Japanese Samurai bonds - rates, eligibility, availability of relief etc.

Withholding Tax

The standard rate of withholding tax on interest from Japanese Samurai bonds is 20.315% in Clearstream.

Availability of relief

The following types of beneficial owner can, provided that the appropriate documentation is submitted to Clearstream, obtain a reduced tax rate or exemption from withholding tax on interest from Japanese Samurai bonds:

• Non-residents of Japan (all beneficial owners, including Clearstream’s client on whose behalf exemption at source is requested should be non-residents of Japan for Japanese tax purposes);
• Residents of Japan (only corporations) (all beneficial owners, including Clearstream’s client on whose behalf a reduced tax rate is requested should be Japanese corporations residents of Japan for Japanese tax purposes); and
• Designated Financial Institutions (DFIs) - provided that the Clearstream client has the DFI status from the Financial Services Agency (FSA) in Japan and is the sole beneficial owner of the Samurai bonds in the account (proprietary assets). The official list of licensed (registered) DFIs is maintained on the FSA website.

Note: A Japanese (domestic) corporation is designated in Act No. 34 of 31 March 1965, Part I Chapter I Article 2-3 of the Corporate Tax Act as a corporation that has its head office or principal office in Japan. The beneficial owner has to be eligible for a reduced rate of Japanese withholding tax (that is, 15.315% for Samurai bonds) however, Clearstream does not assist in this regard. Please consult your tax advisor for further information.

Note: A standard refund of withholding tax on interest from Japanese Samurai bonds is not available through Clearstream.

Documentation requirements

The documentation requirements to obtain relief at source or exemption from withholding tax on interest from Japanese Samurai bonds vary according to the type of beneficial owner.

N.B.: Certain book-entry Samurai bonds issued by U.S. entities are designated as "foreign-target registered obligation" securities (FTROs) or "TEFRA" securities (TEFRAs).

All U.S. Samurai bonds issued on or after 1 January 2016 are:

• no longer exempt of U.S. tax and reporting through a simplified certification procedure, but are subject to dual tax treatment (Japan and U.S.A.);
• according to U.S. legislation, subject to the standard certification and reporting requirements of the QI regime as described in our U.S.A. Market Taxation Guide at a glance.

Tax regime and applicable procedures for all U.S. Samurai bonds issued before 1 January 2016, will remain unchanged.

Under JASDEC’s Business Guidelines for Handling U.S. Book-Entry Transfer Foreign Bonds, any beneficial owners of FTROs and/or TEFRAs that are U.S. residents and hold such securities on interest payment date must submit, in addition to the normal certification requirements for Samurai bonds, an IRS Form W-9 to the paying (issuing) agent through Clearstream and its depository, as indicated below.

For non-residents of Japan:

• Samurai bonds – One-Time Certificate of Residence outside Japan valid 5 years as from the date of signature; and
• Samurai Bonds – Amendment Instructions (if applicable).

Plus, for clients holding FTROs and/or TEFRAs on behalf of U.S. resident beneficial owners:

• Per-Payment Swift MT599, confirming Clearstream’s client account number, the ISIN code, the payment date, the name(s) and the applicable holding(s) of the U.S. resident beneficial owner(s); and
• IRS Form W-9, per U.S. beneficial owner, signed and completed by the U.S. resident beneficial owner and valid until revoked.

For residents of Japan, corporations only:

• Samurai bonds – One-Time Certificate of Residence in Japan - Corporations valid 5 years as from the date of signature; and
• Samurai Bonds – Amendment Instructions (if applicable).

For Designated Financial Institutions (DFIs) resident in Japan:

• One-Time Certificate of Residence in Japan – Designated Financial Institution valid 5 years as from the date of signature;
• Samurai Bonds – Amendment Instructions (if applicable).

Deadlines for receipt of documents

Documentation for exemption at source from withholding tax on interest from Japanese Samurai bonds must be received by Clearstream as follows: