PROTOCOL

At the signing of the Agreement between Japan and the Federal Republic of Germany for the elimination of double taxation with respect to taxes on income and to certain other taxes and the prevention of tax evasion and avoidance (hereinafter referred to as "the Agreement") at Tokyo on 17 December 2015, Japan and the Federal Republic of Germany have agreed upon the following provisions, which shall form an integral part of the Agreement.

(1) With reference to Article 2 of the Agreement:

The provisions of the Agreement in respect of taxation of income shall mutatis mutandis apply to the enterprise tax of Japan and the trade tax (Gewerbesteuer) of the Federal Republic of Germany and any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of those taxes to the extent that they are computed on a basis, or by taking into account any elements, other than income.

(2) With reference to paragraph 1 of Article 4 of the Agreement:

It is understood that a person is "liable to tax" in a Contracting State even where all or part of its income is exempted from tax in that Contracting State by satisfying the requirements for exemption specified in the tax laws of that Contracting State.

(3) With reference to Articles 6 to 20 of the Agreement:

Where, pursuant to any provision of the Agreement, a Contracting State reduces the rate of tax on, or exempts from tax, income of a resident of the other Contracting State and under the laws in force in that other Contracting State the resident is subjected to tax by that other Contracting State only on that part of such income which is remitted to or received in that other Contracting State, then the reduction or exemption shall apply only to so much of such income as is remitted to or received in that other Contracting State.

(4) Notwithstanding any provisions of the Agreement:

• (a) in the case of Japan, the following income or gains arising in Japan may be taxed in Japan according to the laws of Japan:
  • (i) dividends paid by a company which is entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income for Japanese tax;
  • (ii) interest that is determined by reference to receipts, sales, income, profits or other cash flow of the debtor or a related person, to any change in the value of any property of the debtor or a related person or to any dividend, partnership distribution or similar payment made by the debtor or a related person, or any other interest similar to such interest; or
  • (iii) income or gains derived by a silent partner in respect of a silent partnership (Tokumei Kumiai) contract or other similar contract, or
• (b) in the case of the Federal Republic of Germany, any income arising in the Federal Republic of Germany may be taxed in the Federal Republic of Germany according to the laws of the Federal Republic of Germany, if it:
  • (i) is derived from rights or debt-claims carrying a right to participate in profits, including income derived by a silent partner (stiller Gesellschafter) from his participation as such, or from a loan with an interest rate linked to borrower's profit (partiarisches Darlehen) or from profit-sharing bonds (Gewinnobligationen) within the meaning of the tax law of the Federal Republic of Germany; and
  • (ii) is deductible in the determination of profits of the debtor of such income.

(5) With reference to Article 10 of the Agreement:

• (a) It is understood that distributions on certificates of a German investment fund are treated as dividends.
• (b) Notwithstanding the provisions of that Article, sub-paragraph (a) of paragraph 2 and paragraph 3 of that Article shall not apply to dividends paid by a German real estate investment trust company with listed share capital (Real Estate Investment Trust Aktiengesellschaft) and by a German investment fund.
• (c) For purposes of sub-paragraphs (a) and (b), the term "German investment fund" means a vehicle (not established as a partnership) within the meaning of the Investment Act of the Federal Republic of Germany (Kapitalanlagegesetzbuch) that is widely held and that holds a diversified portfolio of securities or invests directly or indirectly in real property for the main purpose of deriving rent.

(6) With reference to paragraph 5 of Article 21 of the Agreement:

It is understood that sub-paragraph (c) of that paragraph applies only to persons who are residents of, and business conducted in, the same Contracting State.

(7) With reference to paragraph 9 of Article 21 of the Agreement:

It is understood that the provisions of the law of a Contracting State which are designed to prevent the avoidance or evasion of taxes include:

• (a) in the case of Japan, Section 4-2 of Chapter II and Sections 7-4 and 24 of Chapter III of the Law on Special Measures Concerning Taxation (Law No. 26 of 1957) of Japan;
• (b) in the case of the Federal Republic of Germany, Parts 4, 5 and 7 of the German External Tax Relations Act (Außensteuergesetz), Section 42 of the German Fiscal Code (Abgabenordnung) and paragraph 3 of Section 50d of the German Income Tax Act (Einkommensteuergesetz).

(8) With reference to Article 22 of the Agreement:

It is understood that the provisions of that Article shall not be construed as obligating Japan to allow any amount of German tax to be credited against the enterprise tax of Japan nor obligating the Federal Republic of Germany to allow any amount of Japanese tax to be credited against the trade tax of the Federal Republic of Germany.

(9) With reference to Article 23 of the Agreement:

It is understood that the provisions of that Article shall not be construed as obligating a Contracting State to permit cross-border consolidation of income or similar benefits between an enterprise of that Contracting State and an enterprise of the other Contracting State.

(10) With reference to paragraph 5 of Article 24 of the Agreement:

• (a) The competent authorities shall by mutual agreement establish a standard procedure in order to seek 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 Agreement and shall use their best endeavors to follow the procedure.
• (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 dealt with the case presented pursuant to paragraph 1 of Article 24 of the Agreement in any capacity. The third arbitrator shall not be a national of either Contracting State, nor have had his usual place of residence in either Contracting State, nor have been employed by either Contracting State.
  • (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 as those described in paragraph 2 of Article 25 of the Agreement and under the applicable domestic laws of the Contracting States.
  • (v) Each competent authority shall bear the costs of its appointed arbitrator and its own expenses. The costs 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 Agreement, of this paragraph or of any procedural rule determined in accordance with sub-paragraph (a) that may reasonably have affected the decision. If the decision is found to be unenforceable due to the violation, the request for arbitration shall be considered not to have been made and the arbitration proceedings shall be considered not to have taken place (except for the purposes of clauses (iv) and (v) of sub-paragraph (b)).
• (e) If at any time before the arbitration panel delivers a determination to the competent authorities of the Contracting States:
  • (i) the competent authorities of the Contracting States reach a mutual agreement to resolve the case pursuant to paragraph 2 of Article 24 of the Agreement;
  • (ii) the presenter of the case withdraws the request for arbitration; or
  • (iii) a binding decision concerning the case is rendered by a court or administrative tribunal of one of the Contracting States during the arbitration proceedings; the mutual agreement procedure, including the arbitration proceedings, with respect to the case shall terminate.
• (f) In the event a case is pending in litigation or appeal, the mutual agreement that implements the arbitration decision shall be considered not to be accepted by the presenter of the case if any person directly affected by the case who is a party to the litigation or appeal does not withdraw within 60 days after receiving the determination of the arbitration panel from consideration by the relevant court or administrative tribunal all issues resolved in the arbitration proceeding. In this case, the case will not be eligible for any further consideration by the competent authorities.
• (g) The provisions of paragraph 5 of Article 24 of the Agreement and this paragraph shall not apply to cases falling within paragraph 3 of Article 4 of the Agreement.
• (h) The provisions of paragraph 5 of Article 24 of the Agreement and this paragraph shall apply mutatis mutandis to a case presented pursuant to paragraph 1 of Article 25 of the Agreement between Japan and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and to certain other taxes, signed at Bonn on 22 April 1966, as modified and supplemented by the Protocol signed at Tokyo on 17 April 1979 and the Second Protocol signed at Bonn on 17 February 1983 only when the competent authorities of the Contracting States have agreed that the case is suitable for resolution through arbitration. No unresolved issues of such case, however, shall be submitted to arbitration earlier than the day on which two years have elapsed from the entry into force of the Agreement.

(11) With reference to Article 25 of the Agreement:

Insofar as personal information is exchanged under that Article, the following provisions shall apply:

• (a) The competent authority of a Contracting State which receives information (hereinafter referred to as "the receiving authority") may use such information in compliance with paragraph 2 of Article 25 of the Agreement only for the purpose stated by the competent authority of the other Contracting State which supplies information (hereinafter referred to as "the supplying authority") and shall be subject to the conditions prescribed by the supplying authority to ensure compliance with that paragraph.
• (b) The supplying authority shall endeavor to ensure that the information to be supplied is accurate and foreseeably relevant within the meaning of the first sentence of paragraph 1 of Article 25 of the Agreement and that it is necessary for and commensurate with the purpose for which it is supplied.
• Information is foreseeably relevant if in the concrete case at hand there is the serious possibility that the Contracting State of which the receiving authority is the competent authority has a right to tax and there is nothing to indicate that the information is already known to the receiving authority or that the receiving authority would learn of the taxable object without that information.
• If the supplying authority discovers that it has supplied inaccurate information or information which should not have been supplied, it shall inform the receiving authority of this without delay.
• The receiving authority shall correct or erase such information without delay.
• (c) In any case, the receiving authority shall erase the information supplied that is not or no longer required for the purpose for which it was supplied.
• (d) The receiving authority shall inform the supplying authority (in the case of information provided on request or spontaneously, on a case-by-case basis) about whether the information supplied has been used if the supplying authority so requests.
• (e) The receiving authority shall inform, in accordance with its domestic law, a person of the supplied information in respect of him and of the purpose for which the information is to be used.
• (f) The Contracting States shall bear liability in accordance with their domestic laws in relation to any person suffering unlawful damage in connection with the exchange of information.
• (g) The competent authorities of the Contracting States shall keep records of the exchange of information.
• (h) The supplying authority may inform the receiving authority of the provisions for the deletion of the personal information under the domestic law of the Contracting State of which the supplying authority is the competent authority.
• (i) The competent authorities of the Contracting States shall take necessary measures to protect information supplied against unauthorised access, alteration or disclosure.

(12) With reference to paragraph 2 of Article 25 of the Agreement:

In the event that information received by a Contracting State is needed to be used by that Contracting State as evidence or otherwise in non-tax criminal proceedings carried out by a court or a judge, that Contracting State shall, in order to use such information as evidence or otherwise in non-tax criminal proceedings carried out by a court or a judge, submit a request in accordance with the Agreement between Japan and the European Union on Mutual Legal Assistance in Criminal Matters signed at Brussels on 30 November 2009 and at Tokyo on 15 December 2009.

IN WITNESS WHEREOF, the undersigned, being duly authorised thereto, have signed this Protocol.

DONE at Tokyo, on this seventeenth day of December 2015, in two originals, each in the Japanese, German and English languages, all three texts being authentic. In the case there is any divergence of interpretation between the Japanese and the German texts, the English text shall prevail.

FOR JAPAN:

YOJI MUTO

FOR THE FEDERAL REPUBLIC OF GERMANY:

HANS CARL FREIHERR VON WERTHERN