordance with subparagraph a) of this paragraph that may reasonably have affected the decision. If the decision is found to be unenforceable due to the violation, the decision shall be considered not to have been made.
• e)Where, at any time after a request for arbitration has been made and before the arbitration panel has delivered a decision to the competent authorities and the person who made the request for arbitration, the competent authorities have solved all the unresolved issues submitted to the arbitration, the case shall be considered as resolved pursuant to paragraph 2 of Article 24 of the Convention and no arbitration decision shall be provided.
• f)The provisions of paragraph 5 of Article 24 of the Convention and this paragraph shall apply mutatis mutandis to a case presented pursuant to paragraph 1 of Article 26 of the Convention between the Government of the Kingdom of the Netherlands and the Government of Japan for the Avoidance of Double Taxation with respect to Taxes on Income, with Protocol, signed at The Hague on 3 March, 1970, as amended by the Protocol signed at The Hague on 4 March, 1992 (hereinafter referred to as “the prior Convention”), unless the competent authorities agree that, on the basis of special reasons, the case is not a case which the provisions of paragraph 5 of Article 24 of the Convention and this paragraph shall apply mutatis mutandis to. However, where the competent authority of a Contracting State, before the entry into force of the Convention, has presented to the competent authority of the other Contracting State the case presented pursuant to paragraph 1 of Article 26 of the prior Convention, the term “the presentation of the cases to the competent authority of the other Contracting State” as referred to in subparagraph b) of paragraph 5 of Article 24 of the Convention shall be replaced with “the entry into force of the Convention” for the purpose of applying this subparagraph.
• 13.With reference to paragraphs 3 and 5 of Article 25 of the Convention, a Contracting State may decline to supply information relating to confidential communications between attorneys, solicitors or other admitted legal representatives in their role as such and their clients to the extent that the communications are protected from disclosure under the domestic laws of that Contracting State.