Corporate tax in Japan

Summary

Corporate Income Tax Rate (%) 23.9 (a)
Capital Gains Tax Rate (%) 23.9 (a)
Branch Tax Rate (%) 23.9 (a)
Withholding Tax (%) (b)
Dividends
20 (c)
Interest 15/20 (c)(d)
Royalties from Patents, Know-how, etc. 20 (c)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 1 (e)
Carryforward 9 (f)

a) Local income taxes (see Section D) are also imposed. The resulting effective corporate income tax rate is approximately 33% (35% for corporations with stated capital of JPY100 million or less).

b) Except for the withholding taxes on royalties and certain interest (see footnote [d] below), these withholding taxes are im posed on both residents and non­residents. For nonresidents, these are final taxes, unless the income is effec­tively connected with a permanent establishment in Japan. Royalties paid to residents are not subject to withholding tax.

c) Under the special law to secure funds for reconstruction related to the 11 March 2011 disasters, a special additional income tax (2.1% of the normal withholding tax due) is imposed for a 25-year period running from 1 January 2013 through 31 December 2037. As a result, the 20% withholding tax rate is increased to 20.42%, and the 15% rate is increased to 15.315%. However, this special additional income tax does not affect reduced withholding taxes under existing income tax treaties.

d) Interest paid to residents on bonds, debentures or bank deposits is subject to a 20% withholding tax, which consists of a national tax of 15% and a local tax of 5%. Other interest paid to residents is not subject to a withholding tax. Interest paid to nonresidents on bonds, debentures or bank deposits is subject to a 15% withholding tax. Interest paid to nonresidents on national and local government bonds under the Book-Entry Transfer System is exempt from withholding tax if certain requirements are met.

e) The loss carryback is temporarily suspended (see Section C).

f) The carryforward period of losses arising in fiscal years beginning on or after 1 April 2017 will be extended to 10 years (see Section C).

Taxes on corporate income and gains

Corporate tax. Japanese domestic companies are subject to tax on their worldwide income, but nonresident companies pay taxes only on Japanese-source income. A domestic corporation is a corporation that is incorporated or has its head office in Japan. Japan does not use the “central management and control” criteria for determining the residence of a company.

Rates of corporate tax. The basic rate of national corporation tax is 23.9% for fiscal years beginning on or after 1 April 2015. For corporations with stated capital of JPY100 million or less, a tax rate of 15% applies to the first JPY8 million of taxable income. The tax rate of 15% applies for fiscal years beginning between 1 April 2012 and 31 March 2017.

Local income taxes, which are local inhabitant tax and enterprise tax, are also imposed on corporate income (see Section D). The resulting effective corporate income tax rate for companies sub­ject to the 23.9% rate is approximately 35%. Under Business Scale Taxation (Gaikei Hyojun Kazei; see Section D), for certain corporations, the effective rate is reduced to approximately 33%.

Capital gains. In general, for Japanese corporate tax purposes, capital gains are not taxed separately. Such gains are treated as ordinary income to which normal tax rates apply. Transferor corporations in qualified reorganizations may defer the recogni­tion of capital gains and losses arising in such transactions. Mergers, corporate spin-offs, share exchanges and contributions in kind are considered qualified reorganizations if they satisfy certain conditions.

A special surplus tax is imposed on capital gains from the sale of land located in Japan. However, this tax is suspended for sales conducted through 31 March 2017. The tax is calculated by ap­plying the following rates, which vary depending on the length of time the property was held, to the capital gains.

Number of years held   Rate
Exceeding Not exceeding %
0 5 10
5 5

The 2009 tax reform introduced two temporary capital gains reliefs with respect to the holding of land investments. Under one of these measures, a special deduction of JPY10 million may be claim ed with respect to capital gains arising from the sale of land acquir ed during the period from 1 January 2009 to 31 December 2010 and held for a period of five years or more, subject to cer­tain conditions. The other measure is a capital gain deferral mechanism applicable to qualifying land acquired in the period from 1 January 2009 through 31 December 2010. This measure provides a deferral of 80% or 60% of the amount of capital gains arising from land disposed within a certain time period after the date on which the land is acquired, subject to certain conditions and filing obligations.

Administration. The tax year for a corporation is its fiscal year. A corporation must file a tax return within two months of the end of its fiscal year, paying the tax at that time. A one-month extension is normally available on application to the tax authorities. Except for newly established corporations, and corporations with a tax amount of JPY100,000 or less in the preceding year, if the fiscal year is longer than six months, the corporation must file an interim return within two months of the end of the first six months and make an advance payment at the time of filing the interim return equal to either 50% of its prior year’s tax liability or 100% of its estimated tax liability for the first six months of the current year.

Dividends received/paid. Dividends received from another dom­estic corporation, net of any related interest expense incurred for acquisition of the shares, are generally excluded from gross in­come. However, if the recipient corporation owns more than 5% and up to 331/3% of the domestic corporation distributing the dividends, 50% of the net dividend income is includible in gross in come. If the recipient corporation owns 5% or less of the domes­tic corporation distributing the dividends, 80% of the net dividend income is includable in gross income. Dividends distributed by a domestic corporation are subject to a 20% (20.42%, inclusive of the 2.1% special additional income tax) withholding tax.

For fiscal years beginning on or after 1 April 2009, a foreign dividend exemption system is available for Japanese companies holding a minimum interest of 25% for a period of at least six months before the date on which the decision to distribute the dividend is made. Under certain tax treaties, the minimum hold­ing interest can be lower than 25%, subject to certain conditions. Under the foreign dividend exemption, 95% of foreign dividends received is excluded from taxable income. No credit for withhold­ing tax or underlying tax on the foreign dividends is available.

For fiscal years beginning on or after 1 April 2016, if foreign dividends received by a domestic corporation are wholly or par­tially included as deductible expenses under the laws of the coun­try where the headquarters of the foreign subsidiary is located, such foreign dividends are excluded from the foreign dividend exemption system. If a portion of the dividends that a domestic corporation receives from its foreign subsidiary are included as deductible expenses, the domestic corporation may elect to ex­clude only such portion from the foreign dividend exemption system (the domestic corporation is required to attach prescribed statements to the tax return and preserve certain documents). Foreign tax credits are available for the amount of withholding taxes imposed on dividends that are excluded from the foreign dividend exemption system. This new rule will not apply to divi­dends received from a foreign subsidiary during fiscal years be­ginning on or after 1 April 2016 and on or before 31 March 2018 if the dividends are paid with respect to shares of the foreign subsidiary held by the domestic corporation as of 1 April 2016.

Foreign tax credit. A Japanese company may be entitled to claim a foreign tax credit against both Japanese corporation tax and local inhabitant tax (see Section D). Creditable foreign income taxes for a Japanese company include foreign income taxes paid directly by a Japanese company and its foreign branches (direct tax credit). In addition, under tax treaties, a tax-sparing credit may be available to domestic companies with a branch or subsid­iary in a developing country.

Determination of trading income

General. The tax law prescribes which adjustments to accounting income are required in computing taxable income. Expenditures incurred in the conduct of the business, except as otherwise pro­vided by the law, are allowed as deductions from gross income.

Remuneration paid to directors cannot be de duct ed as an expense unless it is fixed compensation, remuneration determined and reported in advance or performance-based remuneration. The de­ductibility of entertainment expenses incurred by a corporation in fiscal years beginning during the period of 1 April 2006 through 31 March 2016 is restricted according to the size (capitalization) of the corporation (see Entertainment expenses). Deductions of donations, except for those to national or local governments or similar organizations, are limited.

Entertainment expenses. Entertainment expenses cannot be de­ducted from taxable income. However, all corporations may deduct 50% of entertainment expenses related to meal and drink from taxable income for fiscal years beginning on or after 1 April 2014. Small or medium-sized corporations can choose the 50% deduc­tion or the fixed deduction of up to JPY8 million.

Inventories. A corporation may value inventory at cost under meth­ods such as the following:

  • Actual cost
  • First-in, first-out (FIFO)
  • Weighted average
  • Moving average
  • Most recent purchase
  • Retail

Alternatively, inventory may be valued at the lower of cost or market value. If a corporation fails to report the valuation method to the tax office, it is deemed to have adopted the most recent purchase price method.

Depreciation. The cost of tangible fixed assets, excluding land, may be recovered using statutory depreciation methods, such as straight-line or declining-balance. Depreciation rates are stipu­lated in the Japanese tax law, which provides a range of rates for each asset category based on the useful life. Depreciation for tax purposes may not exceed the amount of depreciation recorded for accounting purposes. Revised depreciation rates apply to assets acquired on or after 1 April 2007. In addition, statutory salvage value and limit of depreciation are abolished in conjunction with the introduction of the revised depreciation rates. The following are the ranges of the revised depreciation rates for the straight-line and declining-balance methods for selected asset categories.

Straight-line Declining-balance
Asset category From To From To
Buildings 0.143 0.02
Building improvements 0.334 0.056 0.667 0.111
Other structures 0.334 0.013 0.667 0.025
Motor vehicles 0.5 0.05 1 0.1
Machinery and equipment 0.5 0.046 1 0.091

In the year of acquisition of specified machinery or equipment, a corporation may take additional depreciation. A corporation has the option of taking such additional depreciation or claiming the investment tax credit (see Investment tax credit).
Intangible assets, including goodwill, are amortized using the straight-line method over their useful lives. The useful life of good will is five years.

Investment tax credit. A specified small or medium-sized corpo­ration that acquires or produces certain qualifying machinery or equipment (for use in its business within one year of acquisition) during the period of 1 June 1998 through 31 March 2017 may receive a credit against its corporate tax liability. The credit gener­ally equals 7% of the cost or 20% of the corporate tax, which ever is less, and acts as a substitute for additional depreciation (see Depreciation).

For fiscal years beginning on or after 1 April 2009, a corporation may claim a credit equal to 8% to 12% of total current research and development (R&D) expenditure, up to a maximum amount equal to 25% (30% for fiscal years beginning on or after 1 April 2009 through 31 March 2012 and those beginning on or after 1 April 2013 through 31 March 2015, and 20% for fiscal years beginning on or after 1 April 2012 through 31 March 2013) of the corporate tax due for the relevant fiscal year. For the fiscal year beginning before 1 April 2015, unused credits may be carried forward to subsequent fiscal years, subject to certain requirements.

For fiscal years beginning during the period of 1 April 2008 through 31 March 2017, corporations may also claim an addition al credit up to 10% of the corporate tax due for certain incremental R&D expenditure or R&D expenditure in excess of specified re­cent average sales figures.

Tax credits for other investments in certain fields, such as job development and environmental operation, or specific facilities are also available for certain periods. Some of these credits apply to small or medium-sized corporations only.

Net operating losses. Net operating losses of certain corporations may be carried forward for 9 years (10 years for losses arising in fiscal years beginning on or after 1 April 2017), and may be car­ried back 1 year. The deductible amount is limited to 80% (65% for fiscal years beginning on 1 April 2015 through 31 March 2017, and 50% for fiscal years beginning on or after 1 April 2017) of taxable income. The loss carryback is suspended for fiscal years ending from 1 April 1992 through 31 March 2016. However, this suspension does not apply to net operating losses generated in fiscal years ending on or after 1 February 2009 for specified small or medium-sized corporations.

Groups of companies. The Consolidated Tax Return System (CTRS) applies to a domestic parent corporation and its 100% domestic subsidiaries. A consolidated group must elect the appli­cation of the CTRS, subject to the approval of the National Tax Agency (NTA). If a consolidated group wants to terminate its CTRS election, it must obtain the approval of the NTA.

The 2010 tax reform introduced special taxation for intra-group transactions in 100% groups. This taxation is separate from the CTRS.

Other significant taxes

The following table summarizes other significant taxes.

 

Nature of tax Rate
Consumption tax; on a broad range of goods
and services
Rate until 31 March 2017 8.00%
Rate beginning 1 April 2017 10.00%
Enterprise tax
Companies that are subject to Business
Scale Taxation; Business Scale Taxation
(Gaikei Hyojun Kazei) applies to
companies with stated capital of more
than JPY100 million; under Business
Scale Taxation, a company is subject to
tax on the basis of its added value, its
capital amount and its taxable income
Rates on added value
Fiscal years beginning before
1 April 2015
0.48% to 0.504%
Fiscal years beginning on or after
1 April 2015 through 31 March 2016
0.72% to 0.756%
Fiscal years beginning on or after
1 April 2016
0.96% to 1.008%
(The 2016 Japan tax reform may
change the above rates for fiscal years
beginning on or after 1 April 2016.)
Rates on capital amount
Fiscal years beginning before
1 April 2015
0.20% to 0.21%
Fiscal years beginning on or after
1 April 2015 through 31 March 2016
0.30% to 0.315%
Fiscal years beginning on or after
1 April 2016
0.40% to 0.42%
(The 2016 Japan tax reform may
change the above rates for fiscal years
beginning on or after 1 April 2016.)
Rates on taxable income
Fiscal years beginning on or after
1 October 2014 through 31 March 2015
2.2% to 4.66%
Fiscal years beginning on or after
1 April 2015 through 31 March 2016
1.6% to 3.4%
Fiscal years beginning on or after
1 April 2016
0.9% to 2.14%
(The 2016 Japan tax reform may
change the above rates for fiscal years
beginning on or after 1 April 2016.)
Companies that are not subject to
Business Scale Taxation; rates
applied to taxable income; rates
for fiscal years beginning on or
after 1 October 2014
3.4% to 7.18%
Special local corporate tax; a national tax,
which is levied on companies that are
subject to enterprise tax; imposed on
local enterprise tax liability; with respect
to taxable income
Companies subject to business scale
enterprise tax
Fiscal years beginning on or after
1 October 2014 through 31 March 2015
67.40%
Fiscal years beginning on or after
1 April 2015 through 31 March 2016
93.50%
Fiscal years beginning on or after
1 April 2016
152.60%
(The 2016 Japan tax reform may change
the above rate for fiscal years beginning
on or after 1 April 2016.)
Companies not subject to business scale
enterprise tax; rate for fiscal years
beginning on or after 1 October 2014
43.20%
Local inhabitant tax, which consists of an
income levy and a capital levy
Income levy; computed as a percentage of
national income tax; rate depends on the
company’s capitalization and amount of
national income tax; rates for fiscal years
beginning on or after 1 October 2014
12.9% to 16.3%
Capital levy; based on the company’s
capitalization and number of employees;
annual assessments vary depending on
the cities and prefectures in which the
company’s offices are located
JPY70,000 to
JPY4,400,000
Local corporate tax; a national tax, which
is effective for fiscal years beginning on or
after 1 October 2014; imposed on standard
corporate tax liability
4.40%
Social insurance contributions, on monthly
standard remuneration and bonuses
Basic contribution, paid by
Employer 15.20%
Employee 14.40%
Nursing insurance premium for employees
who are age 40 or older, paid by
Employer 0.79%
Employee 0.79%

Miscellaneous matters

Foreign-exchange controls. The Bank of Japan controls inbound and outbound investments and transfers of money. Effective from 1 April 1998, the reporting requirements were simplified.

Transfer pricing. The transfer-pricing law stipulates that pricing between internationally affiliated entities should be determined at arm’s length. Entities are considered to be internationally af­filiated entities if a direct or indirect relationship involving 50% or more ownership or substantial control exists. The law provides that the burden of proof as to the reasonableness of the pricing is passed to the taxpayer, and if the taxpayer fails to provide proof or to disclose pertinent information to the tax authorities, taxable income is increased at the discretion of the tax authorities. The 2011 revision of the law eliminated the hierarchy-based selection of transfer-pricing methods and allows the selection of the most appropriate transfer-pricing method in each specific case.

It is possible to apply for advance-pricing arrangements with the tax authorities. In cases in which a taxpayer has received a transfer-pricing assessment as a result of an examination, a taxpayer ap­plying for a Mutual Agreement Procedure between Japan and the relevant treaty partner country may be granted a grace period for the payment of taxes due by assessment, including penalty taxes. The length of the grace period depends on the specific circum­stances of the assessment.

Tax-haven legislation. The Japanese tax law has tax-haven rules. If a Japanese domestic company (including individuals who have a special relationship with such Japanese domestic company) owns 10% or more of the issued shares of a tax-haven subsidiary of which more than 50% is owned directly or indirectly by Japanese domestic companies and Japanese resident individuals (including nonresident individuals who have a special relationship with such Japanese domestic companies or such Japanese resident individu­als), the income of the subsidiary must be included in the Japanese parent company’s taxable income in proportion to the equity held. A foreign subsidiary is considered a tax-haven subsidiary if its head office is located in a country that does not impose income tax or if the subsidiary is subject to tax at an effective rate of 20% or less (less than 20% for fiscal years of a foreign subsidiary be­ginning on or after 1 April 2015). The effective rate is calculated on a company-by-company basis. Losses of a tax-haven subsid­iary may not offset the taxable income of the Japanese parent company.

Dividends distributed by a tax-haven subsidiary cannot generally be excluded from tax-haven income added back to the parent com-pany’s taxable income. However, the following dividends received by a tax-haven subsidiary can be ex cluded from the apportionment to a parent company’s income:

  • Dividends from a foreign subsidiary in which the tax-haven sub­sidiary has held 25% or more of the total issued shares or the total voting shares for a period of at least six months
  • Dividends that have already been added to the Japanese parent company’s taxable income as another tax-haven subsidiary’s in­come under the tax-haven rules

Debt-to-equity rules. Thin-capitalization rules limit the deduction for interest expense for companies with foreign related-party debt if the debt-to-equity ratio exceeds 3:1.

Earnings-stripping rules. Earnings-stripping rules, which limit the deductibility of interest paid by corporations to foreign related persons, apply to fiscal years beginning on or after 1 April 2013. Net interest paid to foreign related persons by a corporation in excess of 50% of its adjusted taxable income is disallowed as a tax deduction. Interest deductions disallowed under this new provision are carried forward for up to seven years. If earnings-stripping rules and thin-capitalization rules both apply, the rule that results in a larger disallowance is applied.

Treaty withholding tax rates

For treaty countries, the rates reflect the lower of the treaty rate and the rate under domestic tax laws on outbound payments.

Dividends

%

Interest

%

Royalties

%

Australia 0/5/10 (m) 0/10 (c) 5
Austria 10/20 (a) 10 10
Bangladesh 10/15 (a) 10 (c) 10
Belgium 10/15 (a) 10 10
Brazil 12.5 12.5 (c) 12.5/15/20 (f)
Brunei Darussalam 5/10 (l) 10 (c) 10
Bulgaria 10/15 (a) 10 (c) 10
Canada 5/15 (a) 10 (c) 10
China 10 10 (c) 10
Czechoslovakia (n) 10/15 (a) 10 (c) 0/10 (i)
Denmark 10/15 (a) 10 10
Egypt 15 15/20 (q) 15
Finland 10/15 (a) 10 10
France 0/5/10 (u) 10 (c) 0
Germany 10/15 (a) 10 (c) 10
Hong Kong SAR 5/10 (l) 10 (c) 5
Hungary 10 10 (c) 0/10 (i)
India 10 10 (c) 10
Indonesia 10/15 (a) 10 (c) 10
Ireland 10/15 (a) 10 10
Israel 5/15 (a) 10 (c) 10
Italy 10/15 (a) 10 10
Kazakhstan 5/15 (a) 10 (c) 5 (w)
Korea (South) 5/15 (a) 10 (c) 10
Kuwait 5/10 (l) 10 (c) 10
Luxembourg 5/15 (a) 10 (c) 10
Malaysia 5/15 (a) 10 (c) 10
Mexico 0/5/15 (o) 10/15 (c)(p) 10
Netherlands 0/5/10 (y) 10 (z) 0 (aa)
New Zealand 0/15 (x) 10 (c) 5
Norway 5/15 (a) 10 (c) 10
Oman 5/10 (l) 10 (c) 10
Pakistan 5/7.5/10 (v) 10 (c) 10
Philippines 10/15 (l) 10 (c) 10 (g)
Poland 10 10 (c) 0/10 (i)
Portugal 5/10 (l) 10 (cc) 5
Romania 10 10 (c) 10/15 (i)
Saudi Arabia 5/10 (l) 10 (c) 5/10 (r)
Singapore 5/15 (a) 10 (c) 10
South Africa 5/15 (a) 10 (c) 10
Spain 10/15 (a) 10 10
Sri Lanka 20 15/20 (c)(q) 0/10 (h)
Sweden 0/10 (t) 0 (dd) 0 (aa)
Switzerland 0/5/10 (y) 10 (z) 0 (aa)
Thailand 15/20 (s)    10/15/20 (c)(j)(q)                       15
Turkey 10/15 (a) 10/15 (c)(j)                 10
USSR (k) 15 10 (c) 0/10 (i)
United Arab Emirates 5/10 (l) 10 (c) 10
United Kingdom 0/10 (t) 0 (dd) 0 (aa)
United States (bb) 0/5/10 (b) 10 (c) 0
Vietnam 10 10 (c) 10
Zambia 0 10 (c) 10
Non-treaty countries 20 15/20 (q) 20

a) The treaty withholding rate is increased to 15% or 20% if the recipient is not a corporation owning at least 25% (Austria, more than 50%; Kazakhstan, 10%; Spain, directly 25%) of the distributing corporation for 6 months (Aus­tria, Denmark, Germany and Indonesia, 12 months).

b) Dividends are exempt from withholding tax if the beneficial owner of the dividends owns directly, or indirectly through one or more residents of either contracting state, more than 50% of the voting shares of the company paying the dividends for a period of 12 months ending on the date on which entitle­ment to the dividends is determined and if certain other conditions are met. The 5% rate applies to dividends paid to a company owning directly or indi­rectly at least 10% of the voting shares of the payer. The 10% rate applies to other dividends.

c) Interest paid to a contracting state, subdivision or certain financial institu­tions is exempt.

d) Dividends are exempt from withholding tax if the beneficial owner of the dividends owns at least 25% of the voting shares of the company paying the dividends during the 6-month period immediately before the end of the ac­counting period for which the distribution of profits takes place and if certain other conditions are met. The withholding tax rate of 5% applies to dividends paid to a company owning at least 25% of the voting shares of the payer dur­ing the 6-month period immediately before the end of the accounting period for which the distribution of profits takes place. The 15% rate applies to other dividends. However, the exemption and the 5% rate described above do not apply to dividends paid by Japanese special purpose companies or securities investment corporations or by Swedish companies similar to such companies that may be introduced in the future. The withholding tax rate of 15% applies to such dividends.

e) Interest paid to a Swiss resident pursuant to debt claims guaranteed or insured by Switzerland is exempt.

f) The withholding rate for trademark royalties is 20%; for motion picture films and videotapes, the rate is 15%. The 12.5% rate applies to other royalties.

g) The withholding rate for motion picture films is 15%.

h) The withholding rate for motion picture films is 0% and for patent royalties is 10%.

i) The withholding tax on cultural royalties is exempt (Romania, 10%) and on industrial royalties is 10% (Romania, 15%).

j) The rate is generally 15% (Thailand, or 20%), except it is reduced to 10% for interest paid to banks.

k) The USSR treaty applies to Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

l) The withholding rate is increased to 10% (Philippines, 15%) if the recipient is not a corporation owning at least 10% of the voting shares (Philippines and Saudi Arabia, or the total shares) of the distributing corporation during the six-month (Saudi Arabia, 183-day, Portugal, 12-month) period ending on the date on which entitlement to the dividends is determined (Philippines, the day immediately preceding the date of payment of the dividends).

m) Dividends are exempt from withholding tax if the beneficial owner of the dividends owns directly at least 80% of the voting shares of the company pay­ing the dividends for a period of 12 months ending on the date on which en­titlement to the dividends is determined and if certain other conditions are met. The 5% rate applies to dividends paid to a company owning directly at least 10% of the voting shares of the payer. The 10% rate applies to other dividends.

n) The Czechoslovakia treaty applies to the Czech and Slovak Republics.

o) The 5% rate applies if the recipient of the dividends is a corporation owning at least 25% of the payer during the 6-month period immediately before the end of the accounting period for which the distribution of profits takes place. The 0% rate applies if the recipient of the dividends is a “specified parent company,” as defined in the treaty. The 15% rate applies to other dividends.

p) The general rate is 15%. The 10% rate applies to certain types of interest pay­ments such as interest paid to or by banks.

q) Loan interest paid to nonresidents is subject to a 20% withholding tax. Interest paid to nonresidents on bonds, debentures or bank deposits is subject to a 15% withholding tax.

r) The withholding rate for the use of, or the right to use, industrial, commercial or scientific equipment is 5%.

s) The 15% rate applies if the dividends are paid by a company engaged in an industrial undertaking to a company owning at least 25% of the payer of the dividends. The 20% rate applies to other dividends.

t) Dividends are exempt from withholding tax if the company receiving the dividends owns at least 10% of the voting shares of the payer for the six-month period ending on the date on which entitlement to the dividends is determined and if certain other conditions are met. The 10% rate applies in other cases.

u) The 0% rate applies if the beneficial owner of the dividends owns directly at least 15%, or owns at least 25% (regardless of whether ownership is direct or indirect), of the voting shares of the payer of the dividends for the six-month period ending on the date on which the entitlement to dividends is determined and if certain other conditions are met. The 5% rate applies to dividends paid to a company owning directly or indirectly at least 10% of the voting shares of the payer for the six-month period ending on the date on which the entitlement to dividends is determined. The 10% rate applies to other dividends.

v) The 5% rate applies if the beneficial owner of dividends owns directly or indirectly at least 50% of the voting shares of the payer of the dividends for the 6-month period ending on the date on which the entitlement to dividends is determined. The 7.5% rate applies to dividends paid to a company owning directly or indirectly at least 25% of the voting shares of the payer for the 6-month period ending on the date on which the entitlement to dividends is determined. The 10% rate applies to other dividends.

w) The withholding tax rate on royalties is 10% under the treaty. However, the reduced rate of 5% provided in the protocol dated 19 December 2008 applies.

x) Dividends are exempt from withholding tax if the company receiving the dividends owns at least 10% of the voting shares of the payer for the six-month period ending on the date on which entitlement to the dividends is determined and if certain other conditions are met.

y) Dividends are exempt from withholding tax if the company receiving the dividends owns at least 50% of the voting shares of the payer for the six-month period ending on the date on which entitlement to the dividends is determined and if certain other conditions are met. The 5% rate applies to dividends paid to a company owning at least 10% of the voting shares of the payer for the six-month period ending on the date on which entitlement to the dividends is determined. The 10% rate applies to other dividends.

z) Interest paid to a contracting state, subdivision or certain financial institu­tions are exempt. The 10% rate applies to other interest payments.

(aa) Royalties are exempt from withholding tax if certain conditions are met.

(bb) In January 2013, Japan signed a protocol to revise its double tax treaty with the United States. The protocol has not yet entered into force. Under the protocol, dividends will be exempt from withholding tax if the company re­ceiving the dividends owns at least 50% of the voting shares of the payer for the six-month period ending on the date on which entitlement to the divi­dends is determined and if certain other conditions are met. The same rates under the current treaty will apply to other dividends. Interest will be exempt from withholding tax if certain conditions are met.

(cc) Interest paid to a contracting state or subdivision is exempt. A 5% rate applies to interest paid to banks. The 10% rate applies to other interest payments. (dd) Interest is exempt from withholding tax if certain conditions are met.

In February 2015, Japan signed a double tax treaty with Qatar. The agreement has not yet entered into force. Under the agree­ment, a 5% rate will apply to dividends paid to a company owning at least 10% of the shares of the payer for the six-month period ending on the date on which entitlement to the dividends is deter­mined. A 10% rate will apply to other dividends. Interest paid to a contracting state, subdivision or certain financial institutions will be exempt. A 10% rate will apply to other interest payments. A 5% rate will apply to royalties.