Act on Special Measures Concerning Taxation

Where a nonresident or foreign corporation receives payment of interest (excluding interest subject to the provisions of Article 8, paragraph (1) or paragraph (2)) on specified book-entry corporate bonds, etc. for which the nonresident or foreign corporation has made entries or records under the book-entry transfer system in the account that they or it has established with a specified book-entry transfer institution, a specified account management institution, or a specified secondary account management institution (hereinafter referred to in this paragraph and paragraph (3) as a "specified book-entry transfer institution, etc.") or a qualified foreign intermediary, via a business office or any other office of the specified book-entry transfer institution, etc. located in Japan or the specified overseas business office, etc. of the qualified foreign intermediary, if, when seeking the application of the provisions of this paragraph for the first time with regard to interest on specified book-entry corporate bonds, etc., the nonresident or foreign corporation has submitted a document stating such intention, their or its name and address (meaning the address prescribed in paragraph (1) of the preceding Article), and any other matters specified by Order of the Ministry of Finance (hereinafter referred to in this Article as a "written application for a tax exemption") to the district director with jurisdiction over the place where the head office or principal office of the specified book-entry transfer institution, etc. is located, via the specified book-entry transfer institution, etc. (where the specified book-entry corporate bonds, etc. fall under government or company bonds other than the specified public and corporate bonds prescribed in Article 3, paragraph (1), item (i) (referred to in paragraph (7) and paragraph (8) as "general bonds, etc."), limited to one that falls under the category of a qualified account management institution; hereinafter the same applies in this paragraph), or via the qualified foreign intermediary and the specified book-entry transfer institution, etc. through which the qualified foreign intermediary makes entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. (in the case where the qualified foreign intermediary is a tertiary foreign account management institution, the specified book-entry transfer institution, etc. through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. makes entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc.), income tax is not imposed on the interest so received.

The provisions of the preceding paragraph do not apply to interest on specified book-entry corporate bonds, etc. received by a specially-related person of the issuer of the specified book-entry corporate bonds, etc. (meaning a person who has a special relationship specified by Cabinet Order with the issuer of the specified book-entry corporate bonds, etc.; the same applies hereinafter in this Article) (excluding interest received by a nonresident or foreign corporation that is the trustee of a qualified foreign securities investment trust prescribed in paragraph (2) of the preceding Article as applied mutatis mutandis pursuant to paragraph (9), for the trust property of that qualified foreign securities investment trust, and interest that the trustee of a foreign pension trust prescribed in paragraph (3) of that Article is deemed to receive pursuant to the provisions of that paragraph as applied mutatis mutandis pursuant to paragraph (9)).

The provisions of paragraph (1) do not apply to interest on specified book-entry corporate bonds, etc. received by a nonresident who has a permanent establishment, which falls under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Income Tax Act. In this case, where the nonresident (limited to one that is not a specially-related person of the issuer of the specified book-entry corporate bonds, etc.; hereinafter the same applies in this paragraph) has submitted a written application for a tax exemption to the district director prescribed in paragraph (1), via the specified book-entry transfer institution, etc. referred to in that paragraph or via the qualified foreign intermediary and specified book-entry transfer institution, etc. referred to in that paragraph, in accordance with the provisions of paragraph (1) (with regard to interest the nonresident receives on specified book-entry corporate bonds, etc. belonging to the partnership property or trust property referred to in paragraph (4) of the preceding Article, where the nonresident has submitted a written application for a tax exemption to the district director prescribed in paragraph (1), via the specified book-entry transfer institution, etc. referred to in that paragraph or via the qualified foreign intermediary and specified book-entry transfer institution, etc. referred to in that paragraph, in accordance with the provisions of paragraph (1), and the business executor, etc. prescribed in paragraph (4) of that Article has submitted the written notification of a partnership, etc. and the copy of the partnership contract, etc. prescribed in paragraph (4) of that Article as applied mutatis mutandis pursuant to paragraph (9) to the district director prescribed in paragraph (1), via the specified book-entry transfer institution, etc. referred to in that paragraph or via the qualified foreign intermediary and specified book-entry transfer institution, etc. referred to in that paragraph, in accordance with the provisions of paragraph (1)), the provisions of Article 9-3-2 of this Act and Article 212 of the Income Tax Act do not apply to the interest so received.

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

specified book-entry transfer institution: A book-entry transfer institution as prescribed in Article 2, paragraph (2) of the Act on Book-Entry Transfer of Corporate Bonds and Shares, which has obtained consent for handling corporate bonds (including those specified by Cabinet Order as being similar thereto; hereinafter referred to in this item as "bonds, etc.") from the issuer of the bonds, etc. referred to in paragraph (1) of Article 13 of that Act, pursuant to the provisions of that Article;

specified account management institution: A specified account management institution as prescribed in paragraph (7), item (ii) of the preceding Article;

specified secondary account management institution: A specified secondary account management institution as prescribed in paragraph (7), item (iii) of the preceding Article;

qualified foreign intermediary: A secondary foreign account management institution or tertiary foreign account management institution that has obtained, pursuant to the provisions of Cabinet Order, the approval of the Commissioner of the National Tax Agency as an institution that has its head office or principal office in the foreign state (referred to in the following item as a "treaty partner state, etc.") in the case where the information may be provided to a foreign authority pursuant to provisions specified by Cabinet Order as provisions concerning the provision of information on taxes to a contracting state or contracting party other than Japan to a convention prescribed in the proviso to Article 2, paragraph (1), item (viii)-4 of the Income Tax Act or any other international agreement concluded by Japan (limited to one that has provisions for the mutual provision of information on the assessment and collection of taxes), or to any other foreign authority;

specified overseas business office, etc.: A business office or any other office of a qualified foreign intermediary, which is located in a treaty partner state, etc.;

entries or records under the book-entry transfer system: Entries or records under the book-entry transfer system as prescribed in paragraph (7), item (vi) of the preceding Article;

specified book-entry corporate bonds, etc.: Of the corporate bonds listed in Article 66, item (ii) of the Act on Book-Entry Transfer of Corporate Bonds and Shares that fall under the category of book-entry corporate bonds prescribed in that Article (including the following; hereinafter referred to in this item as "book-entry corporate bonds, etc."), those other than bonds whose amount of interest is calculated on the basis of an indicator specified by Cabinet Order concerning the issuer of the book-entry corporate bonds, etc. or a specially-related person of that issuer:

investment corporation bonds prescribed in Article 115 of the Act on Book-Entry Transfer of Corporate Bonds and Shares which are subject to the provisions of that Act pursuant to the provisions of Article 66 of that Act as applied mutatis mutandis pursuant to Article 115 of that Act;

corporate bonds of a mutual company prescribed in Article 117 of the Act on Book-Entry Transfer of Corporate Bonds and Shares which are subject to the provisions of that Act pursuant to the provisions of Article 66 of that Act as applied mutatis mutandis pursuant to Article 117 of that Act;

specified corporate bonds prescribed in Article 118 of the Act on Book-Entry Transfer of Corporate Bonds and Shares which are subject to the provisions of that Act pursuant to the provisions of Article 66 of that Act as applied mutatis mutandis pursuant to Article 118 of that Act;

special corporation bonds prescribed in Article 120 of the Act on Book-Entry Transfer of Corporate Bonds and Shares which are subject to the provisions of that Act pursuant to the provisions of Article 66 of that Act as applied mutatis mutandis pursuant to Article 120 of that Act;

foreign bonds prescribed in Article 127 of the Act on Book-Entry Transfer of Corporate Bonds and Shares which are subject to the provisions of that Act pursuant to the provisions of Article 66 of that Act as applied mutatis mutandis pursuant to Article 127 of that Act;

book-entry bonds with share options prescribed in Article 192, paragraph (1) of the Act on Book-Entry Transfer of Corporate Bonds and Shares;

book-entry convertible specified corporate bonds prescribed in Article 250 of the Act on Book-Entry Transfer of Corporate Bonds and Shares;

book-entry specified corporate bonds with preemptive rights for new preferred equity investments prescribed in Article 253 of the Act on Book-Entry Transfer of Corporate Bonds and Shares.

qualified account management institution: A specified account management institution or specified secondary account management institution that has obtained the approval of the Commissioner of the National Tax Agency pursuant to the provisions of Cabinet Order;

tertiary foreign account management institution: A tertiary foreign account management institution as prescribed in paragraph (7), item (vii) of the preceding Article.

secondary foreign account management institution: A secondary foreign account management institution as prescribed in paragraph (7), item (viii) of the preceding Article.

Where an application for approval set forth in item (viii) of the preceding paragraph has been filed, the Commissioner of the National Tax Agency may dismiss the application when they find a fact that falls under any of the following with regard to the applicant:

it is found that any document necessary for filing the application contains a defective or false entry, or it is otherwise found that the application has not been filed pursuant to the provisions of Cabinet Order prescribed in item (viii) of the preceding paragraph;

there are reasonable grounds for finding that it is difficult for the applicant to give notice pursuant to the provisions of paragraph (8) or to submit the record prescribed in Article 225, paragraph (1) of the Income Tax Act as applied with the terms and phrases replaced pursuant to the provisions of paragraph (6) of the preceding Article as applied mutatis mutandis pursuant to paragraph (9).

When the Commissioner of the National Tax Agency finds that a fact that falls under any one of the items of the preceding paragraph has occurred with regard to an institution that has obtained the approval set forth in paragraph (4), item (viii), they may rescind the approval pursuant to the provisions of Cabinet Order.

Where a person who has submitted a written application for a tax exemption receives payment of interest on specified book-entry corporate bonds, etc. (excluding those falling under general bonds, etc.; hereinafter the same applies in this paragraph) for which the person has made entries or records under the book-entry transfer system through a qualified foreign intermediary, the qualified foreign intermediary must, no later than the day preceding the day on which the person is to receive the payment of the interest, give notice of the brand of the specified book-entry corporate bonds, etc., the amount of redemption money for each brand, and any other matters specified by Order of the Ministry of Finance, to the specified account management institution or specified secondary account management institution through which the qualified foreign intermediary made entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. (in the case where the qualified foreign intermediary is a tertiary foreign account management institution, the specified account management institution or specified secondary account management institution through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. made entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc.), by way of a document or any other means specified by Cabinet Order.

Where a person who has submitted a written application for a tax exemption receives payment of interest on specified book-entry corporate bonds, etc. (limited to those falling under general bonds, etc.; hereinafter the same applies in this paragraph) for which the person has made entries or records under the book-entry transfer system through a qualified account management institution or qualified foreign intermediary, the qualified account management institution or qualified foreign intermediary must, no later than the day preceding the day on which the person is to receive the payment of the interest, give notice of the brand of the specified book-entry corporate bonds, etc., the amount of redemption money for each brand, and any other matters specified by Order of the Ministry of Finance, to the person who pays the interest, via a specified book-entry transfer institution, or via the qualified account management institution through which the qualified foreign intermediary made entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. (in the case where the qualified foreign intermediary is a tertiary foreign account management institution, the qualified account management institution through which the secondary foreign account management institution pertaining to the entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc. made entries or records under the book-entry transfer system regarding the specified book-entry corporate bonds, etc.) and a specified book-entry transfer institution, by way of a document or any other means specified by Cabinet Order.

Where income tax has not been collected pursuant to the provisions of Article 9-3-2, paragraph (1) or Article 212 of the Income Tax Act with regard to interest on specified book-entry corporate bonds, etc. on the grounds that the provisions of paragraph (1) or the second sentence of paragraph (3) apply, the person who issued the specified book-entry corporate bonds, etc. must, pursuant to the provisions of Cabinet Order, submit to the district director a document stating the name or title of any nonresident or foreign corporation that is a specially-related person of the issuer, their or its domicile or residence or the location of its head office or principal office outside Japan, and other matters specified by Order of the Ministry of Finance.

The determination of whether a person receiving payment of interest on specified book-entry corporate bonds, etc. is a specially-related person, matters concerning the preservation of documents, etc. pertaining to the notice set forth in paragraph (7) and paragraph (8), and other necessary matters concerning the application of the provisions of paragraphs (1) through (3) and paragraph (5) through the preceding paragraph are specified by Cabinet Order.