Japan Readies Tax Boost For Foreign Investors

by Mary Swire, Tax-News.com, Hong Kong

08 January 2009

The Japanese government is set to remove tax on capital gains for foreign investors who have bought into Japanese companies through funds.

The proposed tax relief measure, which has been widely reported in the world's financial press, is being drafted by Japan's Financial Services Agency, and could form part of the government's fiscal 2009 tax reform plans.

While there is no specific capital gains tax in place under Japanese tax law, companies selling stakes in businesses are currently subject to corporate tax at a rate of over 40%. This is seen as a major factor as to why foreign investment into Japan via funds is very low compared to other major economies.

The tax exemption will be apply to limited liability partnerships which have held a property investment for more than twelve months, but will only apply to foreign investors who hold less than 25% of the shares in a partnership.

It is believed that the measure will be introduced into parliament shortly and, if approved, could become effective as soon as April 1, 2009.

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