Japan: Revised tax agreement between Japan and Germany; new documentation requirements and tax rates for Equities and Convertible bonds

22.12.2016

Clearstream Banking1 wishes to inform customers that effective

1 January 2017

there will be new documentation requirements and tax rates for equities and convertible bonds following a revised tax agreement between Japan and Germany.

Background

The Ministry of Finance (MOF) and the Ministry of Foreign Affairs (MOFA) announced that a revised tax agreement between Japan and Germany has been ratified by the both governments.

The tax agreement is currently in place between Japan and Germany, which was signed in 1966 and amended in 1979 and 1983. 

Impact on customers

Eligible beneficial owners that are resident of Germany holding Japanese Equities and Convertible bonds may apply for withholding tax reduction.

 

Current

Revised (as from 1 January 2017)

Tax rate Interests

10%

0%

Tax rate Dividends

15%

15% 2

The revised tax treaty includes a provision on comprehensive limitation on benefits. To benefit from the withholding tax reduction allowed under the revised tax treaty, eligible beneficial owners must meet the “qualified person” conditions defined below or satisfy other conditions, for example, approval from competent authorities.

 A “Qualified person” is:

  1.  An individual;
  2.  A qualified governmental entity, for example, the Federal Bank of Germany;  
  3.  A publicly traded company (listed or registered on a recognised stock exchange and traded regularly);
  4.  A pension fund/scheme (more than 50% of the beneficiaries/members must be German residents); 
  5.  A person established under the laws of Germany, treated as tax-exempt and operated exclusively for religious, charitable, educational, scientific, artistic, cultural or public purposes;  
  6.  A person other than an individual, who holds at least 65% of voting shares owned directly/indirectly by qualified persons mentioned under (1) to (5) above. This entity will be subjected to minimum holding period of at least 12 months prior to the record date.

The reduced withholding tax rates are available to eligible beneficial owners through the relief at source and standard refund procedures upon submission of the required certification within the prescribed deadlines, as described below.

Japanese Convertible Bonds (JCBs)

Relief at source

Documentation requirements

German beneficial owners applying to obtain relief at source from withholding tax on income from Japanese convertible bonds according to the DTT, should submit to Clearstream Banking the following documentation in addition to the current documentation requirements:

  • Certificate of Residence (in the original), issued by the beneficial owner’s local tax authorities and valid for one year from the date of issuance.
  • Form 17 Attachment Form for Limitation On Benefits Article (except for individuals and pension funds). The Form 17 for German beneficial owners is valid for one year as from the date of submission of the Form 17 to the Japanese Tax Office. The original is needed.

Note: Form 17 for individuals and pension funds will be filled in by our Depository and submitted to the Japanese Tax Office directly.

Deadlines for receipt of documents

The above documents for relief at source from withholding tax on income from dirty JCBs must be received by Clearstream Banking at the latest 10 business days before the first income payment date, by 10:00 CET.

Standard Refund

Documentation requirements

German beneficial owners applying for standard refund from withholding tax on income from Japanese convertible bonds according to the DTT, should submit to Clearstream Banking the following documentation in addition to the current documentation requirements:

  • Certificate of Residence (in the original), issued by the beneficial owner’s local tax authorities and valid for one year from the date of issuance.
  • Form 17 Attachment Form for Limitation On Benefits Article (except for individuals and pension funds). The Form 17 for German beneficial owners must be submitted per reclaim request. The original is needed.

Note: Form 17 for individuals and pension funds will be filled in by our Depository and submitted to the Japanese Tax Office directly.

Statutory deadline

The statutory deadline for reclaiming withholding tax using the standard refund procedure is five years after the date on which the income was distributed.

Clearstream deadline for standard refund applications

Documentation for a standard refund of withholding tax on income from dirty JCBs must be received by Clearstream Banking at the latest three months before the statutory deadline.

All standard refund applications received after this deadline will be processed by Clearstream Banking on a "best efforts" basis. However, in such cases, Clearstream Banking will apply an extra charge and accepts no responsibility for requests that have not reached the Japanese authorities by the date considered as being the statute of limitations deadline.

With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the required forms correctly and to calculate the amount due.

Japanese Equities

Relief at source

Documentation requirements

German beneficial owners applying to obtain relief at source from withholding tax on income from Japanese listed equities, ETFs and REITs according to the DTT, should submit to Clearstream Banking the following documentation in addition to the current documentation requirements:

  • Certificate of Residence (in the original), issued by the beneficial owner’s local tax authorities and valid for one year from the date of issuance.
  • Form 17 Attachment Form for Limitation On Benefits Article (except for individuals and pension funds). The Form 17 for German beneficial owners is valid for one year as from the date of submission of the Form 17 to the Japanese Tax Office. The original is needed.

Note: Form 17 for individuals and pension funds will be filled in by our Depository and submitted to the Japanese Tax Office directly.

Deadlines for receipt of documents

The above documents for relief at source from withholding tax on income from Japanese listed equities, ETFs and REITs must be received by Clearstream Banking according to security type, as follows:

  • For Japanese listed equities: at the latest five business days after the first income record date, by 10:00 CET;
  • For Japanese ETFs or REITs: at the latest three business days after the first income record date, by 10:00 CET.

Standard refund

Documentation requirements

German beneficial owners applying for standard refund from withholding tax on income from Japanese listed equities, ETFs or REITs according to the DTT, should submit to Clearstream Banking the following documentation in addition to the current documentation requirements:

  • Certificate of Residence (in the original), issued by the beneficial owner’s local tax authorities and valid for one year from the date of issuance.
  • Form 17 Attachment Form for Limitation On Benefits Article (except for individuals and pension funds). The Form 17 for German beneficial owners must be submitted per reclaim request. The original is needed.

Note: Form 17 for individuals and pension funds will be filled in by our Depository and submitted to the Japanese Tax Office directly.

Statutory deadline

The statutory deadline for reclaiming withholding tax using the standard refund procedure is five years after the date on which the income was distributed.

Clearstream deadline for standard refund applications

Documentation for a standard refund of withholding tax on income from Japanese listed equities, ETFs or REITs must be received by Clearstream Banking at the latest three months before the statutory deadline.

All standard refund applications received after this deadline will be processed by Clearstream Banking on a "best efforts" basis. However, in such cases, Clearstream Banking will apply an extra charge and accepts no responsibility for requests that have not reached the Japanese authorities by the date considered as being the statute of limitations deadline.

With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the required forms correctly and to calculate the amount due.

Further information

The Market Taxation Guide - Japan will be updated in due course.

For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for CBF customers using CreationOnline), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.
2. There is no change in the tax rate but new documentation requirements exist.