Japan: Taxation processing on income from listed and unlisted securities

Clearstream Banking¹ customers can benefit from tax exemption and/or relief at source from withholding tax on income from Japanese listed and unlisted securities.

N.B.: With immediate effect, a renewal of all certifications in place is required to benefit from any exemption or reduced tax rate. This Announcement replaces any certification request already sent via SWIFT MT564 and linked to the income event. Therefore, any previous certification in place for listed and unlisted equities will be revoked on 6 April 2012.

The current effective rates of withholding tax for all non-resident beneficial owners are as follows:

• For listed equities, Exchange Traded Funds (ETFs) and listed Real Estate Investment Trusts (REITs), the rate is:
  

• 7% until December 2012; and
  
• 7.147% from January 2013 to December 2013.

• 
  
• For unlisted equities, the rate is:
  

• 20% generally; and
  
• Less than 20% for residents of a country that has a Double Taxation treaty (DTT) with Japan.

Based on DTTs, Dutch, Swiss, UK and U.S. pension funds or schemes, as well as residents from the Republic of Zambia, can benefit from exemption from withholding tax on both listed and unlisted securities.

Exemption from withholding tax on all income from both listed and unlisted securities is available for eligible supranational entities.

Customer eligibility

• Unlisted equities
  

Customers can benefit from a rate of less than 20% if they are eligible for DTT reduction. Customers holding any securities on behalf of Dutch, Swiss, UK or U.S. pension funds, as well as residents from the Republic of Zambia and supranational entities, may be granted a total exemption from withholding tax on dividends.

• Listed equities, Exchange Traded Funds (ETFs) and listed Real Estate Investment Trusts (REITs)

Customers holding any listed securities on behalf of Dutch, Swiss, UK or U.S. pension funds, as well as residents from the Republic of Zambia and supranational entities, may be granted a total exemption from withholding tax on income payments.

Documentation requirements

Customers must submit the Holding Breakdown per Beneficial Owner via a SWIFT MT568 or MT599 message that includes the following declaration:

“… In the event of failure to observe the holding breakdown or additional requested documentation, we will indemnify Clearstream Banking for all third-party claims in this respect, in particular all claims for damages….”

The holding breakdown must also include the following details:

• ISIN;
• Record date;
• Holding;
• Beneficiary name;
• Beneficiary address;
• Tax Identification Number (TIN);

and, to be completed by pension funds:

• Statement (for example, “as of the end of the previous taxable year, more than 50% of beneficial owners are residents of xxxxxx (country)”);
• Law for Establishment;
• Law for tax exemption;
• Residency.

Customers whose status is one of the following must deliver additional documentation as indicated:

• Dutch/Swiss /UK pension funds:
  

• Certificate of Residency issued within a year

• 
  
• US pension funds or US residents:
  

• Form 6166 issued within a year

• 
  
• Residents of Republic of Zambia:
  

• One Time Certificate of Residency (Certificate of competent authority)

• 
  
• Supranational Entities:
  

• One Time Certificate of Residency in the form of a copy of Official Certification/Evidence to confirm their supranational status (Certificate of Incorporation, National Legislation, Articles of Association etc.)
  
• Power of Attorney from end-investor to Clearstream Banking

Japanese individuals

Japanese individuals are subject to local tax at the standard rates of 10% for listed securities and 20% for unlisted securities. This local tax should be paid to the tax authority local to the investor’s actual place of residence and the Japanese depository (HSBC) therefore requires at least the name of prefecture.

Customers holding securities on behalf of Japanese individual residents must submit the Holding Breakdown (per prefecture level).

No action is required from customers who do not hold any listed equities, ETFs or REITs on behalf of Japanese individual residents; tax will be withheld at source at the 7% rate.

Deadline for submission of required documentation

The deadline for submitting declarations with regard to listed and unlisted securities as mentioned above is at the latest by 10:00 CET five business days after the record date of the income event. The declarations must be provided for each payment where there are such holders.

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).