Case Study: Japanese companies incorporating an overseas branch

A monochrome picture of Modern Japan that manages to capture some of the atmosphere of the pre war Showa period.

The Japanese tax rules related to the taxation of corporate reorganisations (discussed here) can be applied, with some modification and additional considerations, to transactions involving foreign companies.

The following article gives an example of their application to a relatively simple transaction, the incorporation of a foreign branch of a Japanese company.

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Shareholder and creditor protection in Japanese mergers

The eves of 'Kinkakuji' or the 'Temple of the Golden Pavillion' in Kyoto, rebuilt after its destruction through arson by a Buddhist acolyte in 1950 as described in the book by Yukio Mishima of the same name.

The Japanese Corporate Law (‘JCL’) includes measures allowing creditors or shareholders of the Ceasing or Surviving Companies in a Japanese merger to object to the merger along with mechanisms allowing the companies involved to resolve such objections.  This article describes these measures in more detail.

Procedures for the protection of creditors

Under JCL articles 789-2 and 799-2 the Ceasing and Surviving Companies of a merger are required to Read More

Steps in a Japanese merger

Autumnal flowers floating in drinking bowl in a Kyoto temple.

This article outlines the steps required to complete a Japanese absorptive merger involving one company (below the ‘Surviving Company’) taking over the assets and liabilities of a liquidating company (below the ‘Ceasing Company’ and collectively with the Surviving Company the ‘Companies’) under a process defined by the Japanese Corporate Law (the ‘JCL’).

Please see this article for more background to legal aspects of Japanese mergers and this article for an overview of merger taxation. Read More

Introduction to legal aspects of a Japanese merger

A leaf from a gingko tree, a Tokyo Minicipal symbol often depicted on railings or other street furniture.

A Japanese merger involves two or more companies becoming one company further to a defined process in the Japanese Corporate Law (below the ‘JCL’).  This article outlines legal aspects of the merger process as background for more detailed analysis of the Japanese tax treatment of mergers and other corporate reorganizations. Read More

Debt equity swap taxation

December 9, 2010  |  Corporate Recovery, Court  |  No Comments

Japanese judicial decisions

On 15 September 2010 the 12th division of the Tokyo High Court issued a judgment concerning the taxation of gain arising from the extinguishment of debt in a debt equity swap (‘DES’) transaction. Read More

Authorities challenge real estate loss deduction

News, information

On 5 December 2010 the Asahi Shimbun reported on an investigation by the Tokyo tax authorities into tax relief claimed on losses from a partnership investing in US real estate.  The investors in the partnership (below the ‘Investors’) were, according to the article, a group of around ten former Japanese baseball players Read More

Introduction to JREITs and the Japanese Investment Company

December 1, 2010  |  Entities, Real Estate  |  No Comments

Preparing tai-yaki, a sweet fish shaped sweet often eaten at Japanese festivals recently recovering its popularity in Japan.

In May 2005, the Japanese ‘Law Concerning Investment Trusts and Investment Companies’ (link in Japanese – the ‘投資信託及び投資法人に関する法律’ or ‘toushi shintaku oyobi toushi houjin ni kan suru houritsu’, referred to below as the ‘ITL’) was revised to allow entities covered by the law to invest in real estate.

The law also introduced a new entity, the ‘Japanese Investment Company’ (in Japanese ‘投資法人’ or ‘toushi houjin’ abbreviated below as ‘JIC’) Read More

Introduction to TMK taxation – the Japanese real estate SPC

November 23, 2010  |  Entities, Real Estate, TMK  |  No Comments

Detail taken from a 'mikoshi' or Japanese portable shrine kept for use in local festivals.

The ‘TMK’ (in Japanese the ‘特定目的会社’ or ‘tokutei mokuteki kaisha’ )、a special purpose entity commonly used in Japanese real estate transactions, is regarded as having a corporate nature for Japanese tax purposes and hence is taxed as a corporation rather than as a fiscally transparent entity.

However, a number of special tax provisions apply to the entity introduced in order to help promote the securitization of assets held under the TMK structure. Read More

Introduction to the Japanese Real Estate SPC or ‘TMK’

November 22, 2010  |  Entities, Real Estate, TMK  |  No Comments

A sumo wrestler preparing the training ring in the sumo training house or 'Sumo Beya'

The Japanese authorities first took steps to help encourage liquidity in the Japanese real estate market through the introduction of a conduit entity that could be used in real estate transactions prior to 2000, when the ‘Law Concerning the Liquidation of Specified through a Special Purposes Company’ (in Japanese the ‘特定目的会社による特定資産の流動化に関する法律’ or ‘or tokutei mokuteki kaisha ni yoru tokutei no shisan non ryudouka ni kansuru houritsu’ and referred to be low as the ‘SPC Law’) Read More

Japanese trusts in real estate transactions

November 20, 2010  |  Real Estate, Trusts  |  No Comments

Osaka real estate in need of some redevelopment.

In Japanese real estate transactions rather than owning real estate directly, it is common for a real estate special purpose company (‘SPC’) to own a real estate trust beneficiary certificate (referred to below as a ‘Trust Certificate’) which evidences ownership of an interest in a trust whose underlying asset is Japanese real estate. Read More