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THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNION OF SOVIET SOCIALIST REPUBLICS AND THE GOVERNMENT OF JAPAN

of January 18, 1986

About avoidance of double taxation concerning taxes on the income

Government of the Union of Soviet Socialist Republics and Government of Japan,

wishing to sign the Convention on avoidance of double taxation concerning taxes on the income,

agreed about the following:

Article 1

1. This Convention is applied to persons who are persons with the permanent residence in one or in both Contracting States.

2. For the purposes of this Convention the term "person with the permanent residence in the Contracting State" means any person who is subject to the taxation in this Contracting State on the basis of residence, regular residence, the location of head office, the place of management or any other criterion of similar nature.

3. In case according to Item 2 provisions person is person with the permanent residence in both Contracting States, then competent authorities of Contracting States determine by mutual consent the Contracting State in which this person is considered person with the permanent residence for the purposes of this Convention.

Article 2

1. This Convention extends to the following taxes:

a) in Japan:

(i) income tax;

(ii) tax on corporations; and

(iii) the local taxes from the population;

b) in the Union of Soviet Socialist Republics (which is hereinafter referred to as by USSR):

(i) the income tax from the population; and

(ii) the income tax from foreign legal entities.

2. This Convention extends also to any identical or in essence similar taxes which are levied after signature date of this Convention in addition to about what it is told in Item 1, or instead of them.

Article 3

For the purposes of this Convention if other does not follow from context:

a) the terms "one Contracting State" and "other Contracting State" mean, depending on context, the USSR or Japan;

b) the term "international delivery" means any transportation sea or the aircraft operated by person with the permanent residence in one Contracting State except cases when sea or the aircraft is operated only between Items in other Contracting State;

c) the term "person" includes physical person, the legal entity or any organization considered for the purposes of the taxation as the legal entity (hereinafter referred to as "legal entity"), and also any other consolidation of persons;

d) the term means "competent authority":

(i) in relation to Japan - the Minister of Finance or his authorized representative;

(ii) in relation to the USSR - the Ministry of Finance of the USSR or its authorized representative.

Article 4

1. For the purposes of this Convention the term "permanent mission" means any permanent place of activities through which the business activity of person with the permanent residence in the Contracting State is fully or partially performed.

2. The building site or construction or mounting object represent permanent mission, only if duration of works exceeds 12 months.

3. Irrespective of provisions of Items 1 and 2, the term "permanent mission" is not considered as including:

a) use of constructions only for the purposes of storage, demonstration or delivery of the goods or products belonging to person with the permanent residence specified in Item 1;

b) stock keeping of the goods or products belonging to person with the permanent residence specified in Item 1, only for the purposes of storage, demonstration or delivery;

c) stock keeping of the goods or products belonging to person with the permanent residence specified in Item 1, only for the purposes of conversion by other person;

d) content of the permanent place of activities only for the purposes of purchase of goods or products or for information collection for person with the permanent residence specified in Item 1;

e) content of the permanent place of activities only for the implementation purposes for person with the permanent residence specified in Item 1, to any other activities of preparatory or auxiliary nature; or

f) content of the permanent place of activities only for implementation of any combination of the types of activity listed in subitems from "a" to "e" provided that the cumulative activities of the permanent place of activities resulting from such combination have preparatory or auxiliary nature.

4. Irrespective of Item provisions 1, if person with the permanent residence in one Contracting State performs business activity through the agent in other Contracting State, this face is considered as the having permanent mission in this other Contracting State concerning any activities which such agent undertakes for this person if:

a) the agent has and usually uses in this other Contracting State of power to sign contracts on behalf of this person; and

b) the agent is not agent with the independent status to which Item 5 provisions are applied; and

c) agent activities do not come down to the types of activity mentioned in Item 3.

5. The face with the permanent residence in one Contracting State is not considered as the having permanent mission in other Contracting State, only if it performs business activity in this other Contracting State through the broker, the broker or any other agent with the independent status provided that such broker or the agent act within the regular activities.

6. The fact that the legal entity who is person with the permanent residence in one Contracting State controls or is controlled by the legal entity who is person with the permanent residence in other Contracting State or who performs business activity in this other Contracting State in itself does not turn one of these legal entities into permanent mission of another.

Article 5

1. The profit got from business activity by person with the permanent residence in one Contracting State is subject to the taxation only in this Contracting State if only this person does not perform business activity in other Contracting State through the permanent mission which is in it. If this person performs business activity as it is told above, then the profit of this person can be assessed with taxes in this other Contracting State, but only in that part which is enlisted to this permanent mission.

2. Taking into account Item provisions 3, if person with the permanent residence in one Contracting State performs business activity in other Contracting State through the permanent mission which is in it, then in each Contracting State to this permanent mission the profit which it could receive if it was isolated and the individual occupied with the same or similar activities in the same or similar conditions and would be effective absolutely independently in relation to person whose permanent mission it is is enlisted.

3. In case of determination of profit of permanent mission the deduction of the expenses incurred for the purposes of permanent mission including the management and all-administrative expenses which arose as in the Contracting State where there is permanent mission, and in any other place is allowed.

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