ARTICLE 15

Income from Real Property

This article provides that a resident of one State may be subject to tax in the other State on income from real property and royalties in respect of natural resources if the property or natural resource is located in such other State. The 1954 Convention provided that a resident of one State may be subject to tax on such income or royalties by the other State only if such resident had a permanent establishment in the other State or if such income or royalties constituted industrial or commercial profits. This article does not (as did the 1954 Convention) provide for an election by the resident to compute his tax on such income on a net basis since under the internal laws of Japan and, since 1967, the United States, this can be done. See sections 871(d) and 882(d) of the Internal Revenue Code. The income referred to in this article includes gain from the sale or exchange of real property or natural resource rights, but does not include interest on mortgages and similar instruments. The latter type of income is covered by Article 13 (relating to interest).