Japanese listed equities, ETFs and REITs - rates, eligibility, availability of relief etc.

31.10.2019

Withholding Tax

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

The standard rate of withholding tax on dividends from Japanese listed equities, Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) is 15.315% in Clearstream Banking.

Important note:

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

  • Individuals are subject to 20.315% (15.315% national tax + 5% local tax).
  • Corporations are subject to 15.315%.

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 Tax authorities in this regard (please refer to documentation requirements below for Japanese residents).

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 dividends from Japanese listed equities, ETFs and REITs:

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

N.B.: Residents of DTT countries includes tax-exempt eligible beneficial owners under a double tax treaty that has a limitation on benefits (LOB) clause as determined by the minister of finance. In order to be tax-exempt eligible under a double tax treaty that has an LOB clause, the beneficial owner has to be qualified for Treaty Benefits when looking at the criteria specified in the limitation on benefits article. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

Currently, the following DTT have an LOB: Australia, Austria, Denmark, Estonia, France, Germany, Iceland, Latvia, Lithuania, The Netherlands, New Zealand, Russia, Sweden, Switzerland, UK and U.S.A.

Note: For certain type of beneficial owners residents in a DTT country, the reduced tax rate or exemption may not be applicable to Japanese REITS. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

A standard refund of withholding tax on dividends from Japanese listed equities, ETFs and REITs is available through Clearstream Banking for eligible beneficial owners that did not obtain relief at source.

Relief at source

Relief at source from withholding tax on dividends from Japanese listed equities, ETFs and REITs 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 listed equities, ETFs and REITs, the documentation must be provided to Clearstream Banking before the respective dividend payment date (see “Deadlines for receipt of documents” below).

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

For residents of DTT countries

Customers holding Japanese listed equities, ETFs or REITs for multiple beneficial owners (including themselves when applicable) must submit the following documentation:

  • One-Time Certificate for Japanese Listed Equities, ETFs and REITs, signed and completed by the customer and valid until revoked;
  • Payment Breakdown per payment via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the taxable beneficial owners and the respective DTT rates requested.

Customers holding Japanese listed equities, ETFs or REITs for themselves only, as sole beneficial owner, must submit the following documentation:

  • One-Time Certificate for Japanese Listed Equities, ETFs and REITs – Own Assets, signed and completed by the customer and valid until revoked;
  • A one-time Payment Breakdown via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the DTT rate requested; and
  • A Payment Breakdown Confirmation Message, via SWIFT MT599 or CreationOnline free-format message to be sent to "Attn: Singapore Tax Team - SIT", confirming that the Payment Breakdown sent on the respective date is valid until revoked.

For specific types of beneficial owner applying to obtain relief at source according to a DTT, the following documentation is requested in addition, as indicated:

  • Certificate of Residence (COR), issued by the beneficial owner’s local tax authorities for:
    • All eligible beneficial owners under DTT with Limitation On Benefits Article;
    • U.S. individuals;
    • U.S. investment vehicles (such as mutual funds etc.);
    • German individuals (only for German beneficial owners holding Japanese listed equities and ETFs);
    • Zambian beneficial owners;
    • Chilean eligible beneficial owners (eligible pension funds).

The Certificate of Residence is valid for three years as from the date of submission of the Form 17 to the Japanese Tax Office (except for U.S. investment vehicles and German beneficial owners applying for DTT, the Certificate of Residence is valid for one year as from the date of submission of the Form 17 to the Japanese Tax Office).

For Chilean and Zambian eligible beneficial owners, the Certificate of Residence is valid for one year as from the date of issuance.

  • Form 17 Attachment Form for Limitation On Benefits Article should be provided by the following beneficial owners:
    • All eligible beneficial owners under DTT with Limitation On Benefits Article (excluding eligible individuals, pension funds, pension scheme). 
    • U.S. investment vehicles (such as mutual funds etc.) - Part B, C or D must be completed, as applicable;

      N.B.: Form 17 for eligible beneficial owners under DTT with Limitation On Benefits Article that are individuals and pension funds, pension scheme will be filled in by our Depository and submitted to the Japanese Tax Office directly.

      N.B.: Beneficial owners who should fill in Part B of Form 17 may opt to complete the “Declaration Letter” (see below) instead of Part B of the Form 17 but a Form 17 is, nevertheless, required.

The Form 17 is valid for three years if any line of part A Section 3 of the form applies. The Form 17 is valid for one year if any line of part B, C or D Section 3 of the form applies. The validity of the form starts as from the date of submission of the Form 17 to the Japanese Tax Office.

  • Declaration Letter - For beneficial owners for whom Part B on Form 17, normally applicable, has not been completed and for French (for example, SICAV and FCP) investment vehicles such as mutual funds. The form is valid for one year from the date of issuance.

    Note: For French investment vehicles, no Form 17 is needed.

    Please note that Form 17 and COR will only be submitted by our depository to the Japanese Tax Office once the full set of documents is received. Therefore, in case of submission without an upcoming income payment, a “single” Payment Breakdown via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the taxable beneficial owners and the respective DTT rates requested (customers may use a “dummy” isin and payment date) must be submitted together with Form 17 and COR. 
    Without a valid “single” Payment Breakdown, Form 17 and COR will be rejected. Subsequently, customers still need to submit a Payment Breakdown per payment.

For tax-exempt entities (such as International or Supranational organisations)

Customers holding Japanese listed equities, ETFs or REITs for multiple beneficial owners (including themselves when applicable) must submit the following documentation:

  • One-Time Certificate for Japanese Listed Equities, ETFs and REITs, signed and completed by the customer and valid until revoked;
  • Payment Breakdown per payment via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the taxable beneficial owners and the respective DTT rates requested.

Customers holding Japanese listed equities, ETFs or REITs for themselves only, as sole beneficial owner, must submit:

  • One-Time Certificate for Japanese Listed Equities, ETFs and REITs – Own Assets, signed and completed by the customer and valid until revoked;
  • A one-time Payment Breakdown via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the DTT rate requested; and
  • A Payment Breakdown Confirmation Message, via SWIFT MT599 or CreationOnline free-format message to be sent to "Attn: Singapore Tax Team - SIT", confirming that the Payment Breakdown sent on the respective date is valid until revoked.

In addition, for all tax-exempt entities, the following documentation must be submitted:

  • Copy of the Official Certification (for example, founding documents), valid until revoked;
  • Power of Attorney to Clearstream Banking (in the original) executed by the final beneficial owner granting Clearstream Banking the right to request tax relief at source, valid until revoked (unless there is a change in the beneficial owner’s details).

    N.B.: In case of customer holding third party assets, the Power Of Attorney from the Beneficial Owner to Clearstream Banking should be supplemented with a Cover Letter signed by the Clearstream Banking customer (two authorised signatories) and confirming that the signatures on the Power Of Attorney are true and valid.

For residents of Japan that are individuals

  • Payment Breakdown, submitted via Clearstream Banking’s Upload Beneficial Owner List facility, per payment in order to have the correct tax rate of 20.315% (15.315% national tax + 5% local tax) applied.

    N.B.: When completing the Payment Breakdown, 15.315% should be specified (and not 20.315%, as the file refers to national tax only. The 5% local tax will, however, be deducted in addition to the 15.315% when processing the payment to a Japanese individual, resulting in an effective tax rate of 20.315%.

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 a reduced rate of withholding tax at source; and
  • Any other tax documentation requested from time to time.

Deadlines for receipt of documents

Documentation for relief at source from withholding tax on dividends must be received by Clearstream Banking according to security type, as follows:

  • For Japanese listed equities and REITs: at the latest five business days after the first income record date, by 10:00 CET, and, for each per-payment Payment Breakdown only, at the latest five business days after each income record date, by 10:00 CET;
  • For Japanese ETFs: at the latest three business days after the first income record date, by 10:00 CET, and, for each per-payment Payment Breakdown only, at the latest three business days after each income record date, by 10:00 CET.

Standard refund

Standard refund of withholding tax on dividends from Japanese listed equities, ETFs or REITs is available through Clearstream Banking for eligible beneficial owners for whom relief or exemption at source has not been obtained, 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 apply for a standard refund of withholding tax on dividends from Japanese listed equities, ETFs or REITs, the following documentation must be provided to Clearstream Banking before the respective deadline (see “Statutory deadline” below):

  • Letter of Request to Clearstream Banking for Reclaim of Withholding Tax on Japanese Securities, signed and completed by the customer and submitted per reclaim request.
  • Certificate of Residence (in the original), to be submitted by all customers except exempt entities (such as International or Supranational organisations). The Certificate of Residence should be issued by the beneficial owner’s competent local tax authority and is valid for one year following the date on which it was stamped by the local tax authorities.
    This period must cover the date on which the reclaim application is submitted to the Japanese Tax Authorities.
  • Power of Attorney to Clearstream Banking (in the original and notarised), executed by the final beneficial owner granting Clearstream Banking the right to request a tax refund, valid until revoked (unless there is a change in the beneficial owner’s details).

    Note: In case of customer holding third party assets, the Power Of Attorney from the Beneficial Owner to Clearstream Banking should be supplemented with a Cover Letter signed by the Clearstream Banking customer (two authorised signatories) and confirming that the signatures on the Power Of Attorney are true and valid.
  • Beneficial Owner Details List, submitted via Clearstream Banking’s Upload Beneficial Owner List facility, giving details of the beneficial owner and the respective tax treaty rate requested, per reclaim request;
  • Credit Advice of the payment to the final beneficial owner, per reclaim request.
    If the income is not paid by us directly to the final beneficial owner, credit advices of the payment from all parties involved, from Clearstream banking up to the final beneficial owner, are required.

For specific types of beneficial owner applying for a standard refund according to a DTT, the following documentation is requested in addition, as indicated:

  • Form 17 Attachment Form for Limitation On Benefits Article should be provided by the following beneficial owners:
    • All eligible beneficial owners under DTT with Limitation On Benefits Article (excluding eligible individuals, pension funds, pension scheme).
    • U.S. investment vehicles (such as mutual funds etc.) - Part B, C or D must be completed, as applicable;

      N.B.: Form 17 for tax-exempt eligible beneficial owners under DTT with Limitation On Benefits Article that are individuals and pension funds, pension scheme will be filled in by our Depository and submitted to the Japanese Tax Office directly.

The Form 17 must be submitted per reclaim request.

  • Declaration Letter - U.S. Investment Funds (for U.S. investment vehicles (such as mutual funds etc.)), to be submitted per reclaim request.
  • Declaration Letter - <national> Pension Fund (applicable country-specific form) should be provided by all exempt pension funds under DTT with Limitation On Benefits Article.

The form is valid until revoked (unless there is a change in the beneficial owner’s details).

For specific beneficial owners applying for a standard refund as a tax-exempt entity, the following documentation is requested in addition, as indicated:

  • Copy of the Official Certification (for example, founding documents), (only for exempt entities such as International or Supranational organisations), valid until revoked (unless there is a change in the beneficial owner’s details);

Further additional supporting documentation upon request from the Japanese Tax Authorities or Clearstream’s local depository.

Note: For standard refund, the depository charges a fee for any tax adjustments received by Clearstream Banking. This fee will be passed on to customers.

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 dividends from Japanese listed equities 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 request 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.

When are refunds received?

The estimated time for receiving a standard refund is approximately six months from the date of receipt of the refund request.