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Overview of Taxation on JGBs (Recent tax-related initiatives)

  In the wake of continued large-scale JGB issuance, the tax systems concerning JGBs holdings have been reviewed as part of an effort to correct the financial institution-dominant JGB holding structure and in order to promote further diversification of JGB holders.
  The tax system revisions in recent years can be summarized as follows:

 

FY1999

  Application of tax exemption to interest on coupon-bearing JGBs held by nonresident individuals or foreign corporations which are directly deposited in transfer accounts at JBESPs.

  Exemption from tax for redemption profits arising from TBs/FBs (which are now collectively called "T-bills") held by foreign corporations which are directly deposited in transfer accounts at JBESPs.

 

FY2000

  Application of tax exemption for the accrued interest on JGBs that needs to be paid back to the national treasury when the JGBs have been reopened (i.e. additional issuance of the existing JGBs).

 

FY2001

  Expansion of the tax exemption to cover interest on coupon-bearing JGBs held by nonresident individuals or foreign corporations in transfer accounts with QFIs.

 

FY2002

  Expansion of the tax exemption to cover the interest on JGBs held by non-juridical foreign investment trusts, provided that the investment trusts are publicly offered and are not offered in Japan.

  Application of tax exemption, under certain conditions, to interest generated from Bond Gensaki Transactions involving JGBs, which is received by foreign financial institutions (till March 31, 2004).

  Introduction of STRIPS related tax systems in light of the limitation that only corporations can hold principal-only book-entry transfer JGBs and coupon-only book-entry transfer JGBs.

  Adoption of the necessary tax related measures in conjunction with the transition to the new JGB book-entry transfer system.

 

FY2003

  Application of withholding tax exemption to the interest on coupon-bearing JGBs held by non-financial domestic companies capitalized at 100 million yen or more.

  Application of withholding tax exemption to the interest on coupon-bearing JGBs held by Japan Government Bond Clearing Corporation.

 

FY2004

  Expansion of tax exemption to cover redemption profit arising from TBs/FBs (which are now collectively called "T-bills") held in transfer accounts with QFIs by foreign corporations.

  Extension of the applicable period of tax exemption on interest generated from Bond Gensaki Transactions which is received by foreign financial institutions by 2 years (till March 31, 2006).

 

FY2005

  Expansion of eligible holders of Inflation-Indexed bonds to include foreign juridical persons, provided that they are not subject to income tax on interest income.

  Relaxation/Simplification of the various procedural requirements to apply for beneficial tax treatment schemes related to JGBs held by nonresident individuals or foreign corporations, including: (i) simplification of the procedure required for notification from QFIs to JBESPs in Japan when the nonresident individuals or foreign corporations hold the JGBs in transfer accounts with QFIs and (ii) simplification of the procedures required for application of tax exemption concerning the interest on coupon-bearing JGBs to those who have tax exemption concerning TBs/FBs (which are now collectively called "T-bills") under certain conditions.

 

FY2006

  Extension of the applicable period of tax exemption on interest generated from Bond Gensaki Transactions which is received by foreign financial institutions by 2 years (till March 31, 2008).

 

FY2008

  Tax exemption on interest generated from Bond Gensaki Transactions which is received by foreign financial institutions becomes a permanent measure.

 

FY2010

  The book prepared for each investor by the JBESPs in Japan upon receiving notice from QFIs can be omitted under certain conditions.

  Expansion of the scope of the Qualified Foreign Securities Investment Trusts.

 

FY2011

  Procedures for applying tax-exemption measures on interest of book-entry transfer JGBs to Foreign Pension Trusts, partnerships and Trusts Taxable on Beneficiaries were refined.

  With respect to the Securities Lending Transactions using JGBs, tax exemption measures were applied on the interest, etc. received by foreign financial institutions, etc. as in the case of Bond Gensaki Transactions.

 

FY2012

  Submission etc. of Application Form for Withholding Tax Exemption on interest of book-entry transfer JGBs pertaining to the trust property of Trusts Taxable on Beneficiaries were made possible to be performed by the trustees of the relevant trust.

 

FY2013

  After January 2016, the taxation system for public and corporate bonds was changed to separate taxation. Moreover, the extent of profit-loss offsetting for financial products was expanded to public and corporate bonds (Integration of financial income taxes).

 

FY2014

  Regarding the integration of financial income taxes to be implemented in January 2016, the scope of discount bills has been revised.

 

FY2017

  Expansion of tax exemption to cover interest, etc. generated from Bond gensaki Transactions using JGBs which is received by specified foreign corporations (till March 31, 2019).

 

FY2019

  Extension of the applicable period of tax exemption on interest, etc. generated from Bond Gensaki Transactions using JGBs which is received by specified foreign corporations by 2 years (till March 31, 2021).

FY2021

  Extension of the applicable period of tax exemption on interest, etc. generated from Bond Gensaki Transactions using JGBs which is received by specified foreign corporations by 2 years (till March 31, 2023).
  Allowing an Application Form for Withholding Tax Exemption, etc. for special  taxation measures for interest on book-entry transfer JGBs involving cross-border transactions to be filed electronically. 

FY2023

  Extension of the applicable period of tax exemption on interest, etc. generated from Bond Gensaki Transactions using JGBs which is received by specified foreign corporations by 3 years (till March 31, 2026).