Treasury And IRS Clarify Position On Japanese Business Entities
The US Treasury Department announced on Monday that in conjunction with the Internal
Revenue Service, it has issued a revenue ruling that addresses the US federal
tax classification of certain Japanese business entities.
The revenue ruling responds to numerous enquiries regarding the effect that newly enacted
Japanese laws have on the existing Yugen Kaisha (YK) business entity. Under the new Japanese laws, all existing YKs will be converted into Tokurei
Yugen Kaisha (TYK) business entities, and will be considered a type of Kabushiki
Kaisha (KK) business entity. Generally under the entity classification regulations, which apply for US
federal tax purposes, a business entity is eligible to elect its tax classification
(partnership, corporation, or entity disregarded as separate from its owner).
However, certain business entities, such as the Japanese KK, are always considered
corporations. Under the regulations, a Japanese YK business entity is an entity
that is eligible to elect its US federal tax classification. The revenue ruling concludes that even though a YK that becomes a TYK under
the new Japanese law will be considered a type of KK business entity under such
law, it will, for US federal tax purposes, remain an eligible entity that
is eligible to elect its US tax classification. .
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