Article 27 (Administrative Assistance)

Paragraph 1

Paragraph 1 provides for assistance in collection of taxes to the extent necessary to ensure that treaty benefits are enjoyed only by persons entitled to those benefits under the terms of the Convention. Under paragraph 1, a Contracting State will endeavor to collect on behalf of the

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other Contracting State only those amounts necessary to ensure that any exemption or reduced rate of tax at source granted under the Convention by that other Contracting State is not enjoyed by persons not entitled to those benefits. For example, if the payer of a U.S.-source portfolio dividend receives a Form W-8BEN or other appropriate documentation from the payee, the withholding agent is permitted to withhold at the portfolio dividend rate of 10 percent. If, however, the addressee is merely acting as a nominee on behalf of a third-country resident, paragraph 1 would obligate Japan to take collection action against a person for the difference in applicable withholding rates in response to a specific request from the U.S. competent authority. Paragraph 2

Paragraph 2 makes clear that the provisions of paragraph 1 do not obligate the Contracting State asked to collect the tax to carry out administrative measures that are different from those used in the collection of its own taxes, or that would be contrary to its sovereignty, security or public policy, in the process of providing such assistance.