Japanese taxation of a US Spin-off

August 6, 2011  |  Court, Dividend Taxation  |  No Comments

Japanese judicial decisions

On 21 April 2011 the Tokyo High Court handed down a decision concerning whether shares acquired by a Japanese resident individual further to a spin off by an American company should be treated as dividend income for Japanese income tax purposes. Read More

Distributions: Income or capital gains for the shareholder?

August 4, 2011  |  Dividend Taxation  |  No Comments

Preparations for the tea ceremony

A lady tends to the charcoal brazier in preparation for the tea ceremony.

An issue common to many tax systems is whether a distribution made by a company to its shareholders in respect of their shares should be treated as a return of capital to those shareholders or alternatively as an item of income. Shareholder taxation will, of course, often vary dramatically depending on the characterization of such a distribution as an item of income or return of capital. Read More

Japanese dividend taxation for individuals

September 14, 2010  |  Dividend Taxation, Individual  |  No Comments

Japanese monkeys enjoying an onsen in Nagano-ken

This article outlines how individuals are taxed on dividend income for Japanese tax purposes.

As so often seems the case with Japanese individual taxation, what would be expected to be a simple tax matter is made overly complicated by a range of expiring tax benefits (that are often revised or extended) Read More

2010 tax reform and deemed dividends

2010 tax reform and dividends

This article outlines an anti-avoidance measure included in the 2010 tax reform that prevents a shareholder applying the Japanese Dividends Received Deduction (‘DRD’) on a Deemed Dividend arising on the purchase by a company of its own shares. Read More

Dividends and Attributable Interest

Wagashi traditional Japanese sweets often reflecting the seasons

The Japanese Dividends Received Deduction (‘DRD’) helps mitigate the double taxation a company would otherwise suffer through tax on dividends the company receives from other Japanese companies.  However the DRD regulations also include provisions that effectively disallow financing costs that are attributable to dividends to which the DRD is applied.  Read More

Dividends and short term share holdings

July 28, 2010  |  Dividend Taxation, Domestic  |  No Comments

Center Gai, a main shopping street in Shibuya

In order to apply the Japanese Dividends Received Deduction (‘DRD’) a holding period requirement (the ‘Holding Criteria’) has to be met relating to the shares on which the dividend concerned is paid (below, relating to the ‘Shares’).   The Holding Criteria is an anti-avoidance measure intended to prevent companies buying shares shortly before a dividend is due, Read More

Deemed dividends – calculation

July 28, 2010  |  Dividend Taxation  |  No Comments

Sapporo station in the snow, Hokkaido

This post gives an example of the calculation of the amount of a Deemed Dividend for Japanese DRD purposes in a merger. You can find at this post an explanation of the Deemed Dividends concept, including the basic formulae for their calculation.   This post explains Tax Based Capital, which is an important concept Read More

Tax Based Retained Profits – Japanese “Earnings and Profit”?

A train departing from a Tokyo Metro platform

As noted in this post on Tax Based Capital, the Japanese tax system includes concepts similar to “outside basis” and “earnings and profits” found in the US tax code.  In the Japanese tax system Tax Based Retained Profits (in Japanese 利益積立金) are conceptually similar to US earnings and profits, although the detailed rules in the Japan tax system are of course very different. Read More

Tax Based Capital – Japanese “Outside Basis”?

Maiko, trainee gaisha, in Kyoto

This post looks at the Japanese tax concept of Tax Based Capital, or in Japanese 資本金等/shihonkintou.   The Japanese tax law seeks to tax shareholders on either income from their shareholdings or on capital gain or loss while simultaneously avoiding or mitigating the double taxation of corporate earnings. The concept of Tax Based Capital Read More

Deemed dividends – concept, transactions

July 19, 2010  |  Dividend Taxation, Domestic, Featured  |  No Comments

Mount Fuji from the air, of course.

As explained in this post introducing the Japanese Dividends Received Deduction (‘DRD’), Article 23-1 of the Japanese Corporate Tax Law recognises that, in order to mitigate double taxation of corporate profits, certain distributions to shareholders of corporate surplus Read More