Japan: Increase in withholding tax on securities income from 2013 : Reminder
Further to our Announcement A11182, dated 2 December 2011, we hereby remind customers that, effective
1 January 2013
the Japanese government has revised its proposal for a temporary increase in withholding tax. The new proposal provides an increase for a period of 25 years to secure funding for reconstruction after the earthquake of 11 March 2011.
According to the proposal and subject to approval during the current Diet session, the national tax on interest and dividends would increase by 2.1% (meaning, for example, an increase from 7% to 7.147% for dividend income paid to foreign investors until December 2013).
Note: The J-BIEM (the tax-exemption scheme for Japanese fixed income instruments) is not within the scope of the proposal and will not be affected.
Details of the increase
Further to the conference held by the Japanese Governmental Tax Research Commission on 15 November 2011, the Cabinet Office of the Government of Japan has published the revised rates of a temporary increase of withholding tax on interest and dividend income.
In the proposal, rates will be increased by 2.1% for 25 years starting from 1 January 2013. This temporary increase would apply to national tax only. The previously proposed increase was 4% for 10 years.
Note: In the following tables, N=National tax; L=Local tax.
Dividends
| Type of investor | Current rate | Rate from January 2013 | Rate from January 2014 | Rate from January 2038 |
| Japanese investors | 10% (= 7% N + 3% L) | 10.147% (= 7.147% N + 3% L) | 20.315% (= 15.315% N + 5% L) | 20% (= 15% N + 5% L) |
| Foreign investors | 7% | 7.147% | 15.315% | 15% |
Interest
| Type of investor | Current rate | Rate from January 2013 | Rate from January 2014 | Rate from January 2038 |
| Japanese investors | 20% (= 15% N + 5% L) | 20.315% (= 15.315% N + 5% L) | 20.315% (= 15.315% N + 5% L) | 20% (= 15% N + 5% L) |
| Foreign investors | 15% | 15.315% | 15.315% | 15% |
Note: The applicability of the special taxation treatment to dividend income (7% for foreign investors) is due to expire in December 2013 and the approval of the Diet is required for any further extension.
The above information is from the Cabinet Office of the Government of Japan. More information (in Japanese) is available from the Cabinet Office website (www.cao.go.jp/zei-cho/gijiroku/zeicho/2011/index.html).
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