Japanese Government Bonds (JGBs) - rates, eligibility, availability of relief etc.

18.10.2023

Withholding Tax

Standard rate of withholding tax:

0%

Holding requirements / restrictions:

Yes

Only tax-exempt beneficial owners are eligible to hold Japanese Government Bonds (JGBs) in Clearstream Banking. The standard rate of withholding tax on interest and redemptions from JGBs is therefore 0% in Clearstream Banking and consequently no relief/reclaim procedures apply.

Beneficial owners eligible to hold JGBs 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 JGBs in the account (proprietary assets).

Documentation requirements

The documentation to be submitted in order to qualify to hold JGBs in Clearstream Banking vary depending on whether the client is to hold the JGBs as proprietary assets or as an intermediary.

Important Note: Clients may hold proprietary assets and assets for third parties but the respective holdings must be held in strictly separate accounts. For clients 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 JGBs as proprietary assets

To hold JGBs 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 JGB Book-entry System operated by Bank of Japan, signed by the Clearstream Banking client and valid until revoked.

      Note: Clearstream Banking S.A. clients must use the form “Consent Letter for JGB Book-entry System operated by Bank of Japan (CBL)” and Clearstream Banking AG clients must use the form “Consent Letter for JGB Book-entry System operated by Bank of Japan (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 the JGB 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 Government 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 JGB Book-entry System operated by Bank of Japan 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 JGBs are eligible for the CBL JGB service.
    Eligible clients that are DFI must be:
    • 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.

The official list of licensed (registered) DFIs is maintained on the FSA website.

To hold JGBs as proprietary assets in an account with Clearstream Banking, DFIs must submit the following documentation:

  • One-Time Certificate of Residence in Japan - Designated Financial Institution, signed by the DFI and valid until revoked;
  • Consent Letter for JGB Book-entry System operated by Bank of Japan, signed by the Clearstream Banking client and valid until revoked;

    Note: Clearstream Banking S.A. clients must use form “Consent Letter for JGB Book-entry System operated by Bank of Japan (CBL)” and Clearstream Banking AG clients must use the form “Consent Letter for JGB Book-entry System operated by Bank of Japan (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 JGB 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 Government 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 Government Bonds.
We also confirm that this account will be used solely by a DFI for the purpose of safekeeping only proprietary Japanese Government Bonds, whose tax status should be 'exempt' under the DFI regime.”

For clients to hold JGBs as intermediary

Clients acting as intermediary must be non-resident investors and must, before holding the JGBs for third parties, have:

  • Foreign Indirect Participant (FIP) status; and
  • Qualified Foreign Intermediary (QFI) status.

Note: All intermediaries in the custody chain are required to have FIP status.

The last financial institution in the custody chain with which the final beneficial owner has the account must, in addition to FIP status, also have obtained QFI status for government bonds from the National Tax Agency (NTA) Commissioner via the Bank of Japan (BOJ).

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 has already obtained FIP status and QFI status required to JGBs.

Intermediaries must appoint Clearstream Banking as their additional Designated Participant via their current/existing agent even if they already have obtained FIP statuses. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

Information is available on the website of the Japanese Ministry of Finance as follows:

Information is available on the website of the Bank of Japan as follows:

To hold JGBs 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 JGB Book-entry System operated by Bank of Japan, signed by the Clearstream Banking client and valid until revoked;

    Note: Clearstream Banking S.A. clients must use the form “Consent Letter for JGB Book-entry System operated by Bank of Japan (CBL)” and Clearstream Banking AG clients must use the form “Consent Letter for JGB Book-entry System operated by Bank of Japan (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 JGB 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 Government 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 FIP status/QFI status/FIP and 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 JGB Book-entry System operated by Bank of Japan based on the Article 20 (Agreement with Client) of the Bank of Japan Regulations concerning the JGB Book-entry System, signed by the applicant.”

  • Copy of the document proving FIP 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).

Transferring holdings to Clearstream Banking

When preparing an asset/portfolio transfer, clients must, before the transfer occurs, advise Clearstream Banking that they are appointing Clearstream Banking as a Designated Participant, as follows:

Clients transferring proprietary holdings

  • If the local representative is to remain:
    The client must inform their local representative that Clearstream Banking will act as their additional Designated Participant.
  • If the local representative is to change:
    The client must inform Clearstream Banking of the current local representative, including contact details, and request the change of local representative to HSBC (Clearstream Banking’s depository in Japan).

Clients transferring third-party holdings

  • If the local representative is to remain:

    The client must inform their local representative to arrange for Clearstream Banking to be added as a Designated Participant.
  • If the local representative is to change:

    The client must notify Clearstream Banking of the intended change and complete an application form, which will, upon such notification, be provided to the client.
    The application form will be processed via Bank of Japan and clients must be aware that additional documentation may be required by Bank of Japan to carry out the change of local representative.

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 Corporate Bonds or Japanese municipal bonds, a new number for JGBs 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.

Reporting

Clients holding JGBs are obliged to fulfil certain reporting requirements. For more information, please refer to "Non-resident investors" under the Japanese Government Bond (JGB) service section of the Creation Link Guide - Debt securities.

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