Australian Tax Treaties
Japanese Convention
CONVENTION BETWEEN AUSTRALIA AND JAPAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
ARTICLE 10
Dividends
(1)
Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends beneficially owned by a resident of the other Contracting State, may be taxed in that other Contracting State.
(2)
However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax and according to the law of that Contracting State, but the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the dividends if the beneficial owner of the dividends is a company which owns directly shares representing at least 10 per cent of the voting power of the company paying the dividends;
(b) 10 per cent of the gross amount of the dividends in all other cases.
(3)
Notwithstanding the provisions of paragraph 2, dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax if the beneficial owner of the dividends is a company that is a resident of the other Contracting State and that has owned directly shares representing at least 80 per cent of the voting power of the company paying the dividends for the 12 month period ending on the date on which entitlement to the dividends is determined and the company that is the beneficial owner of the dividends:
(a) is a qualified person by reason of the provisions of subparagraph (c) of paragraph 2 of Article 23;
(b) has at least 50 per cent of the aggregate vote and value of its shares owned directly or indirectly by five or fewer companies referred to in subparagraph (a); or
(c) is granted benefits with respect to those dividends under paragraph 5 of Article 23.
(4)
Notwithstanding the provisions of paragraphs 2 and 3, dividends paid by a company that is a resident of Japan and that is entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income in Japan, being dividends beneficially owned by a resident of Australia, may also be taxed in Japan according to the law of Japan, but the tax so charged shall not exceed:
(a) 15 per cent of the gross amount of the dividends if more than 50 percent of the assets of such company consist, directly or indirectly, of real property situated in Japan;
(b) 10 per cent of the gross amount of the dividends in all other cases.
(5)
The provisions of paragraphs 2, 3 and 4 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
(6)
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 or other distributions which are subjected to the same taxation treatment as income from shares by the law of the Contracting State of which the company making the distribution is a resident for the purposes of its tax.
(7)
(a) Distributions of income, profits or gains by a Real Estate Investment Trust (hereinafter referred to as a " REIT " ), being distributions beneficially owned by a resident of Japan, may be taxed in Japan.
(b) However, such distributions may also be taxed in Australia according to the law of Australia, but the tax so charged shall not exceed 15 per cent of the gross amount of the distributions if the beneficial owner of the distributions is a resident of Japan other than a beneficial owner of the distributions which holds, or has held at any time in the 12 month period preceding the date on which the distributions are made, directly or indirectly, capital that represents at least 10 percent of the value of all the capital in the REIT.
(c) For the purposes of this paragraph, the term " Real Estate Investment Trust " means a managed investment trust created or organised under the laws of Australia which carries on a business consisting of investment, directly or indirectly, in real property for the main purpose of deriving rent.
(8)
The provisions of paragraphs 1, 2, 3, 4 and 7 shall not apply if the beneficial owner of the dividends or distributions, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident for the purposes of its tax (or, in the case of a REIT to which paragraph 7 applies, in Australia) through a permanent establishment situated therein and the holding in respect of which the dividends or distributions are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.
(9)
Where a company which is a resident of a Contracting 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 company - being dividends beneficially owned by a person who is not a resident of that other Contracting State - except insofar as the holding in respect of which such dividends are paid is effectively connected with a permanent establishment situated in that other Contracting State, nor subject the company ' s undistributed profits to a tax on the company ' s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other Contracting State. However, in the case of dividends paid by a company which is deemed to be a resident only of a Contracting State by reason of the provisions of paragraph 3 of Article 4, the other Contracting State may tax such dividends to the extent that they are paid out of profits or income arising in that other Contracting State and, in the case of dividends beneficially owned by a resident of the first-mentioned Contracting State, according to the provisions of paragraphs 2 or 3.
(10)
A resident of a Contracting State shall not be considered the beneficial owner of the dividends paid by a resident of the other Contracting State for the purposes of its tax in respect of preferred shares or other similar interests if such preferred shares or other similar interests might not have been expected to have been established or acquired unless a person:
(a) that is not entitled to benefits with respect to dividends paid by a resident of that other Contracting State which are equivalent to, or more favourable than, those available under this Convention to a resident of the first-mentioned Contracting State; and
(b) that is not a resident of either Contracting State,
(11)
No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the assignment of the dividends or distributions, the creation or assignment of the shares or other rights in respect of which the dividends or distributions are paid, or the establishment, acquisition or maintenance of the company which is the beneficial owner of the dividends or distributions or the conduct of its operations to take advantage of this Article.
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends beneficially owned by a resident of the other Contracting State, may be taxed in that other Contracting State.
(2)
However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax and according to the law of that Contracting State, but the tax so charged shall not exceed:
(a) 5 per cent of the gross amount of the dividends if the beneficial owner of the dividends is a company which owns directly shares representing at least 10 per cent of the voting power of the company paying the dividends;
(b) 10 per cent of the gross amount of the dividends in all other cases.
(3)
Notwithstanding the provisions of paragraph 2, dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax if the beneficial owner of the dividends is a company that is a resident of the other Contracting State and that has owned directly shares representing at least 80 per cent of the voting power of the company paying the dividends for the 12 month period ending on the date on which entitlement to the dividends is determined and the company that is the beneficial owner of the dividends:
(a) is a qualified person by reason of the provisions of subparagraph (c) of paragraph 2 of Article 23;
(b) has at least 50 per cent of the aggregate vote and value of its shares owned directly or indirectly by five or fewer companies referred to in subparagraph (a); or
(c) is granted benefits with respect to those dividends under paragraph 5 of Article 23.
(4)
Notwithstanding the provisions of paragraphs 2 and 3, dividends paid by a company that is a resident of Japan and that is entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income in Japan, being dividends beneficially owned by a resident of Australia, may also be taxed in Japan according to the law of Japan, but the tax so charged shall not exceed:
(a) 15 per cent of the gross amount of the dividends if more than 50 percent of the assets of such company consist, directly or indirectly, of real property situated in Japan;
(b) 10 per cent of the gross amount of the dividends in all other cases.
(5)
The provisions of paragraphs 2, 3 and 4 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
(6)
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 or other distributions which are subjected to the same taxation treatment as income from shares by the law of the Contracting State of which the company making the distribution is a resident for the purposes of its tax.
(7)
(a) Distributions of income, profits or gains by a Real Estate Investment Trust (hereinafter referred to as a " REIT " ), being distributions beneficially owned by a resident of Japan, may be taxed in Japan.
(b) However, such distributions may also be taxed in Australia according to the law of Australia, but the tax so charged shall not exceed 15 per cent of the gross amount of the distributions if the beneficial owner of the distributions is a resident of Japan other than a beneficial owner of the distributions which holds, or has held at any time in the 12 month period preceding the date on which the distributions are made, directly or indirectly, capital that represents at least 10 percent of the value of all the capital in the REIT.
(c) For the purposes of this paragraph, the term " Real Estate Investment Trust " means a managed investment trust created or organised under the laws of Australia which carries on a business consisting of investment, directly or indirectly, in real property for the main purpose of deriving rent.
(8)
The provisions of paragraphs 1, 2, 3, 4 and 7 shall not apply if the beneficial owner of the dividends or distributions, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident for the purposes of its tax (or, in the case of a REIT to which paragraph 7 applies, in Australia) through a permanent establishment situated therein and the holding in respect of which the dividends or distributions are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.
(9)
Where a company which is a resident of a Contracting 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 company - being dividends beneficially owned by a person who is not a resident of that other Contracting State - except insofar as the holding in respect of which such dividends are paid is effectively connected with a permanent establishment situated in that other Contracting State, nor subject the company ' s undistributed profits to a tax on the company ' s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other Contracting State. However, in the case of dividends paid by a company which is deemed to be a resident only of a Contracting State by reason of the provisions of paragraph 3 of Article 4, the other Contracting State may tax such dividends to the extent that they are paid out of profits or income arising in that other Contracting State and, in the case of dividends beneficially owned by a resident of the first-mentioned Contracting State, according to the provisions of paragraphs 2 or 3.
(10)
A resident of a Contracting State shall not be considered the beneficial owner of the dividends paid by a resident of the other Contracting State for the purposes of its tax in respect of preferred shares or other similar interests if such preferred shares or other similar interests might not have been expected to have been established or acquired unless a person:
(a) that is not entitled to benefits with respect to dividends paid by a resident of that other Contracting State which are equivalent to, or more favourable than, those available under this Convention to a resident of the first-mentioned Contracting State; and
(b) that is not a resident of either Contracting State,
owned equivalent preferred shares or other similar interests in the first-mentioned resident.
(11)
No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the assignment of the dividends or distributions, the creation or assignment of the shares or other rights in respect of which the dividends or distributions are paid, or the establishment, acquisition or maintenance of the company which is the beneficial owner of the dividends or distributions or the conduct of its operations to take advantage of this Article.
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