Archive for September, 2010

Impairment losses on shares in a subsidiary

Japanese judicial decisions

This case concerns a Japanese company which claimed a deductible impairment loss on shares in a recently acquired US subsidiary which it had re-capitalized.  The facts of the case reflect what is probably a relatively common commercial situation. Read More

Nin’i kumiai – Japanese civil code partnerships

September 28, 2010  |  Business combinations  |  No Comments
A Japanese serow or in Japanese a Kamoshika, capricornis crispus, photographed near Mount Asama, an active volcano near Karuizawa about an hour and a half from Tokyo by bullet train.

A Japanese serow or in Japanese a Kamoshika, capricornis crispus, photographed near Mount Asama, an active volcano near Karuizawa about an hour and a half from Tokyo by bullet train.

The Japanese Civil Code (‘CC’) defines the Japanese partnership form, the Nin’I Kumiai.  Not to be confused with the Tokumei Kumiai defined under the Japanese commercial code, the legal form of the Nin’I Kumiai is more similar to a conventional US or UK partnership.

For tax purposes a Nin’I Kumiai is treated as a pass through. One commonly used translation of Nin’I Kumiai is ‘voluntary partnership’, in Japanese 任意組合 and referred to below as an NK. Read More

Japanese withholding tax on royalties

September 26, 2010  |  Withholding tax  |  2 Comments

A tasty looking Japanese Taraba gani soup. In English, King Crab latin name Paralithodes camtschaticus

The table linked to this article summarizes the withholding tax rates on royalties under Japan’s different tax treaties.

The withholding tax rate under Japan’s model tax treaty is 10 per cent. More recent tax treaties Read More

Timing of payment, Japanese withholding tax

September 25, 2010  |  Withholding tax  |  No Comments

Shakado pass, one of a number of narrow passages in the mountains surrounding Kamakura, a historic former Japanese capital south of Tokyo.

The issue of determining whether or not an item of income has been “paid” for withholding tax purposes, thus triggering the obligation to remit the taxes withheld to the authorities within an allowed time limit, is an issue common to all withholding tax systems.

Read More

Tax deductibility of bonus payments

September 24, 2010  |  Court, News  |  No Comments

Japanese judicial decisions

On 16 October 2009 the Osaka High Court determined, in favor of the tax authorities, an appeal from a taxpayer concerning the timing of tax deductibility of bonus payments. Read More

Japanese taxes payable by a foreign company

September 23, 2010  |  International Taxation, Japan Source Rules  |  No Comments

A view of one of Nara's temples

Under Japanese tax law, Japanese companies are taxed on their worldwide income while foreign companies are taxed only on their Japanese source income.

This article explains when a foreign company will suffer Japanese withholding tax or when it has an obligation to file a Japanese corporate tax return. Read More

The Japanese general tax anti-avoidance rule

September 20, 2010  |  basics, Latest  |  No Comments

Lanterns in the shrine of Kasuga Taisha, in Nara central Japan.

Japan has a very broad general tax anti-avoidance rule that can be applied to certain defined classes of company (referred to below as ‘Anti-Avoidance Rule Companies’ or ‘AAR Cos’).  This is Article 132 of the Japanese Corporation Tax Law.

The scope of the companies to whom this rule can apply Read More

Japanese withholding tax; legal outline and concepts

September 19, 2010  |  Latest, Withholding tax  |  No Comments

A colorful Japanese manhole cover from Matsumoto in Nagano

This article is the first in a series that outlines the structure, target income and administration of the Japanese withholding tax system.  These articles will form a foundation for understanding more complex Japanese withholding tax issues arising in an international context.

Japan has an extensive system of withholding taxes (‘WHT’) imposed on different types of income.  Read More

Status of foreign entities as corporations or passthrough

September 18, 2010  |  Guidance, Guidance, News  |  No Comments


Whether or not a non-Japanese entity is fiscally transparent for Japanese tax purposes is often a key issue for the taxation of both Japanese inbound and outbound investment. Read More

Discussing Japanese financial taxation

September 17, 2010  |  Individual, News, Policy  |  No Comments

Government policy

The documents made public by the Finance Tax Research Group (below ‘FTRG’), a tax committee within the Japanese Ministry of Finance, include a listing of topics that the committee considers important Read More