Tax Exemption Scheme

  • Starting in 2008, with the Article 5-2 Act on Special Measures Concerning Taxation (Limited to the provisions related to nonresidents and foreign corporations), the interest gains on LGBs owned by non-resident or foreign corporations which settled by the book-entry system are exempted from withholding tax. Previously, 15% WHT rate was applied to foreign investors. (With the bilateral tax treaty, the tax charged shall not exceed 10 per cent of the gross amount of the interest)


  • Non-JGB securities are required to be settled through Japan Securities Depository Centre (JASDEC ) -Japanfs central securities custody and book-entry transfer system.
  • Non-resident investors can enjoy tax exemption only when they hold LGBs through a direct participant of JASDEC (i.e., a local sub-custodian in Japan) or via a designated FIAMI/QFI (i.e., a global custodians).
  • In case the beneficiary holds LGBs through a global custodian, such global custodian needs to be FIAMI/QFI.
  • Entities who are exempted for JGBs are also eligible for the tax exemption on Local Government Bonds.

Application form for Tax Exemption

  • When seeking the attached application of LGB tax exemption for the first time,nonresident or foreign corporation are required to submit an application form to the tax office via the institutions as left.
  • However, in the case of investors having exempt status of JGB, they can submit just the copy of existing JGB application, which usually local custodian take care of.
  • Up to now the 16 Global Custodian have registered as QFI (Qualified Foreign Intermediary on the next page).
  • Also Clear Stream was designated as FIAMI this September. Therefore investors can use the service of the Clear Stream through blue line scheme.