Note from US to Japan Regarding the Protocol of 2013 (Second Protocol), Jan 24, 2013

# DEPARTMENT OF STATE WASHINGTON

January 24, 2013

Excellency:

I have the honor to acknowledge receipt of Your Excellency's Note
of today's date which reads as follows:

"I have the honor to refer to the Protocol signed today
(hereinafter referred to as "the Protocol of 2013"), to the Convention
between the Government of Japan and the Government of the United
States of America for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income,
signed at Washington on 6 November 2003, as amended by the
Protocol of 2013 (hereinafter referred to as "the Convention"), to the
Protocol signed at Washington on 6 November 2003 as amended by
the Protocol of 2013 (hereinafter referred to as "the Protocol of
2003") and to the agreement effected by exchange of notes between
the Government of Japan and the Government of the United States of
America on 6 November 2003 concerning taxation (hereinafter
referred to as "the Notes of 2003"), and to make, on behalf of the
Government of Japan, the following proposals:

1\.
Paragraphs 5, 7 and 8 of the Notes of 2003 shall be deleted
and paragraph 6 of the Notes of 2003 shall be renumbered as
paragraph 5.

2\.
It is understood that the "special income tax for
reconstruction" and the "special corporation tax for reconstruction"
enacted under the Act on Special Measures Concerning Securing
Financial Resources Necessary for Implementing Measures for
Reconstruction in Response to the Great East Japan Earthquake (Law
No. 117 of 2011) of Japan are identical or substantially similar taxes
within the meaning of paragraph 2 of Article 2 of the Convention.

His Excellency
Mr. Kenichiro Sasae
Ambassador Extraordinary
and Plenipotentiary of Japan
to the United States of America

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3\.
With reference to Article 15 of the Convention, it is
understood that if a resident of a Contracting State does not serve as
a member of a board of directors of a company, Article 15 of the
Convention does not apply to his remuneration regardless of his title
or position. In addition, it is understood that where a member of the
board of directors of a company also has other functions (for
example, as ordinary employee, advisory, or consultant) with the
company, Article 15 of the Convention does not apply to
remuneration paid to such a person on account of such other
functions.

4\.
With reference to paragraph 5 of Article 25 of the Convention,
it is understood that the fact that tax collection procedures may have
been suspended shall not affect a determination that taxation not in
accordance with the provisions of the Convention has resulted from
the actions of one or both Contracting States.

5\.
With reference to paragraph 1 of Article 27 of the Convention,
it is understood that the obligation to lend assistance shall be
satisfied in cases where the requested State had made reasonable
efforts to lend assistance but was unsuccessful in collecting the
revenue claim on behalf of the applicant State.

6\.
With reference to clause (i) of subparagraph (a) of paragraph 4
of Article 27 of the Convention, it is understood that the term "the
consumption tax" means only the consumption tax imposed by
Japan, and does not include any consumption tax imposed by a local
authority of Japan.

7\.
With respect to clause (ii) of subparagraph (b) of paragraph 4
of Article 27 of the Convention and subparagraph (a) of paragraph 1
of the Protocol of 2003, it is understood that the term "Federal excise
tax on insurance policies issued by foreign insurers" means taxes
imposed pursuant to Section 4371 through 4374 of the Internal
Revenue Code of the United States.

8\.
With respect to clause (iii) of subparagraph (b) of paragraph 4
of Article 27 of the Convention and subparagraph (b) of paragraph 1
of the Protocol of 2003, it is understood that the term "Federal excise
tax imposed with respect to private foundations" means taxes
imposed pursuant to Section 4940 through 4948 of the Internal
Revenue Code of the United States.

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9\.
With reference to clause (iv) of subparagraph (b) of paragraph
4 of Article 27 of the Convention, it is understood that the term "the
Federal taxes related to employment and self-employment" means
taxes imposed pursuant to Chapter 2 and Chapters 21 through 23A of
the Internal Revenue Code of the United States.

10\. With reference to paragraph 4 of Article XV of the Protocol of
2013, it is understood that Article 26 and Article 27 of the
Convention shall have effect from the date of the entry into force of
the Protocol of 2013, without regard to the taxable year to which the
matter or revenue claim relates, provided all of the conditions and
requirements of the respective Articles are satisfied.

If the foregoing proposals are acceptable to the Government of
the United States of America, I have further the honor to suggest that
the present Note and Your Excellency's Note in reply shall constitute
an agreement between the two Governments on this matter, which
shall enter into force on the same date as the Protocol of 2013
amending the Convention between the Government of Japan and the
Government of the United States of America for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with respect to
Taxes on Income, signed at Washington on 6 November 2003."

The foregoing proposals being acceptable to the Government
of the United States of America, I have further the honor to confirm
that Your Excellency's Note and this Note in reply shall constitute an
agreement between our two Governments on this matter, which shall
enter into force on the same date as the Protocol signed today.

I avail myself of this opportunity to extend to Your Excellency
the assurance of my highest consideration.

For the Secretary of State,
the