Act on Special Measures Concerning Taxation

If a foreign financial institution, etc. receives payment of interest listed in Article 161, paragraph (1), item (x) of the Income Tax Act from a specified financial institution, etc. with respect to a bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. (meaning a bond transaction with a repurchase/resale agreement (meaning a sale and purchase transaction of bonds specified by Cabinet Order as prescribed in Article 161, paragraph (1), item (x) of the Income Tax Act with an agreement to repurchase or resell them; the same applies in paragraphs (3) and (7)) pertaining to the bonds listed in items (i) through (iii) of this paragraph that satisfies the requirements specified by Cabinet Order, or a securities lending transaction (meaning a transaction specified by Cabinet Order in which securities are lent or borrowed with cash or securities as collateral; the same applies in that paragraph) pertaining to the following securities that satisfies the requirements specified by Cabinet Order; hereinafter the same applies in this paragraph) that is conducted between a foreign financial institution, etc. and a specified financial institution, etc. (where the transaction is conducted with a foreign financial institution, etc. listed in paragraph (7), item (i), (b), limited to the case where the transaction pertains to that foreign financial institution, etc. having assumed, as a business of the same kind as financial instruments obligation assumption service prescribed in Article 2, paragraph (28) of the Financial Instruments and Exchange Act (hereinafter referred to as "financial instruments obligation assumption service" in this Article), by underwriting, novation or any other method (hereinafter referred to as "underwriting, etc." in this Article), the obligations under a bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. conducted between another foreign financial institution, etc. (excluding a foreign corporation listed in (b) of that item; hereinafter the same applies in this paragraph) and a specified financial institution, etc. (excluding a corporation listed in paragraph (7), item (ii), (b)), and, where the transaction is conducted with a specified financial institution, etc. listed in paragraph (7), item (ii), (b), limited to the case where the transaction pertains to that specified financial institution, etc. having assumed, as financial instruments obligation assumption service, by underwriting, etc., the obligations under a bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. conducted between a foreign financial institution, etc. and another specified financial institution, etc. (excluding a corporation listed in (b) of that item); referred to as a "specified bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc." in the following paragraph and paragraph (13)), no income tax is imposed on the interest so received (excluding that specified by Cabinet Order).

book-entry government bonds prescribed in Article 88 of the Act on Book-Entry Transfer of Corporate Bonds and Shares (referred to as "book-entry government bonds" in paragraph (3), item (i)), book-entry municipal bonds prescribed in Article 5-2, paragraph (1) or book-entry corporate bonds prescribed in Article 66 of that Act (including those listed in Article 5-3, paragraph (4), item (vii), (a) through (h); hereinafter referred to as "book-entry corporate bonds, etc." in this item), other than those whose amount of interest or amount of redemption money prescribed in Article 41-13-3, paragraph (7), item (viii) is calculated on the basis of an indicator specified by Cabinet Order relating to the issuer of those book-entry corporate bonds, etc. or a specially related person of that issuer (meaning a person having a special relationship specified by Cabinet Order with the issuer of book-entry corporate bonds, etc.);

bonds issued or guaranteed by a foreign state or its local government (excluding those listed in the preceding item);

bonds issued or guaranteed by a foreign corporation, which are specified by Cabinet Order (excluding those listed in the preceding two items);

shares, etc. listed in Article 37-10, paragraph (2), items (i) through (v) (with regard to the beneficial rights listed in item (iv) of that paragraph, limited to beneficial rights of securities investment trusts other than bond investment trusts and beneficial rights of investment trusts other than securities investment trusts that do not fall under bond-based investment trusts) or bonds with share options (including convertible specified corporate bonds prescribed in Article 131, paragraph (1) of the Act on the Securitization of Assets and specified corporate bonds with subscription rights for new preferred equity prescribed in Article 139, paragraph (1) of that Act), that fall under the shares, etc. listed in Article 37-11, paragraph (2), item (i) (excluding those listed in the preceding three items).

The provisions of the preceding paragraph do not apply to the interest received prescribed in that paragraph that is received by the foreign financial institution, etc. referred to in that paragraph if that foreign financial institution, etc. (limited to a foreign corporation listed in paragraph (7), item (i), (a)) falls under any of the foreign corporations listed in the following items, or if, in the case where the foreign financial institution, etc. referred to in the preceding paragraph (limited to a foreign corporation listed in paragraph (7), item (i), (b)) has assumed, as a business of the same kind as financial instruments obligation assumption service, by underwriting, etc., the obligations under a specified bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. (limited to one pertaining to the interest received prescribed in the preceding paragraph that is received by the foreign financial institution, etc. referred to in that paragraph) between another foreign financial institution, etc. (limited to a foreign corporation listed in paragraph (7), item (i), (a)) and a specified financial institution, etc. (excluding a corporation listed in paragraph (7), item (ii), (b)), that other foreign financial institution, etc. falls under any of the foreign corporations listed in the following items:

a foreign corporation that falls under a foreign controlling shareholder, etc. prescribed in Article 66-5, paragraph (5), item (i) of the specified financial institution, etc. paying that interest (or, if that specified financial institution, etc. (limited to a corporation listed in paragraph (7), item (ii), (b)) has assumed, as financial instruments obligation assumption service, by underwriting, etc., the obligations under a specified bond transaction with a repurchase/resale agreement, etc. involving book-entry bonds, etc. (limited to one pertaining to that interest) between a foreign financial institution, etc. (limited to a foreign corporation listed in item (i), (a) of that paragraph) and another specified financial institution, etc. other than a corporation listed in item (ii), (b) of that paragraph, that other specified financial institution, etc.) (excluding a corporation of a foreign state in the case where information can be provided to a foreign authority pursuant to the 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 treaty 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 mutually providing information concerning the imposition and collection of taxes), or to any other foreign authority (including an association or foundation without juridical personality prescribed in Article 2, item (viii) of the Corporation Tax Act; referred to as a "corporation of a treaty partner state, etc." in the following paragraph));

a foreign corporation (excluding a foreign corporation listed in the preceding item) that falls under a foreign affiliated company prescribed in Article 40-4, paragraph (2), item (i) or Article 66-6, paragraph (2), item (i) pertaining to a resident or domestic corporation (excluding one to which the provisions of Article 40-4, paragraph (7) or (12) (limited to the part pertaining to item (i)) or Article 66-6, paragraph (7) or (12) (limited to the part pertaining to item (i)) apply);

a foreign corporation (excluding the foreign corporations listed in the preceding two items) in the case where foreign country's corporate tax (meaning foreign country's corporate tax prescribed in Article 69, paragraph (1) of the Corporation Tax Act; hereinafter the same applies in this item) is not imposed on the foreign corporation with respect to that interest in the state or territory where its head office or principal office is located (hereinafter referred to in this item as the "state of the head office") (excluding the case where that interest is attributed to a business conducted by the foreign corporation at its business office or other office (referred to in paragraph (7) and paragraph (10) as a "business office or similar place") located in any state or territory other than the state of the head office, and foreign country's corporate tax is imposed on the foreign corporation with respect to that interest in such state or territory).

If a foreign corporation other than a foreign financial institution, etc. (limited to a corporation of a treaty partner state, etc.; hereinafter referred to as a "specified foreign corporation" in this Article) receives payment of interest listed in Article 161, paragraph (1), item (x) of the Income Tax Act from a specified financial institution, etc. with respect to a bond transaction with a repurchase/resale agreement involving book-entry government bonds, etc. (meaning a bond transaction with a repurchase/resale agreement pertaining to the following bonds that satisfies the requirements specified by Cabinet Order; hereinafter the same applies in this paragraph) that commenced during the period from April 1, 2017 to March 31, 2029 and is conducted between the specified foreign corporation and a specified financial institution, etc. (limited to a corporation listed in paragraph (7), item (ii), (a), if the transaction pertains to the bonds listed in item (ii) or (iii) of this paragraph) (where the transaction is conducted with a specified financial institution, etc. listed in (b) of that item, limited to the case where the transaction pertains to that specified financial institution, etc. having assumed, as financial instruments obligation assumption service, by underwriting, etc., the obligations under a bond transaction with a repurchase/resale agreement involving book-entry government bonds, etc. conducted between a specified foreign corporation and another specified financial institution, etc. (excluding a corporation listed in (b) of that item); referred to as a "specified bond transaction with a repurchase/resale agreement involving book-entry government bonds, etc." in the following paragraph and paragraph (13)), no income tax is imposed on the interest so received (excluding that specified by Cabinet Order).

book-entry government bonds;

bonds issued or guaranteed by a foreign state, which are specified by Cabinet Order;

bonds issued by a foreign corporation, which are specified by Cabinet Order (excluding those listed in the preceding item).

The provisions of the preceding paragraph do not apply if a specified foreign corporation receiving payment of the interest received prescribed in that paragraph (excluding a specified foreign corporation that is the trustee of a qualified foreign securities investment trust (meaning a qualified foreign securities investment trust prescribed in Article 5-2, paragraph (2); hereinafter the same applies in this paragraph, the following paragraph and paragraph (10)) in the case where it receives payment of that interest with respect to the trust property of that qualified foreign securities investment trust) falls under a foreign related person (meaning a foreign corporation that has, with the specified financial institution, etc. paying that interest, a relationship in which either corporation directly or indirectly holds shares or capital contributions accounting for 50 percent or more of the total number or total amount of the issued shares of or capital contributions to the other corporation (excluding its own shares or capital contributions held by that other corporation) or any other special relationship specified by Cabinet Order) of the specified financial institution, etc. paying that interest (or, if that specified financial institution, etc. (limited to a corporation listed in paragraph (7), item (ii), (b)) has assumed, as financial instruments obligation assumption service, by underwriting, etc., the obligations under a specified bond transaction with a repurchase/resale agreement involving book-entry government bonds, etc. (limited to one pertaining to that interest) between a specified foreign corporation and another specified financial institution, etc. other than a corporation listed in (b) of that item, that other specified financial institution, etc.; hereinafter the same applies in this paragraph).

The provisions of paragraph (3) apply to the interest received prescribed in paragraph (3) that a specified foreign corporation that is the trustee of a foreign investment trust (meaning a foreign investment trust prescribed in Article 2, paragraph (24) of the Act on Investment Trusts and Investment Corporations; hereinafter the same applies in this paragraph) receives with respect to the trust property of that foreign investment trust, only if that foreign investment trust is a qualified foreign securities investment trust.

The provisions of paragraphs (1) and (3) do not apply to the interest received prescribed in those provisions (hereinafter referred to as "specified interest" in this Article) that is received by a foreign corporation having a permanent establishment and that falls under the domestic source income listed in Article 141, item (i), (a) of the Corporation Tax Act.

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

foreign financial institution, etc.: Any of the following foreign corporations:

a foreign corporation engaged in the banking business, financial instruments business or insurance business in a foreign state in accordance with the laws and regulations of the state;

a foreign corporation that conducts, in a foreign state, a business of the same kind as financial instruments obligation assumption service and that has obtained, for conducting that business, a license of the same kind as the license referred to in Article 156-2 of the Financial Instruments and Exchange Act, or a permission similar thereto or any other administrative disposition, in that state under the laws and regulations of that state (limited to a foreign corporation that, as that business it conducts, assumes by underwriting, etc. the obligations under a bond transaction with a repurchase/resale agreement or a securities lending transaction between another foreign corporation (limited to a foreign corporation listed in (a), (c) or (d)) and a specified financial institution, etc. (excluding a corporation listed in (b) of the following item));

a central bank of a foreign state;

an international organization established based on an international agreement;

specified financial institution, etc.: Any of the following corporations:

a corporation (limited to a corporation that has a business office or similar place in Japan) which is a financial institution prescribed in Article 8, paragraph (1), a financial instruments business operator prescribed in paragraph (2) of the Article or any other entity specified by Cabinet Order, and which falls under the category of financial institution prescribed in Article 2, paragraph (2) of the Act on Close-Out Netting of Specified Financial Transactions Conducted by Financial Institutions (Act No. 108 of 1998);

a financial instruments clearing organization prescribed in Article 2, paragraph (29) of the Financial Instruments and Exchange Act (limited to a financial instruments clearing organization that, as financial instruments obligation assumption service it conducts, assumes by underwriting, etc. the obligations under a bond transaction with a repurchase/resale agreement or a securities lending transaction between a foreign financial institution, etc. (excluding a foreign corporation listed in (b) of the preceding item) or a specified foreign corporation and another corporation (limited to a corporation listed in (a) or (c)));

the Bank of Japan.

A foreign financial institution, etc. or specified foreign corporation that seeks the application of the provisions of paragraph (1) or (3), pursuant to the provisions of Cabinet Order, must submit a return stating that it seeks the application of those provisions with respect to the specified interest receivable, as well as its name and the location of its head office or principal office (or any other place specified by Order of the Ministry of Finance for a foreign corporation with a permanent establishment; hereinafter the same applies in this 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"), no later than the day preceding the day on which the foreign financial institution, etc. or specified foreign corporation is to receive payment for the first time, via the person who pays the specified interest, to the competent district director with jurisdiction over the place for tax payment pursuant to the provisions of Article 17 of the Income Tax Act which pertains to the person who makes payment in terms of the specified interest (in the case where another place has been designated pursuant to the provisions of Article 18, paragraph (2) of the Act: the designated place for tax payment).

In the case referred to in the preceding paragraph, where a written application for a tax exemption has been submitted to the district director of the tax office prescribed in the paragraph, it is deemed that the submission to the district director of the tax office has been made when the written application has been received by the person who pays the specified interest set forth in the paragraph.

A foreign financial institution, etc. or specified foreign corporation that submits a written application for a tax exemption, upon submission, must present its certificate of registered matters of the corporation and any other document specified by Cabinet Order (or, where the provisions of paragraph (5) apply, those documents and the document specified by Order of the Ministry of Finance as a document certifying that it falls under a specified foreign corporation that is the trustee of a qualified foreign securities investment trust) to the head of the business office or similar place of the specified financial institution, etc. via which submission is made, and the head of the business office or similar place of the specified financial institution, etc. must confirm, by the documents specified by Cabinet Order, the name and the location of the head office or principal office stated in the written application (or, where the provisions of that paragraph apply, the name and the location of the head office or principal office stated in that written application for a tax exemption, and the name of the qualified foreign securities investment trust and the statement pertaining to that qualified foreign securities investment trust referred to in Article 5-2, paragraph (2)).

Where a foreign financial institution, etc. or specified foreign corporation that has submitted a written application for a tax exemption comes to fall under any of the cases listed in the following items (or, for a foreign financial institution, etc. (limited to a foreign corporation listed in paragraph (7), item (i), (c) or (d); hereinafter referred to as a "foreign central bank, etc." in this paragraph), comes to fall under the case listed in item (i)), it must, no later than the day preceding the day on which it is to receive, for the first time since the day on which it came to fall under that case, payment of specified interest from the specified financial institution, etc. via which the written application for a tax exemption has been submitted, submit the return specified in each of those items (or, for a foreign central bank, etc., the return specified in item (i); hereinafter the same applies in this paragraph) to the district director prescribed in paragraph (8) via the specified financial institution, etc. In this case, where it has failed to submit the return specified in each of those items, the provisions of paragraphs (1) and (3) do not apply to the specified interest to be received by it from the specified financial institution, etc. on or after the day on which it came to fall under that case.

if it has changed its name, the location of its head office or principal office or any other matter specified by Order of the Ministry of Finance stated in that written application for a tax exemption or in the return specified in the following item: a return stating the name and the location of the head office or principal office and other matters specified by Order of the Ministry of Finance, after that change, of the person who submitted that written application for a tax exemption or that return;

if five years (or two years, for a specified foreign corporation) have elapsed from the day following the date on which that written application for a tax exemption was submitted, the date on which the return specified in the preceding item was submitted or the date on which the return specified in this item was submitted, whichever is the latest: a return stating the name and the location of the head office or principal office and other matters specified by Order of the Ministry of Finance of the person who submitted that written application for a tax exemption.

The provisions of paragraphs (9) and (10) apply mutatis mutandis to the submission of the return specified in each item of the preceding paragraph. In this case, the phrase "the preceding paragraph" in paragraph (9) is deemed to be replaced with "paragraph (11)", the phrase "a written application for a tax exemption has been submitted to the district director of the tax office prescribed in the paragraph" is deemed to be replaced with "the return specified in each item of that paragraph has been submitted to the district director prescribed in the preceding paragraph", the phrase "submits a written application for a tax exemption" in paragraph (10) is deemed to be replaced with "submits the return specified in each item of the following paragraph", the phrase "that written application for a tax exemption" is deemed to be replaced with "the return specified in each of those items", the phrase "本店又は" (head office or) is deemed to be replaced with "本店若しくは" (head office or, joining a smaller group of alternatives), the phrase "(or, where the provisions of that paragraph apply" is deemed to be replaced with "or the name and the location of the head office or principal office after the change (or, where the provisions of paragraph (5) apply", the phrase "principal office stated in that written application for a tax exemption, and" is deemed to be replaced with "principal office stated in that written application for a tax exemption, or the name and the location of the head office or principal office after the change, and", and the phrase "the name of the qualified foreign securities investment trust" is deemed to be replaced with "the name, or the name after the change, of the qualified foreign securities investment trust".

A specified financial institution, etc. must keep books with regard to the specified bond transactions with a repurchase/resale agreement, etc. involving book-entry bonds, etc. or the specified bond transactions with a repurchase/resale agreement involving book-entry government bonds, etc. pertaining to the specified interest that a foreign financial institution, etc. or specified foreign corporation that has submitted a written application for a tax exemption receives from that specified financial institution, etc., and must state or record in such books, pursuant to the provisions of Cabinet Order, the day on which a contract for such transactions was concluded and any other matters specified by Order of the Ministry of Finance, for each foreign financial institution, etc. or specified foreign corporation that has submitted a written application for a tax exemption.

A foreign financial institution, etc. or specified foreign corporation referred to in paragraph (8) or (11) may, in lieu of submitting a written application for a tax exemption under the provisions of paragraph (8) or submitting the return specified in each item of paragraph (11) under the provisions of that paragraph, provide the person who pays the specified interest referred to in paragraph (8) or the specified financial institution, etc. referred to in paragraph (11) with the matters to be stated in that written application for a tax exemption or in the return specified in each of those items by electronic or magnetic means (meaning the method of using an electronic data processing system or any other method using information and communications technology that is specified by Order of the Ministry of Finance). In this case, that foreign financial institution, etc. or specified foreign corporation is deemed to have submitted that written application for a tax exemption or the return specified in each of those items to that person who pays the specified interest or that specified financial institution, etc.

With regard to the application of the provisions of paragraphs (9) and (12) in the case where the provisions of the preceding paragraph apply, the phrase "a written application for a tax exemption" in paragraph (9) is deemed to be replaced with "the matters to be stated in a written application for a tax exemption", the phrase "when the written application has been received" is deemed to be replaced with "when the matters have been provided", the phrase "a written application for a tax exemption has" in paragraph (12) is deemed to be replaced with "the matters to be stated in a written application for a tax exemption have", and the phrase "the return specified in each item of that paragraph" is deemed to be replaced with "the matters to be stated in the return specified in each item of that paragraph".

The due date of filing a written application for a tax exemption, and other necessary matters concerning the application of the provisions of paragraphs (1) through (6) and paragraph (8) through the preceding paragraph are specified by Cabinet Order.