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 23
Limitation on Benefits
(1)
Except as otherwise provided in this Article, a resident of a Contracting State that derives income, profits or gains described in Article 7; in paragraph 3 of Article 10 or paragraph 3 of Article 11; or in Article 13 from the other Contracting State shall be entitled to the benefits granted for a taxable year by the provisions of those paragraphs or Articles only if such resident is a qualified person as defined in paragraph 2 and satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
(2)
A resident of a Contracting State shall be a qualified person for a taxable year only if such resident is either:
(a) an individual;
(b) a qualified governmental entity;
(c) a company (including a company participating in a dual listed company arrangement), if its principal class of shares is listed or registered on a recognised stock exchange specified in clause (i) or (ii) of subparagraph (d) of paragraph 6 and is regularly traded on one or more recognised stock exchanges;
(d) a person other than an individual or a company, if the principal class of units in that person is listed or admitted to dealings on a recognised stock exchange specified in clause (i) or (ii) of subparagraph (d) of paragraph 6 and is regularly traded on one or more recognised stock exchanges;
(e) a pension fund, provided that as of the end of the prior taxable year more than 50 per cent of its beneficiaries, members or participants are individuals who are residents of either Contracting State;
(f) an organisation established under the law of that Contracting State and operated exclusively for a religious, charitable, educational, scientific, artistic, cultural or public purposes, provided that all or part of its income, profits or gains may be exempt from tax under the domestic law of that Contracting State; or
(g) a person other than an individual, if residents of either Contracting State that are qualified persons by reason of the provisions of subparagraphs (a) to (f) of this paragraph own, directly or indirectly, at least 50 per cent of the aggregate vote and value of the shares of the person, or at least 50 per cent of the beneficial interests in the person.
(3)
Where the provisions of subparagraph (g) of paragraph 2 apply:
(a) in respect of taxation by withholding at source, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph for the taxable year in which the payment is made if such resident satisfies those conditions during the 12 month period preceding the date of payment of an item of income, profits or gains (or, in the case of dividends, the date on which entitlement to the dividends is determined);
(b) in all other cases, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph for the taxable year in which the payment is made if such resident satisfies those conditions on at least half the days of the taxable year.
(4)
(a) Notwithstanding that a resident of a Contracting State may not be a qualified person, that resident shall be entitled to the benefits granted by the provisions of Article 7; of paragraph 3 of Article 10 or paragraph 3 of Article 11; or of Article 13 with respect to an item of income, profits or gains described in those paragraphs or Articles derived from the other Contracting State if the resident is carrying on business in the first-mentioned Contracting State (other than the business of making or managing investments for the resident ' s own account, unless the business is banking, insurance or securities business carried on by a bank, insurance company or securities dealer), the income, profits or gains derived from the other Contracting State are derived in connection with, or are incidental to, that business and that resident satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
(b) If a resident of a Contracting State derives an item of income, profits or gains from a business carried on by that resident in the other Contracting State or derives an item of income, profits or gains arising in the other Contracting State from a person that has with the resident a relationship described in subparagraph (a) or (b) of paragraph 1 of Article 9, the conditions described in subparagraph (a) of this paragraph shall be considered to be satisfied with respect to such an item of income, profits or gains only if the business carried on in the first-mentioned Contracting State is substantial in relation to the business carried on in the other Contracting State. Whether such business is substantial for the purpose of this paragraph shall be determined on the basis of all the facts and circumstances.
(c) In determining whether a person is carrying on business in a Contracting State under subparagraph (a) of this paragraph, the business conducted by a partnership in which that person is a partner and the business conducted by persons connected to such person shall be deemed to be conducted by such person. A person shall be connected to another if one possesses, directly or indirectly, at least 50 per cent of the beneficial interests in the other (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the shares of the company) or another person possesses, directly or indirectly, at least 50 per cent of the beneficial interests (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the shares of the company) in each person. In any case, a person shall be considered to be connected to another if, on the basis of all the facts and circumstances, one has control of the other or both are under the control of the same person or persons.
(5)
A resident of a Contracting State that is neither a qualified person nor entitled under paragraph 4 to the benefits granted by the provisions of Article 7; of paragraph 3 of Article 10 or paragraph 3 of Article 11; or of Article 13 with respect to an item of income, profits or gains described in those paragraphs or Articles shall, nevertheless, be granted such benefits if the competent authority of the other Contracting State determines, in accordance with its domestic law or administrative practice, that the establishment, acquisition or maintenance of such resident and the conduct of its operations are considered as not having the obtaining of such benefits as one of the principal purposes.
(6)
For the purposes of this Article:
(a) the term " qualified governmental entity " means entities referred to in subparagraphs (a) and (c) of paragraph 3 of Article 11;
(b) the term " principal class of shares " means the ordinary shares of the company, provided that such class of shares represents the majority of the voting power and value of the company. If no single class of ordinary shares represents the majority of the voting power and value of the company, the principal class of shares is that class or those classes that in the aggregate represent a majority of the voting power and value of the company. For the purposes of the preceding sentences, in the case of a company participating in a dual listed company arrangement, the principal class of shares will be determined after excluding the special voting shares which were issued as a means of establishing that dual listed company arrangement;
(c) the term " dual listed company arrangement " means an arrangement pursuant to which two publicly listed companies, while maintaining their separate legal entity status, shareholdings and listings, align their strategic directions and the economic interests of their respective shareholders through:
(d) the term " recognised stock exchange " means:
(e) the term " units " includes any instrument, not being a debt-claim, granting an entitlement to share in the asset or income of, or receive a distribution from, the person;
(f) the term " principal class of units " means the class of units which represents the majority of the value of the person. If no single class of units represents the majority of the value of the person, the principal class of units is that class or those classes that in the aggregate represent the majority of the value of the person; and
(g) the term " pension fund " means any person that:
(7)
Nothing in this Article shall be construed as restricting, in any manner, the application of any provisions of the law of a Contracting State which are designed to prevent the avoidance or evasion of taxes.
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.
Except as otherwise provided in this Article, a resident of a Contracting State that derives income, profits or gains described in Article 7; in paragraph 3 of Article 10 or paragraph 3 of Article 11; or in Article 13 from the other Contracting State shall be entitled to the benefits granted for a taxable year by the provisions of those paragraphs or Articles only if such resident is a qualified person as defined in paragraph 2 and satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
(2)
A resident of a Contracting State shall be a qualified person for a taxable year only if such resident is either:
(a) an individual;
(b) a qualified governmental entity;
(c) a company (including a company participating in a dual listed company arrangement), if its principal class of shares is listed or registered on a recognised stock exchange specified in clause (i) or (ii) of subparagraph (d) of paragraph 6 and is regularly traded on one or more recognised stock exchanges;
(d) a person other than an individual or a company, if the principal class of units in that person is listed or admitted to dealings on a recognised stock exchange specified in clause (i) or (ii) of subparagraph (d) of paragraph 6 and is regularly traded on one or more recognised stock exchanges;
(e) a pension fund, provided that as of the end of the prior taxable year more than 50 per cent of its beneficiaries, members or participants are individuals who are residents of either Contracting State;
(f) an organisation established under the law of that Contracting State and operated exclusively for a religious, charitable, educational, scientific, artistic, cultural or public purposes, provided that all or part of its income, profits or gains may be exempt from tax under the domestic law of that Contracting State; or
(g) a person other than an individual, if residents of either Contracting State that are qualified persons by reason of the provisions of subparagraphs (a) to (f) of this paragraph own, directly or indirectly, at least 50 per cent of the aggregate vote and value of the shares of the person, or at least 50 per cent of the beneficial interests in the person.
(3)
Where the provisions of subparagraph (g) of paragraph 2 apply:
(a) in respect of taxation by withholding at source, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph for the taxable year in which the payment is made if such resident satisfies those conditions during the 12 month period preceding the date of payment of an item of income, profits or gains (or, in the case of dividends, the date on which entitlement to the dividends is determined);
(b) in all other cases, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph for the taxable year in which the payment is made if such resident satisfies those conditions on at least half the days of the taxable year.
(4)
(a) Notwithstanding that a resident of a Contracting State may not be a qualified person, that resident shall be entitled to the benefits granted by the provisions of Article 7; of paragraph 3 of Article 10 or paragraph 3 of Article 11; or of Article 13 with respect to an item of income, profits or gains described in those paragraphs or Articles derived from the other Contracting State if the resident is carrying on business in the first-mentioned Contracting State (other than the business of making or managing investments for the resident ' s own account, unless the business is banking, insurance or securities business carried on by a bank, insurance company or securities dealer), the income, profits or gains derived from the other Contracting State are derived in connection with, or are incidental to, that business and that resident satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
(b) If a resident of a Contracting State derives an item of income, profits or gains from a business carried on by that resident in the other Contracting State or derives an item of income, profits or gains arising in the other Contracting State from a person that has with the resident a relationship described in subparagraph (a) or (b) of paragraph 1 of Article 9, the conditions described in subparagraph (a) of this paragraph shall be considered to be satisfied with respect to such an item of income, profits or gains only if the business carried on in the first-mentioned Contracting State is substantial in relation to the business carried on in the other Contracting State. Whether such business is substantial for the purpose of this paragraph shall be determined on the basis of all the facts and circumstances.
(c) In determining whether a person is carrying on business in a Contracting State under subparagraph (a) of this paragraph, the business conducted by a partnership in which that person is a partner and the business conducted by persons connected to such person shall be deemed to be conducted by such person. A person shall be connected to another if one possesses, directly or indirectly, at least 50 per cent of the beneficial interests in the other (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the shares of the company) or another person possesses, directly or indirectly, at least 50 per cent of the beneficial interests (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the shares of the company) in each person. In any case, a person shall be considered to be connected to another if, on the basis of all the facts and circumstances, one has control of the other or both are under the control of the same person or persons.
(5)
A resident of a Contracting State that is neither a qualified person nor entitled under paragraph 4 to the benefits granted by the provisions of Article 7; of paragraph 3 of Article 10 or paragraph 3 of Article 11; or of Article 13 with respect to an item of income, profits or gains described in those paragraphs or Articles shall, nevertheless, be granted such benefits if the competent authority of the other Contracting State determines, in accordance with its domestic law or administrative practice, that the establishment, acquisition or maintenance of such resident and the conduct of its operations are considered as not having the obtaining of such benefits as one of the principal purposes.
(6)
For the purposes of this Article:
(a) the term " qualified governmental entity " means entities referred to in subparagraphs (a) and (c) of paragraph 3 of Article 11;
(b) the term " principal class of shares " means the ordinary shares of the company, provided that such class of shares represents the majority of the voting power and value of the company. If no single class of ordinary shares represents the majority of the voting power and value of the company, the principal class of shares is that class or those classes that in the aggregate represent a majority of the voting power and value of the company. For the purposes of the preceding sentences, in the case of a company participating in a dual listed company arrangement, the principal class of shares will be determined after excluding the special voting shares which were issued as a means of establishing that dual listed company arrangement;
(c) the term " dual listed company arrangement " means an arrangement pursuant to which two publicly listed companies, while maintaining their separate legal entity status, shareholdings and listings, align their strategic directions and the economic interests of their respective shareholders through:
(i) the appointment of common (or almost identical) boards of directors;
(ii) management of the operations of the two companies on a unified basis;
(iii) equalised distributions to shareholders in accordance with an equalisation ratio applying between the two companies, including in the event of a winding up of one or both of the companies;
(iv) the shareholders of both companies voting in effect as a single decision-making body on substantial issues affecting their combined interests; and
(v) cross-guarantees as to, or similar financial support for, each other ' s material obligations or operations except where the effect of the relevant regulatory requirements prevents such guarantees or financial support;
(d) the term " recognised stock exchange " means:
(i) any stock exchange established by a Financial Instruments Exchange or an approved-type financial instruments firms association under the terms of the Financial Instruments and Exchange Law (Law No. 25 of 1948) of Japan;
(ii) the Australian Securities Exchange and any other securities exchange recognised as such under the Corporations Act 2001 of Australia; and
(iii) any other stock exchange which the competent authorities of the Contracting States agree to recognise for the purposes of this Article;
(e) the term " units " includes any instrument, not being a debt-claim, granting an entitlement to share in the asset or income of, or receive a distribution from, the person;
(f) the term " principal class of units " means the class of units which represents the majority of the value of the person. If no single class of units represents the majority of the value of the person, the principal class of units is that class or those classes that in the aggregate represent the majority of the value of the person; and
(g) the term " pension fund " means any person that:
(i) is established under the law of a Contracting State; and
(ii) is operated principally to administer or provide pensions, retirement benefits or other similar remuneration or to earn income, profits or gains for the benefit of other pension funds.
(7)
Nothing in this Article shall be construed as restricting, in any manner, the application of any provisions of the law of a Contracting State which are designed to prevent the avoidance or evasion of taxes.
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