ARTICLE 21

Governmental Functions

The provisions of the 1954 Convention with respect to governmental functions were substantially the same as those of the new Convention. The new Convention provides an exemption from Japanese tax with respect to wages, salaries, and similar remuneration, including pensions or similar benefits, paid by (or from the public funds of) the United States, or a political

subdivision or local authority thereof, to a citizen of the United States for services performed for the United States or for any of its political subdivisions or local authorities in the discharge of governmental functions, provided such individual is not a national of Japan and has not been admitted to Japan for permanent residence. An exemption from United States tax is provided with respect to such payments paid by (or out of funds to which contributions are made by) Japan, or a local authority thereof, to an individual who is a national of Japan for services performed for Japan or for any of its local authorities in the discharge of governmental functions, provided such individual is not a citizen of the United States and does not have immigrant status in the United States. In the case of Japan, this article is applicable to payments made by the National Civil Servant Mutual Aid Association and the Local Civil Servant Mutual Aid Association. Compensation paid in connection with industrial or commercial activity carried on by a government is treated the same as compensation paid by a private employer. The provisions relating to dependent personal services, and pensions, annuities and social security payments would apply in such a case.