Japanese corporate bonds and municipal bonds - rates, eligibility, availability of relief etc.
Withholding Tax
| Standard rate of withholding tax: | 0% | Holding requirements / restrictions: | Yes |
Only tax-exempt beneficial owners are eligible to hold Japanese corporate bonds and municipal bonds in Clearstream Banking. The standard rate of withholding tax on interest and redemptions from such bonds is therefore 0% in Clearstream Banking and consequently no relief/reclaim procedures apply.
Beneficial owners eligible to hold Japanese corporate bonds and municipal bonds are as follows:
- Non-residents of Japan;
- Designated Financial Institutions (DFIs) - provided that the Clearstream Banking client has DFI status and is the sole beneficial owner of the bonds in the account (proprietary assets).
Documentation requirements
The documentation to be submitted in order to hold Japanese corporate bonds and municipal bonds vary depending on whether the client is to hold the bonds as proprietary assets or as an intermediary.
Important Note: Client may hold proprietary assets and assets for third parties but the respective holdings must be held in strictly separate accounts. For client holding third party assets, the holding in each account may strictly be held on behalf of one single beneficial owner only.
For clients to hold Japanese corporate bonds and municipal bonds as proprietary assets
To hold Japanese corporate bonds and municipal bonds as proprietary assets in a Clearstream Banking account, clients must submit the following documentation depending on their status:
- Non-residents of Japan
- Application Form for Withholding Tax Exemption;
- Notification Form for Withholding Tax Exemption (for Partnership or Trust only).
The applicant should always be the ultimate beneficial owner of the securities (in this case, the Clearstream Banking client).
Clearstream Banking, being the Qualified Financial Intermediary (QFI) of the applicant, will complete the QFI parts on behalf of the client holding the proprietary assets (boxes 8 and 9). The form is valid for five years.
The electronic format in Word (editable/fillable format) must be sent by email to tax@clearstream.com. The original is not required. - Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking client and valid until revoked.
Note: Clearstream Banking S.A. clients must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG clients must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.
- A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) issued by the government or any public office within six months. The valid ID document should mention a valid ID number, the beneficial owner’s name and address. It must be sent together with the Application Form for Withholding Tax Exemption, Notification Form for Withholding Tax Exemption (for Partnership or Trust only). The valid ID document can be submitted in an electronic format instead of submission in hard copy format;
- SWIFT MT599 or Xact free-format message, to be sent “Attn: Singapore Tax team - SIT”.
Clients that want an account to be eligible for Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or Xact free-format message:
“We kindly request Clearstream to make account number ______ (insert the Clearstream Banking account number) eligible for Japanese corporate bonds and municipal bonds and confirm that this account will be used solely for proprietary business."
Note: In case of change of details of the ultimate beneficial owner of the securities, the following documents need to be submitted to Clearstream, in addition to the consent letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds and the valid ID document:- Application Form for Amendment concerning Withholding Tax Exemption (if applicable);
- Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only).
- Designated Financial Institutions (DFIs)
Clients that are institutions with DFI status from the Financial Services Agency (FSA) in Japan and hold only proprietary Japanese corporate bonds and municipal bonds are eligible for the CBL Japanese Corporate and Municipal Bonds service.
Eligible clients that are DFI must be:
The official list of licensed (registered) DFIs is maintained on the FSA website.
To hold Japanese corporate bonds and municipal bonds as proprietary assets in an account with Clearstream Banking, DFIs must submit the following documentation:- Resident for tax purposes in Japan (Japanese residents, Japanese corporations resident in Japan and branches of such resident corporations); or
- Overseas branches of Japanese corporations; or
- Overseas affiliates of Japanese corporations.
- One-Time Certificate of Residence in Japan - Designated Financial Institution, signed by the DFI and valid until revoked;
- Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking client and valid until revoked.
Note: Clearstream Banking S.A. clients must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG clients must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.
- SWIFT MT599 or Xact free-format message, to be sent “Attn: Singapore Tax team - SIT”.
Clients that want an account to be eligible for the Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or Xact free-format message:
“We kindly request Clearstream to make account number ______ (insert the Clearstream Banking account number) eligible for Japanese corporate bonds and municipal bonds and confirm that we are a DFI resident in Japan for tax purposes and that we are eligible to utilise the book-entry system for Japanese corporate bonds and municipal bonds. Appropriate documentation will be provided by us to confirm these statuses.
We also confirm that this account will be used solely by a DFI for the purpose of safekeeping only proprietary Japanese corporate bonds and municipal bonds, whose tax status should be 'exempt' under the DFI regime.”
For clients to hold Japanese corporate bonds and municipal bonds as intermediary
Clients acting as intermediary must be non-resident investors and must, before holding the Japanese corporate bonds and municipal bonds for third parties, have:
- Foreign Indirect Account Management Institution (FIAMI) status;
All intermediaries in the custody chain are required to have FIAMI status for corporate bonds obtained from JASDEC.
Details of the FIAMI definition and application procedures are available on Japan Securities Depository Center, Inc. “JASDEC” website: http://www.jasdec.com/en/system/less/participation/account/. And - Qualified Foreign Intermediary (QFI) status
The last financial institution in the custody chain with which the final beneficial owner has the account must, in addition to FIAMI status, also have obtained QFI status for corporate bonds from the National Tax Agency (NTA) Commissioner via JASDEC.
It is the responsibility of each intermediary in the chain, where there are several intermediaries, to ensure that their direct client has obtained QFI status (if required).
Clearstream Banking (CBL and CBF) has already obtained FIAMI status and QFI status required to hold Japanese corporate bonds and municipal bonds.
Intermediaries must request FIAMI status for corporate bonds and QFI status for corporate bonds through CBL and CBL's sub custodian HSBC, even if the status has already been obtained through another sub custodian.
To hold Japanese corporate bonds and municipal bonds for third-party beneficial owners via Clearstream Banking, clients must submit the following documentation:
- Application Form for Withholding Tax Exemption;
- Notification Form for Withholding Tax Exemption (for Partnership or Trust only).
The forms must be dated by the respective QFI on behalf of the beneficial owner and are valid for five years.
The QFI is required to insert the name of the ID document by which the QFI has identified the applicant (Name of the ID Document by which the QFI's specified foreign branch identified the applicant (boxes 8 and 9)).
The applicant in the form should always be the ultimate beneficial owner of the securities.
The electronic format in PDF (non-editable format) must be sent by email to tax@clearstream.com. The original is not required.
- Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking client and valid until revoked.
Note: Clearstream Banking S.A. clients must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and Clearstream Banking AG clients must use the form Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.
- SWIFT MT599 or Xact free-format message, to be sent “Attn: Singapore Tax team - SIT”.
Clients that want an account to be eligible for the Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or Xact free-format message:
“We kindly request Clearstream to make account number ______ (insert the Clearstream Banking account number) eligible for Japanese corporate bonds and municipal bonds and confirm that this account will be used solely for third-party business.
Using this account for third-party (agent) business, we confirm that we have FIAMI and/or QFI status (delete as appropriate) and that the appropriate documentation will be provided.
We also confirm that we have duly received the Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds based on the Article 26 (Agreement with Client) of the JASDEC regulation, signed by the applicant.” - Copy of the document proving FIAMI status, valid until revoked;
- A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) issued by the government or any public office within six months, has to be submitted and retained by the last financial institution/QFI in the chain with whom the applicant (final beneficial owner) has the account and who must, in turn, provide it promptly to the Clearstream Banking client, upon request at any time, for forwarding to Clearstream Banking (in an electronic format).
Note: In case of change of details of the ultimate beneficial owner of the securities, the following documents need to be submitted to Clearstream:- Application Form for Amendment concerning Withholding Tax Exemption (if applicable);
- Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only).
End Investor Registration Number (TIN)
Once the application is complete and processed by Clearstream Banking’s depository, an “End Investor Registration Number” (TIN) will be allocated and sent to the client via SWIFT message. If a Registration Number was previously provided for Japanese Government Bonds (JGBs), a new number for Japanese corporate bonds and municipal bonds will not be provided.
Clearstream Banking deadline
Clients must ensure that the required documentation is provided before any underlying beneficial owner makes a first investment.
Beneficial Owner Disclosure Requirement
Clients holding Japanese corporate bonds and municipal bonds are obliged to fulfil certain disclosure requirements. For more information, please refer to "Beneficial Owner Disclosure Requirement" under the Japanese Corporate and Municipal Bonds service section of the Creation Link Guide - Debt securities.