Tax Treaty Case Law around the Globe 2017

S. 45Japan: The Procedural Requirements for Applying a Treaty and Determination of a Permanent Establishment for an Online Sales Business

Tsutomu Endo

1. S. 46Introduction

In this case, essentially three issues were discussed. The first issue concerned the procedural requirements for applying the Japan-United States Income and Capital Tax Treaty (2004). The Japan-US tax treaty provides a limitation on benefits (LOB) clause. While the treaty, in general, does not include any procedural requirements in relation to the LOB clause, submitting an application form is required under the domestic law of Japan. In this regard, the question arose as to whether a taxpayer is entitled to treaty benefits under the Japan-US tax treaty where the taxpayer has failed to submit the relevant application form in accordance with domestic law. Submitting an application form is provided for only in a ministerial ordinance, a piece of delegated legislation. Therefore, the legal nature of the application form was at issue.

The second and third issues related to the determination of a permanent establishment (PE), in particular, the exceptions to the definition of a PE, and attribution of profits to the PE. The OECD Mode...