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 12
Royalties
(1)
Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other Contracting State.
(2)
However, such royalties may also be taxed in the Contracting State in which they arise and according to the law of that Contracting State, but the tax so charged shall not exceed 5 per cent of the gross amount of the royalties.
(3)
The term " royalties " as used in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for:
(a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right;
(b) the supply of scientific, technical, industrial or commercial knowledge or information;
(c) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (a) or any such knowledge or information as is mentioned in subparagraph (b);
(d) the use of, or the right to use:
(e) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph.
(4)
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein and the property or right in respect of which the royalties are paid or credited is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.
(5)
Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting State for the purposes of its tax. Where, however, the person paying royalties, whether such person is a resident of a Contracting State or not, has in a Contracting State or a state other than the Contracting States a permanent establishment in connection with which the liability to pay or credit the royalties was incurred, and such royalties are borne by such permanent establishment, then:
(a) if the permanent establishment is situated in a Contracting State, such royalties shall be deemed to arise in that Contracting State; and
(b) if the permanent establishment is situated in a state other than the Contracting States, such royalties shall not be deemed to arise in either Contracting State.
(6)
Where, by reason of a special relationship between the payer and the beneficial owner of the royalties, or between both of them and some other person, the amount of the royalties, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence 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 or credits shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.
(7)
A resident of a Contracting State shall not be considered the beneficial owner of the royalties arising in the other Contracting State in respect of the use of the property or right if such royalties might not have been expected to have been paid to the resident unless the resident paid royalties in respect of the same property or right to a person:
(a) that is not entitled to benefits with respect to royalties arising in 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.
(8)
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 royalties, the creation or assignment of the property or right in respect of which the royalties are paid, or the establishment, acquisition or maintenance of the company which is the beneficial owner of the royalties 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.
Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other Contracting State.
(2)
However, such royalties may also be taxed in the Contracting State in which they arise and according to the law of that Contracting State, but the tax so charged shall not exceed 5 per cent of the gross amount of the royalties.
(3)
The term " royalties " as used in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for:
(a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or other like property or right;
(b) the supply of scientific, technical, industrial or commercial knowledge or information;
(c) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (a) or any such knowledge or information as is mentioned in subparagraph (b);
(d) the use of, or the right to use:
(i) motion picture films; or
(ii) films or audio or video tapes or disks, or any other means of image or sound reproduction or transmission for use in connection with television, radio or other broadcasting; or
(e) total or partial forbearance in respect of the use or supply of any property or right referred to in this paragraph.
(4)
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein and the property or right in respect of which the royalties are paid or credited is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.
(5)
Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting State for the purposes of its tax. Where, however, the person paying royalties, whether such person is a resident of a Contracting State or not, has in a Contracting State or a state other than the Contracting States a permanent establishment in connection with which the liability to pay or credit the royalties was incurred, and such royalties are borne by such permanent establishment, then:
(a) if the permanent establishment is situated in a Contracting State, such royalties shall be deemed to arise in that Contracting State; and
(b) if the permanent establishment is situated in a state other than the Contracting States, such royalties shall not be deemed to arise in either Contracting State.
(6)
Where, by reason of a special relationship between the payer and the beneficial owner of the royalties, or between both of them and some other person, the amount of the royalties, having regard to what they are paid or credited for, exceeds the amount which might have been expected to have been agreed upon by the payer and the beneficial owner in the absence 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 or credits shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.
(7)
A resident of a Contracting State shall not be considered the beneficial owner of the royalties arising in the other Contracting State in respect of the use of the property or right if such royalties might not have been expected to have been paid to the resident unless the resident paid royalties in respect of the same property or right to a person:
(a) that is not entitled to benefits with respect to royalties arising in 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.
(8)
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 royalties, the creation or assignment of the property or right in respect of which the royalties are paid, or the establishment, acquisition or maintenance of the company which is the beneficial owner of the royalties or the conduct of its operations to take advantage of this Article.
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