Outline of the Tax Exemption Scheme for Nonresident Individuals, etc.

Following the amendment of Article 5-2 of the Act on Special Measures Concerning Taxation, nonresident individuals and foreign corporations are now eligible for tax exemption on interest accruing from book-entry transfer JLGBs paid on or after January 1st, 2008, provided certain conditions are met. Until the amendment, interest on Japanese JLGBs received by nonresident individuals, etc., was basically subject to 15% withholding income tax.

Conditions

• Payment of interest must be made via the Japan Securities Depository Center, Inc.
• Nonresident individuals, etc., must hold the bonds through qualified foreign intermediaries or specified book-entry transfer institutions, etc.
• An Application Form for Withholding Tax Exemption must be submitted.

Simplification, etc., of tax exemption procedures for nonresident individuals, etc.
From June 2010, measures were taken to simplify tax exemption procedures concerning interest on book-entry transfer JLGBｓ received by nonresident individuals, etc., and to expand the scope of eligibility for tax exemption. These measures included the following:
(1)Simplification of procedures, such as changing tax exemption procedures from every issuer (numerous) to every book-entry transfer institution, and abolishing individual records of beneficial owners under certain conditions;
(2)Expansion of the scope of qualified foreign securities investment trusts, and exemption of tax on profit from redemption.
　 Among others, interest on Japan Finance Organization for Municipalities bonds is now also eligible for tax exemption.
　 The above efforts to simplify and expand tax exemption measures are designed to attract foreign investors, and this is expected to significantly assist the revitalization of JLGB markets.