Taxation of JGBs varies depending on the bondholder - e.g. resident individual, domestic corporation, domestic financial institution, nonresident individual, foreign corporation - 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.
Individuals (residents)
Interest, capital gains and profits from redemption on coupon-bearing bonds are subject to separate self-assessment taxation at a rate of 20.315% (15% income tax + 0.315% special income tax for reconstruction + 5% local tax) and profit/loss offset among them and listed stocks, etc. is allowed. With regards to interest, taxes are withheld when a coupon is paid.
Other tax breaks, known as "Maruyu" and "Tokubetsu-Maruyu" tax-free saving schemes which provide tax exemption on interest income from JGBs, are offered to individuals with disabilities and certain other types of individuals.
Capital gains and profits from redemption on T-Bills (Treasury Discount Bills) and STRIPS (principal-only book-entry transfer JGBs and coupon-only book-entry transfer JGBs) are subject to separate self-assessment taxation at a rate of 20.315% (15% income tax + 0.315% special income tax for reconstruction + 5% local tax) and profit/loss offset among them and listed stocks, etc. is allowed. At the time of redemption, tax on profits from redemption is withheld.
Domestic corporations
1. Coupon-bearing bonds
Interest, capital gains and profits from redemption on coupon-bearing bonds are counted as profits, and are subject to corporate tax and the houjinzei-wari local tax (municipal tax multiplied by a certain rate) . With regards to interest, taxes are withheld when the interest is paid. Financial institutions such as banks, and financial instruments firms and domestic corporations capitalized at 100 million yen or more may be exempt from withholding tax imposed on the interest income.
Capital gains and profits from redemption on T-Bills and STRIPS (principal-only book-entry transfer JGBs and coupon-only book-entry transfer JGBs) are counted as profits, and are subject to corporate tax and the houjinzei-wari local tax (municipal tax multiplied by a certain rate) (Public Interest Incorporated Associations or Public Interest Incorporated Foundations may be exempt from tax.) With regards to profits from redemption received by General Incorporated Associations or General Incorporated Foundations (excluding Public Interest Incorporated Associations or Public Interest Incorporated Foundations), etc. , taxes are withheld at the time of redemption.