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- 1. Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom or, as the case may be, regarding the exemption from United Kingdom tax of a dividend arising in a territory outside the United Kingdom or of the profits of a permanent establishment situated in a territory outside the United Kingdom (which shall not affect the general principle hereof):
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- (a) Japanese tax payable under the laws of Japan and in accordance with this Convention, whether directly or by deduction, on income, profits or chargeable gains from sources within Japan (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same income, profits or chargeable gains by reference to which the Japanese tax is computed;
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- (b) a dividend which is paid by a company which is a resident of Japan to a company which is a resident of the United Kingdom shall be exempted from United Kingdom tax, when the conditions for exemption under the law of the United Kingdom are met;
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- (c) the profits of a permanent establishment in Japan of a company which is a resident of the United Kingdom shall be exempted from United Kingdom tax when the exemption is applicable under the law of the United Kingdom and the conditions for exemption under the law of the United Kingdom are met;
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- (d) in the case of a dividend not exempted from tax under subparagraph (b) of this paragraph which is paid by a company which is a resident of Japan to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit mentioned in subparagraph (a) of this paragraph shall also take into account the Japanese tax payable by the company in respect of its profits out of which such dividend is paid.
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- 2. Subject to the provisions of the laws of Japan regarding the allowance as a credit against Japanese tax of tax payable in any country other than Japan, where a resident of Japan derives income from the United Kingdom which may be taxed in the United Kingdom in accordance with the provisions of this Convention, the amount of the United Kingdom tax payable in respect of that income shall be allowed as a credit against the Japanese tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Japanese tax which is appropriate to that income.
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- 3. For the purposes of the preceding paragraphs of this Article, income, profits or gains beneficially owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State.