Overview of Taxation on JGBs (Nonresident individuals and foreign corporations)

Taxation of JGBs varies depending on the bondholders - e.g. resident individuals, domestic corporations, domestic financial institutions, nonresident individuals, foreign corporations - and on the types of bonds.
A tax exemption scheme for interest, etc., is offered not only to domestic financial institutions and certain corporations, but also to nonresident individuals and foreign corporations.

Nonresident individuals and foreign corporations

1. Coupon-bearing bonds, T-Bills and STRIPS

Interest, etc. on book-entry transfer JGBs (interest on book-entry transfer JGBs or profits from redemption of T-Bills and STRIPS) held by nonresident individuals or foreign corporations without a permanent establishment in Japan are exempt from tax under certain conditions under the tax exemption scheme as described below. Aside from such tax exemption scheme, if there is a tax treaty in effect between Japan and the country of residence of the nonresident individuals or the country where the foreign corporation is located, and the tax rate on interest stipulated under the treaty is set lower than 15%, the withholding tax rate on the interest, etc. from book-entry transfer JGBs will be lowered to match the rate stipulated under the treaty, provided that the relevant procedures have been completed.

In addition, for coupon-bearing bonds held by foreign corporations with a permanent establishment in Japan, the income tax is withheld, but the income tax withheld will be deducted from their corporation tax.

2. Bond Gensaki Transactions, etc.

Interest, etc. that foreign financial institutions, etc. receive from specified financial institutions, etc. in Japan on their Bond Gensaki Transactions or Securities Lending Transactions and that those specified foreign corporations receive from specified financial institutions in Japan on their Bond Gensaki Transactions are exempt from tax, provided that certain requirements are met.

HOME