Act on Special Measures Concerning Taxation

Where a financial institution prescribed in paragraph (3) of Article 21 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949) has received deposits or borrowings on or after April 1, 1998, from a foreign corporation that has been certified, pursuant to the provisions of Order of the Ministry of Finance, as falling under the category of nonresident prescribed in the paragraph, and has managed such deposits or borrowings in a Special International Financial Transactions Account prescribed in the paragraph (hereinafter referred to in this Article as a "Special International Financial Transactions Account"), income tax is not imposed with respect to any interest on the deposits or borrowings paid to the foreign corporation (including gains specified by Cabinet Order as arising from transactions specified by Cabinet Order as sales and purchases of bonds with repurchase or resale agreements); provided, however, that where any event has occurred that is in violation of the provisions of Cabinet Order established pursuant to the provisions of Article 21, paragraph (4) of the Act, which pertains to the matters concerning the settlement of a Special International Financial Transactions Account, the provisions of the main clause of this Article do not apply to such interest pertaining to the accounting period that includes the day on which such event has occurred.

The provisions of Article 174, Article 175, Article 178, Article 179, and Article 212, paragraphs (1) through (3) of the Income Tax Act do not apply to the following interest on public and corporate bonds or deposits and savings, distributions of proceeds from a jointly managed trust or bond-based investment trust under public offering (limited to an investment trust operated without instruction from the settlor as prescribed in Article 2, paragraph (2) of the Act on Investment Trusts and Investment Corporations; referred to in item (iv) as a "specific form of bond-based investment trust under public offering"), or dividends of surplus on bond-type beneficial interests (meaning bond-type beneficial interests as prescribed in Article 230, paragraph (1), item (ii) of the Act on the Securitization of Assets (Act No. 105 of 1998); the same applies hereinafter in this Chapter), which are received by a bank with business offices in Japan and any other financial institution specified by Cabinet Order (hereinafter referred to in this Article as a "financial institution"):

interest on public and corporate bonds which is entered or recorded in a transfer account book as prescribed in the Act on Book-Entry Transfer of Corporate Bonds and Shares (referred to in item (iv) and item (v) as a "transfer account book") (such interest excludes the interest on entered or recorded public and corporate bonds of a financial institution that is engaged in a trust business as prescribed in Article 1, paragraph (1) of the Act on Engagement in Trust Business by Financial Institutions under that Act and which is specified by Cabinet Order);

interest on corporate bonds (meaning corporate bonds as prescribed in Article 2, paragraph (1), item (ix) of the Income Tax Act which fall under the rights prescribed in Article 29-2, paragraph (1), item (viii) of the Financial Instruments and Exchange Act; hereinafter the same applies in this item, item (ii) of the following paragraph, and paragraph (3), item (ii)) which are held as proprietary property of a financial institution by a specified management method (meaning a method that satisfies the requirements specified by Cabinet Order, such as imposing restrictions on the transfer of corporate bonds; hereinafter the same applies in this item, item (ii) of the following paragraph, and paragraph (3), item (ii)), or which have been placed in custody by a specified management method with a financial instruments business operator as prescribed in Article 2, paragraph (9) of that Act (limited to a person engaged in type I financial instruments business as prescribed in Article 28, paragraph (1) of that Act; referred to in item (ii) of the following paragraph and paragraph (3), item (ii) as a "financial instruments business operator") or with a registered financial institution as prescribed in Article 2, paragraph (11), item (i) of that Act (referred to in item (ii) of the following paragraph and paragraph (3), item (ii) as a "registered financial institution") (excluding the interest on corporate bonds so placed in custody of a financial institution prescribed in the preceding item which is specified by Cabinet Order);

interest on deposits or savings at a financial institution (excluding the interest specified by Cabinet Order); and

distribution of proceeds from a jointly managed trust or specific form of bond-based investment trust under public offering, with a financial institution as both a settlor and a beneficiary, which accrued within the period of the entrustment (for distribution of proceeds from a loan trust, within the period during which its beneficiary certificate (including rights to be indicated thereon) continued to be registered or was entered or recorded in a transfer account book);

dividends of surplus on bond-type beneficial interests which are entered or recorded in a transfer account book (excluding the dividends of surplus on entered or recorded bond-type beneficial interests of a financial institution prescribed in item (i) which are specified by Cabinet Order).

The provisions of Article 174, Article 175, Article 178, Article 179, and Article 212, paragraphs (1) through (3) of the Income Tax Act do not apply to the following interest on public and corporate bonds or dividends of surplus on bond-type beneficial interests which are received by a financial instruments business operator, a financial instruments clearing organization, or a securities finance company specified by Cabinet Order (referred to in item (ii) and the following paragraph as a "financial instruments business operator, etc."):

interest on public and corporate bonds or dividends of surplus on bond-type beneficial interests listed in item (i) or item (v) of the preceding paragraph;

interest on corporate bonds which are held as proprietary property of a financial instruments business operator, etc. by a specified management method, or which have been placed in custody by a specified management method with another financial instruments business operator or with a registered financial institution.

The provisions of Article 174, Article 175, and Article 212, paragraph (3) of the Income Tax Act do not apply to interest on public and corporate bonds or dividends of surplus on bond-type beneficial interests which are received by a domestic corporation (excluding a financial institution, financial instruments business operator, etc., and any other corporation specified by Cabinet Order and limited to a domestic corporation which is specified by Cabinet Order as a principal trader of public and corporate bonds and bond-type beneficial interests) and which are listed in the following items and specified by Cabinet Order:

interest on public and corporate bonds or dividends of surplus on bond-type beneficial interests listed in paragraph (1), item (i) or item (v);

interest on corporate bonds which have been placed in custody by a specified management method with a financial instruments business operator or with a registered financial institution.

Where a financial institution receives payment of distribution of proceeds prescribed in paragraph (1), item (iv), it must submit a detailed statement that separates the portion of the distribution of proceeds which is subject to the provisions of the paragraph and the other portion, to the competent district director with jurisdiction over the place for tax payment under the provisions of Article 17 of the Income Tax Act for the income tax on the distribution of proceeds (or, where a designation has been made under the provisions of Article 18, paragraph (2) of that Act, the place for tax payment so designated), via the person in charge of handling payment, as specified by Order of the Ministry of Finance.

A financial institution referred to in the preceding paragraph may, in lieu of submitting the written statement pursuant to the provisions of that paragraph, provide the person in charge of handling payment referred to in that paragraph with the matters to be stated in the written statement by electronic or magnetic means prescribed in Article 3-3, paragraph (8). In this case, the financial institution is deemed to have submitted the written statement to the person in charge of handling payment.

Necessary matters concerning the period of the entrustment, the period of registration, or the period during which the relevant information was entered or recorded, as prescribed in paragraph (1), item (iv), and the calculation of the amount of the portion that has accrued within these periods are specified by Order of the Ministry of Finance.

With regard to dividends of surplus which a resident or a nonresident who has a permanent establishment is to receive in Japan on or after January 1, 2016, and which pertain to distributions of proceeds from the following beneficial rights (hereinafter referred to in this Article as "dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc."), notwithstanding the provisions of Article 22, Article 89, and Article 165 of the Income Tax Act, income tax is imposed by applying a tax rate of 15 percent to the amount to be received, separately from other income:

beneficial rights in a bond-based investment trust (excluding one for which the public offering of beneficial rights at its establishment was conducted through a public offering (meaning a solicitation of offers to acquire as prescribed in Article 2, paragraph (3) of the Financial Instruments and Exchange Act which is specified by Cabinet Order as falling under the case listed in item (i) of that paragraph)) (excluding those falling under the shares, etc. listed in Article 37-11, paragraph (2), item (i));

bond-type beneficial interests in a special purpose trust (excluding one for which the public offering of bond-type beneficial interests held at the time of conclusion of its trust contract by the original entrustor prescribed in Article 224 of the Act on the Securitization of Assets (referred to in Article 8-4, paragraph (1), item (v), Article 8-5, paragraph (1), item (vi), Article 9-3, item (v), Article 9-3-2, paragraph (1), item (v), and Article 37-11, paragraph (2), item (iv) as the "original entrustor") was conducted through a public offering (meaning a solicitation of offers to acquire as prescribed in Article 2, paragraph (3) of the Financial Instruments and Exchange Act which is specified by Cabinet Order as falling under the case listed in item (i) of that paragraph)) (excluding those falling under the shares, etc. listed in Article 37-11, paragraph (2), item (i)).

The provisions of the preceding paragraph do not apply to dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. which are received by a nonresident who has a permanent establishment and which do not fall under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Income Tax Act.

With regard to the application of the provisions of Article 170, Article 175, or Article 179 of the Income Tax Act to dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. which a nonresident, a domestic corporation or foreign corporation is to receive on or after January 1, 2016 (for those to be received by a nonresident who has a permanent establishment, limited to those that do not fall under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of that Act), the tax rate of 20 percent prescribed in those provisions is to be a tax rate of 15 percent.

With regard to the application of the provisions of Article 182 or Article 213 of the Income Tax Act to dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. to be received on or after January 1, 2016, the tax rate of 20 percent prescribed in those provisions is to be a tax rate of 15 percent.

With regard to the application of the provisions of Article 9-6-3 and Article 9-6-4 to a resident or a nonresident who has a permanent establishment who receives payment of dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc., the phrase "of a dividend of surplus" in Article 9-6-3, paragraph (3) and Article 9-6-4, paragraph (3) is deemed to be replaced with "of a dividend of surplus (excluding dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. prescribed in Article 8-2, paragraph (1) to which the provisions of that paragraph have been applied; the same applies hereinafter in this paragraph)".

The provisions of Article 224, Article 225, paragraph (1), and Article 228, paragraph (1) of the Income Tax Act, insofar as they pertain to dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc., do not apply to a resident or nonresident who receives payment of dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. to be received on or after January 1, 2016 and the person who makes that payment, or to a resident or nonresident who receives payment of dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. from a person who receives payment of dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. as a nominee for another person in connection with the person's business, and the person who receives payment of the dividends, etc. from distributions of proceeds of privately placed bond-based investment trusts, etc. as the nominee.