Japanese corporate bonds and municipal bonds - rates, eligibility, availability of relief etc.

27.09.2017

Withholding Tax

Standard rate of withholding tax:0%Holding requirements / restrictions:Yes

Only tax-exempt beneficial owners are eligible to hold Japanese corporate bonds and municipal bonds in Clearstream Banking. The standard rate of withholding tax on interest and redemptions from such bonds is therefore 0% in Clearstream Banking and consequently no relief/reclaim procedures apply.

Beneficial owners eligible to hold Japanese corporate bonds and municipal bonds are as follows:

  • Non-residents of Japan;
  • Designated Financial Institutions (DFIs) - provided that the Clearstream Banking customer has DFI status and is the sole beneficial owner of the bonds in the account (proprietary assets).

Documentation requirements

The documentation to be submitted in order to hold Japanese corporate bonds and municipal bonds vary depending on whether the customer is to hold the bonds as proprietary assets or as an intermediary.

Important Note: Customers may hold proprietary assets and assets for third parties but the respective holdings must be held in strictly separate accounts. For customers holding third party assets, the holding in each account may strictly be held on behalf of one single beneficial owner only.

For customers to hold Japanese corporate bonds and municipal bonds as proprietary assets

To hold Japanese corporate bonds and municipal bonds as proprietary assets in a Clearstream Banking account, customers must submit the following documentation depending on their status:

  • Non-residents of Japan
    • Application Form;
    • Application Form for Amendment concerning Withholding Tax Exemption (if applicable);
    • Notification Form for Withholding Tax Exemption (for Partnership or Trust only);
    • Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only).

      The applicant should always be the ultimate beneficial owner of the securities (in this case, the Clearstream Banking customer).

      Clearstream Banking, being the Qualified Financial Intermediary (QFI) of the applicant, will complete the QFI part and sign this on behalf of the customer holding the proprietary assets (boxes 8 and 9). The form is valid for five years.

      An electronic copy must be sent by email to tax@clearstream.com.
    • Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking customer and valid until revoked.

      Note: Clearstream Banking S.A. customers must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG customers must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.

    • A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) issued by the government or any public office within six months, valid until revoked;
    • SWIFT MT599 or CreationOnline free-format message, to be sent “Attn: Singapore Tax team - SIT”.

      Customers that want an account to be eligible for Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or CreationOnline free-format message:
      “We kindly request Clearstream to make account number xxxxx eligible for Japanese corporate bonds and municipal bonds and confirm that this account will be used solely for proprietary business."
  • Designated Financial Institutions (DFIs)

    Customers that are institutions with DFI status from the Financial Services Agency (FSA) in Japan and hold only proprietary Japanese corporate bonds and municipal bonds are eligible for the CBL Japanese Corporate and Municipal Bonds service.
    Eligible customers that are DFI must be:
    • Resident for tax purposes in Japan (Japanese residents, Japanese corporations resident in Japan and branches of such resident corporations); or
    • Overseas branches of Japanese corporations; or
    • Overseas affiliates of Japanese corporations.

    The official list of licensed (registered) DFIs is maintained on the FSA website.
    To hold Japanese corporate bonds and municipal bonds as proprietary assets in an account with Clearstream Banking, DFIs must submit the following documentation:
    • One-Time Certificate of Residence in Japan - Designated Financial Institution, signed by the DFI and valid until revoked;
    • Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking customer and valid until revoked.

      Note: Clearstream Banking S.A. customers must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG customers must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.

    • SWIFT MT599 or CreationOnline free-format message, to be sent “Attn: Singapore Tax team - SIT”.

      Customers that want an account to be eligible for the Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or CreationOnline free-format message:
      “We kindly request Clearstream to make account number xxxxx eligible for Japanese corporate bonds and municipal bonds and confirm that we are a DFI resident in Japan for tax purposes and that we are eligible to utilise the book-entry system for Japanese corporate bonds and municipal bonds. Appropriate documentation will be provided by us to confirm these statuses.
      We also confirm that this account will be used solely by a DFI for the purpose of safekeeping only proprietary Japanese corporate bonds and municipal bonds, whose tax status should be 'exempt' under the DFI regime.”

For customers to hold Japanese corporate bonds and municipal bonds as intermediary

Customers acting as intermediary must be non-resident investors and must, before holding the Japanese corporate bonds and municipal bonds for third parties, have:

  • Foreign Indirect Account Management Institution (FIAMI) status;

    All intermediaries in the custody chain are required to have FIAMI status for corporate bonds obtained from JASDEC.
    Details of the FIAMI definition and application procedures are available on Japan Securities Depository Center, Inc. “JASDEC” website: http://www.jasdec.com/en/system/less/participation/account/. And
  • Qualified Foreign Intermediary (QFI) status

    The last financial institution in the custody chain with which the final beneficial owner has the account must, in addition to FIAMI status, also have obtained QFI status for corporate bonds from the National Tax Agency (NTA) Commissioner via JASDEC.
    It is the responsibility of each intermediary in the chain, where there are several intermediaries, to ensure that their direct client has obtained QFI status (if required).

Clearstream Banking (CBL and CBF) has already obtained FIAMI status and QFI status required to hold Japanese corporate bonds and municipal bonds.

Intermediaries must request FIAMI status for corporate bonds and QFI status for corporate bonds through CBL and CBL's sub custodian HSBC, even if the status has already been obtained through another sub custodian.

To hold Japanese corporate bonds and municipal bonds for third-party beneficial owners via Clearstream Banking, customers must submit the following documentation:

  • Application Form;
  • Application Form for Amendment concerning Withholding Tax Exemption (if applicable),
  • Notification Form for Withholding Tax Exemption (for Partnership or Trust only),
  • Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only).

The forms must be dated and signed by the respective QFI on behalf of the beneficial owner and are valid for five years.

The QFI is required to insert the ID number and name of the ID document by which the QFI has identified the applicant (Name of the ID Document by which the QFI's specified foreign branch identified the applicant (boxes 8 and 9)).

The applicant in the form should always be the ultimate beneficial owner of the securities.

Originals are needed; a scanned copy can be first sent by email to tax@clearstream.com for review and subsequently, the original may follow upon approval.

  • Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking customer and valid until revoked.

    Note: Clearstream Banking S.A. customers must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG customers must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.

  • SWIFT MT599 or CreationOnline free-format message, to be sent “Attn: Singapore Tax team - SIT”.

    Customers that want an account to be eligible for the Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or CreationOnline free-format message:
    “We kindly request Clearstream to make account number xxxxx eligible for Japanese corporate bonds and municipal bonds and confirm that this account will be used solely for third-party business.
    Using this account for third-party (agent) business, we confirm that we have FIAMI and/or QFI status (delete as appropriate) and that the appropriate documentation will be provided.
    We also confirm that we have duly received the Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds based on the Article 26 (Agreement with Customer) of the JASDEC regulation, signed by the applicant.
  • Copy of the document proving FIAMI status, valid until revoked;
  • A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) issued by the government or any public office within six months, has to be submitted and retained by the last financial institution/QFI in the chain with whom the applicant (final beneficial owner) has the account and who must, in turn, provide it promptly to the Clearstream Banking customer, upon request at any time, for forwarding to Clearstream Banking.

Change in customer details

Where there is any change in the address, registered address or name of the bond holder, the customer must provide the completed and signed “Application Form for Amendment” or “Notification Form for Amendment” (for Partnership or Trust only).

End Investor Registration Number

Once the application is complete and processed by Clearstream Banking’s depository, an “End Investor Registration Number” will be allocated and sent to the customer via SWIFT message. If a Registration Number was previously provided for Japanese Government Bonds (JGBs), a new number for Japanese corporate bonds and municipal bonds will not be provided.

Clearstream Banking deadline

Customers must ensure that the required documentation is provided before any underlying beneficial owner makes a first investment.

Beneficial Owner Disclosure Requirement

Customers holding Japanese corporate bonds and municipal bonds are obliged to fulfil certain disclosure requirements. For more information, please refer to "Beneficial Owner Disclosure Requirement" under the Japanese Corporate and Municipal Bonds service section of the Creation Link Guide - Debt securities.