Japanese American Depository Receipts (ADRs) - rates, eligibility, availability of relief etc.

16.07.2014

Withholding Tax

Standard rate of withholding tax:15.315%Holding requirements / restrictions:No

The standard rate of withholding tax on dividends from Japanese American Depository Receipts (ADRs)is 15.315% in Clearstream Banking.

Important note:

Residents of Japan are subject to withholding tax on dividends from Japanese listed equities as follows:

  • Individuals are subject to 20.315%.
  • Corporations are subject to 15.315%.
  • Foreign and Japanese individuals holding 3% or more of the issued shares are subject to 20.42%.

It is the responsibility of the customer to ensure that final beneficial owners are eligible for the tax rates applied for, including the Clearstream Banking default rate. Neither Clearstream Banking nor its local depository has any direct or indirect liability towards the Japanese authorities in this regard (please refer to documentation requirements below for Japanese residents that are individuals and for investors holding 3% or more of the issued shares).

Availability of relief

The following types of beneficial owner can, provided that the appropriate documentation is submitted to Clearstream Banking, obtain relief at source from withholding tax on on dividends from Japanese ADRs:

  • Residents of Double Taxation Treaty (DTT) countries; and
  • Tax-exempt entities (such as international or supranational organisations).

A standard refund of withholding tax on dividends from Japanese ADRs is not available through Clearstream Banking.

Relief at source

Relief at source from withholding tax on dividends from Japanese ADRs is available through Clearstream Banking for eligible beneficial owners as follows:

  • For residents of DTT countries, the applicable rate is the tax treaty rate or 15.315%, whichever is lower.
  • For tax-exempt entities (such as international or supranational organisations), the applicable rate is 0%.

Documentation requirements

To obtain relief at source from withholding tax on income from Japanese ADRs, the documentation must be provided to us ("Attn: the Luxembourg Tax Team - OTL") before the respective dividend payment date (see “Deadlines for receipt of documents” below).

The documentatrion requirements vary according to the status of the beneficial owner, as follows.

For residents of DTT countries:

  • One-Time Certificate for Japanese ADRs, signed and completed by the customer and valid until revoked
  • Payment Breakdown (per payment), submitted via CreationOnline or SWIFT MT599 free-format message, including the following information:
    • Customer account number;
    • Payment date;
    • Record date;
    • Number of shares;
    • Applicable tax rate;
    • Name, address and country of residence of the beneficial owner;
    • (For U.S. pension funds only) Tax Identification number (TIN).

For pension funds resident in The Netherlands, Switzerland, The UK and The U.S.A. and exempt according to a DTT, the following documentation is requested in addition:

  • Appendix A - For Exempt Pension funds resident in Netherlands, Switzerland, United Kingdom and U.S.A., signed and completed by the exempt pension fund

    The depository bank to be inserted in the Appendix A will be communicated to customers via the tax notification.
  • Appendix B - Power of Attorney, printed under the pension fund’s letterhead, signed and completed by the exempt pension fund and issued to the depository bank that is sponsoring the event

    The depository bank will be communicated to customers in our tax notification per event.

For tax-exempt entities (such as international or supranational organisations):

  • One-Time Certificate for Japanese ADR’s, signed and completed by the customer
  • Payment Breakdown (per payment), submitted via CreationOnline or SWIFT MT599 free-format message, including the following information:
    • Customer account number;
    • Payment date;
    • Record date;
    • Number of shares;
    • Applicable tax rate (0%);
    • Name, address and country of residence of the beneficial owner.
  • Government issued certification or other supporting document(s) acknowledging the beneficial owner as tax-exempt and valid until revoked.

For residents of Japan that are individuals and subject to 20.315%:

  • One-Time Certificate for Japanese ADRs, signed and completed by the customer and valid until revoked
  • Payment Breakdown (per payment), submitted via CreationOnline or SWIFT MT599 free-format message, in order to have the correct tax rate of 20.315% applied, and including the following information:
    • Customer account number;
    • Payment date;
    • Record date;
    • Number of shares;
    • Applicable tax rate (20.315%);
    • Japanese Tax Identification number (TIN).

For foreign and Japanese individuals holding 3% or more of the issued shares subject to 20.42%:

  • One-Time Certificate for Japanese ADRs, signed and completed by the customer and valid until revoked
  • Payment Breakdown submitted via CreationOnline or SWIFT MT599 free-format message, including the following information:
    • Customer account number;
    • Payment date;
    • Record date;
    • Number of shares;
    • Applicable tax rate (20.42%);
    • Japanese Tax Identification number (TIN).

Additional documentation

All customers may be requested to provide the following additional documentation upon request:

  • Proof of tax residence for beneficial owners that are eligible to obtain relief at source from withholding tax, either via a Certificate of Residence issued by the beneficial owner’s local tax authorities or via U.S. Internal Revenue Service (IRS) Form W-8BEN/W-9; and
  • Any other tax documentation requested from time to time.

Note: All proof of residence must be signed, stamped and dated before the first dividend payment date to which it applies and, furthermore:

  • The Certificate of Residence must be issued within nine months and in the same year of the dividend payment and, in cases of an exempt pension fund, must show the exempt status of the pension fund.
  • The IRS Form W-8BEN must be dated within three years of the payment.
  • The IRS Form W9 may not contain a PO Box address and must include the U.S. TIN of the beneficial owner. It is valid until revoked.

Deadlines for receipt of documents

The deadline for the receipt by Clearstream Banking of the documentation to obtain exemption or relief at source from withholding tax on income from Japanese ADRs will be communicated on a per-payment basis via the Clearstream Banking tax notification.