Income Tax Act

A person paying a Nonresident, in Japan, domestic source income as set forth in Article 161, paragraph (1), item (iv) through (xvi) (Domestic Source Income) (excluding what is prescribed by Cabinet Order), or a person paying a Foreign Corporation, in Japan, domestic source income as set forth in item (iv) through (xi) or item (xiii) through (xvi) of that paragraph (excluding anything that falls under the provisions of Article 180, paragraph (1) (Special Provisions on Taxation of Domestic Source Income Received by Foreign Corporations With a Permanent Establishment) or Article 180-2, paragraph (1) or paragraph (2) (Special Provisions on Taxation of Interest and Similar Income from Trust Property), and what is prescribed by Cabinet Order) must withhold income taxes from that domestic source income at the time of payment and pay them over to the national government no later than the tenth day of the month after that in which the date of withholding falls.

If domestic source income as prescribed in the preceding paragraph is paid outside Japan but the person making the payment has a domicile or residence in Japan or has an office, place of business, or anything equivalent thereto in Japan, the person is deemed to be paying the domestic source income in Japan, and the provisions of that paragraph apply. In such a case, the phrase "no later than the tenth day of the month" in that paragraph is deemed to be replaced with "no later than the last day of the month".

A person paying a Domestic Corporation, in Japan, interest or similar income, dividends or similar income, compensation for periodic deposits, finance charges, profits, margin profits, a distribution of profits, or a monetary award as set forth in the items of Article 174 (Tax Base for a Domestic Corporation's Income Taxes) (other than anything that falls under the provisions of Article 176, paragraph (1) or paragraph (2) (Special Provisions on Taxation of Interest and Similar Income from Trust Property) or Article 177 (Special Provisions on Taxation of Dividends and Similar Income from Shares or Similar Interests in Wholly Owned Subsidiaries)) must withhold income taxes from that interest or similar income, dividends or similar income, compensation for periodic deposits, finance charges, profits, margin profits, distribution of profits, or monetary award at the time of payment and pay them over to the national government no later than the tenth day of the month after that in which the date of withholding falls.

The provisions of Article 181, paragraph (2) (Obligation to Withhold Taxes) apply mutatis mutandis when the provisions of paragraph (1) or the preceding paragraph apply, and the provisions of Article 183, paragraph (2) (Obligation to Withhold Taxes) apply mutatis mutandis when paragraph (1) applies.

If a Nonresident or Foreign Corporation is a partner under a partnership agreement as prescribed in that item (or is a person similar thereto that is as prescribed by Cabinet Order) and is delivered monies or any other assets as the domestic source income set forth in Article 161, paragraph (1), item (iv) which is distributed thereto as prescribed in that item and which arises during the calculation period stipulated in the partnership agreement or in any period similar thereto (or in any of the year-long terms into which that period is divided (and in any term of less than one year in length, if the final term resulting from the division is less than this), the first day of such term commencing on the first day of the calculation or similar period, if that period is longer than one year; hereinafter referred to as the "calculation period" in this paragraph) (such monies and other assets are hereinafter referred to as "monies or other assets" in this paragraph), the person making the distribution is deemed to be the person paying the domestic source income, that payment is deemed to be made on the day that those monies or other assets are paid (or on the last day in the two-month period following the day after the end of the calculation period, if the monies or other assets constituting domestic source income are not paid by that day), and the provisions of this Act apply.

Income taxes must be withheld pursuant to the provisions of paragraph (1) of the preceding Article in the amounts that each of the following items prescribes for the category to which the item refers:

domestic source income as prescribed in paragraph (1) of the preceding Article (other than what is set forth in the following item and item (iii)): the amount calculated when that domestic source income (or the amount set forth in each of the following clauses for domestic source income as set forth in the clause) is multiplied by a tax rate of 20 percent:

pensions as set forth in Article 161, paragraph (1), item (xii), (b) (Domestic Source Income): the amount remaining after 50,000 yen is multiplied by the number of months in which the pension is paid and the product is deducted from the pension that is paid;

monetary awards as set forth in Article 161, paragraph (1), item (xiii): the amount remaining after 500,000 yen is deducted from the monetary award (or from the amount calculated pursuant to Cabinet Order as the value of the award at the time of payment, if the award is paid other than in monies);

pensions as set forth in Article 161, paragraph (1), item (xiv): the amount remaining after the part of the insurance premiums or installment deposits paid based on a contract as prescribed in that item which is calculated pursuant to Cabinet Order as being part of the amount of the pension that will be paid is deducted from the amount of pension to be paid under that contract.

domestic source income as set forth in Article 161, paragraph (1), item (v): the amount calculated when that domestic source income is multiplied by a tax rate of ten percent;

domestic source income as set forth in Article 161, paragraph (1), item (viii) and item (xv): the amount calculated when each of these is multiplied by a tax rate of 15 percent.

Income taxes must be withheld pursuant to paragraph (3) of the preceding Article in the amounts that each of the following items prescribes for the category to which the item refers:

interest and similar income, compensation for periodic deposits, finance charges, profits, or margin profits prescribed in paragraph (3) of the preceding Article:the amount calculated when each of these is multiplied by a tax rate of 15 percent;

dividends and similar income or distributions of profits prescribed in paragraph (3) of the preceding Article:the amount calculated when each of these is multiplied by a tax rate of 20 percent;

monetary awards prescribed in paragraph (3) of the preceding Article:the amount calculated when the amount prescribed by Cabinet Order is deducted from the monetary award (or from the amount calculated pursuant to Cabinet Order as the value of the award at the time of payment, if the award is paid other than in monies), and then multiplying the remaining amount by a tax rate of ten percent.

Notwithstanding the provisions of Article 212, paragraph (1) (Obligation to Withhold Taxes), if a Nonresident with a permanent establishment who satisfies the requirements prescribed by Cabinet Order and who is paid domestic source income as set forth in Article 161, paragraph (1), item (iv), (vi), (vii), (x), (xi), (xii), (a) (excluding the portion related to salary), or (xiv) (Domestic Source Income) (excluding what is prescribed by Cabinet Order) which is attributable to the Nonresident's permanent establishment (for domestic source income as set forth in item (iv) of that paragraph, this is limited to domestic source income attributable to a permanent establishment other than the permanent establishment related to the business prescribed in that item; hereinafter referred to as "covered domestic source income" in this paragraph) is issued a certificate, pursuant to Cabinet Order, by the competent district director for the locality in which the person pays taxes, certifying that the person being paid the domestic source income satisfies those requirements and that the domestic source income that the person is paid falls under the category of covered domestic source income, and the person presents that certificate to the person paying the domestic source income, the person paying that domestic source income is not required to withhold and pay over income taxes to the national government from the domestic source income that it pays to the person presenting that certificate, while the certificate remains valid.

If, after being issued the certificate prescribed in the preceding paragraph, a Nonresident prescribed in that paragraph ceases to satisfy the requirements provided for in that paragraph or ceases to have a permanent establishment, the person must report this to the competent district director for the locality in which the person pays taxes and notify the person to which it has presented the certificate of the same without undue delay on or after the day that the person ceases to satisfy those requirements or ceases to have a permanent establishment, pursuant to Cabinet Order.

If the competent district director for the locality in which a person pays taxes finds that a Nonresident prescribed in paragraph (1) has ceased to satisfy the requirements provided for in that paragraph or ceased to have a permanent establishment after being issued a certificate as prescribed in that paragraph, the director is to notify the person that has been issued the certificate of this via a paper-based notice.

In a case as referred to in the preceding paragraph, the person notified as prescribed in that paragraph must notify the person to which it has presented the certificate prescribed in paragraph (1) that it has been so notified without undue delay on or after the day on which the person is notified.

Having received a report under paragraph (2) or having notified a person pursuant to paragraph (3), the competent district tax office director for the locality in which the person pays taxes is to issue public notice, pursuant to Ministry of Finance Order, giving the name of the person that has so reported or that has been so notified, and giving any other information prescribed by Ministry of Finance Order.

The certificate prescribed in paragraph (1) becomes invalid if:

the valid period of the certificate set by the competent district tax office director for the locality in which the person pays taxes expires;

public notice under the preceding paragraph is issued.

If income taxes are withheld pursuant to Article 212, paragraph (1) (Obligation to Withhold Taxes) from the compensation as set forth in Article 161, paragraph (1), item (vi) (Domestic Source Income) of a Nonresident or Foreign Corporation that conducts business as prescribed in that item in Japan, the income taxes under Article 212, paragraph (1) are deemed, pursuant to Cabinet Order, to be withheld at the time of payment from the salary or remuneration as set forth in Article 161, paragraph (1), item (xii), (a) or (c) which the Nonresident or Foreign Corporation pays a Nonresident providing it with personal services that benefit the business for providing it with those personal services, out of the compensation from which that income tax has been withheld pursuant to Article 212, paragraph (1).