Overview

In 2009, the Japanese Ministry of Economy, Trade and Industry (METI) and the Financial Services Agency (FSA) proposed measures to promote the onshore bond market for Japanese issuers. The proposal would temporarily expand the exemption from Japanese withholding tax on onshore issuances to include corporate bonds and reduce the burden of the procedural requirements for obtaining the exemption.

The exemption is effective for interest accruing from 1 June 2010 on any qualifying bond issued before 1 April 2013, including currently-issued bonds from before 1 April 2010. In this regard, it is similar to the limitation on the exemption for select Eurobonds, which was repealed in the 2010 Tax Reform. Thus, interest accruing after 31 March 2013 will still continue to qualify if the bond was issued prior to 1 April 2013.

In addition, the exemption also applies to so-called “redemption gain” – this is the difference between the proceeds received upon redemption of the bond by the issuer and the price paid for the bond - on all bonds issued prior to 1 April 2013.

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