Japanese Government Bonds (JGBs) - rates, eligibility, availability of relief etc.
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 | The Excel Application Form for Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms. The form is valid for five years. The applicant should always be the ultimate beneficial owner of the securities (in this case, the Clearstream Banking client). |
Notification Form for Withholding Tax Exemption (for Partnership or Trust only) | The Notification Form for Withholding Tax Exemption (for Partnership or Trust only) in Word format (editable/fillable format) must be sent by email to tax@clearstream.com. The original is not required. The form is valid for five years. The applicant should always be the ultimate beneficial owner of the securities (in this case, the Clearstream Banking client). |
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 the beneficial owner’s name and address. The valid ID document can be submitted in an electronic format instead of submission in hard copy format. |
SWIFT MT599 or Xact Web Portal message | 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 Web Portal message: |
If the details of the ultimate beneficial owner of the securities must be changed, 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) | The Excel Application Form for Amendment concerning Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Amendment concerning Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms. |
Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only) | The Notification Form for Amendment concerning Withholding Tax Exemption (for Partnership or Trust only) in Word format (editable/fillable format) must be sent by email to tax@clearstream.com. The original is not required. |
For a TIN extension, the following document needs to be submitted to Clearstream, in addition to the relevant consent letter and the valid ID document:
Application Form for Amendment concerning Withholding Tax Exemption | The Excel Application Form for Amendment concerning Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Amendment concerning Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms. |
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 Web Portal message | Clients that require 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 Web Portal message: |
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:
- Details of the FIP definition, the application procedures for FIP status;
- Information regarding taxation on JGBs.
To hold JGBs for third-party beneficial owners via Clearstream Banking, clients must submit the following documentation:
Application Form for Withholding Tax Exemption | The Excel Application Form for Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms. The forms are valid for five years. The applicant in the form should always be the ultimate beneficial owner of the securities. |
Notification Form for Withholding Tax Exemption (for Partnership or Trust only) | The Notification Form for Withholding Tax Exemption (for Partnership or Trust only) in pdf format (non-editable format) must be sent by email to tax@clearstream.com. The original is not required. The forms are valid for five years. The applicant in the form should always be the ultimate beneficial owner of the securities. |
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 Web Portal message | Clients that require 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 Web Portal message: |
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). |
If the details of the ultimate beneficial owner of the securities must be changed, the following documents need to be submitted to Clearstream:
Application Form for Amendment concerning Withholding Tax Exemption (if applicable). | The Excel Application Form for Amendment concerning Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Amendment concerning Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms. |
Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only) | The Notification Form for Amendment concerning Withholding Tax Exemption (for Partnership or Trust only) in pdf format (non-editable format) must be sent by email to tax@clearstream.com. |
For a TIN extension, the following documents need to be submitted to Clearstream, in addition to the relevant consent letter:
A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) | 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). |
Application Form for Amendment concerning Withholding Tax Exemption. | Application Form for Amendment concerning Withholding Tax Exemption. The Excel Application Form for Amendment concerning Withholding Tax Exemption must be password protected and sent by email to tax@clearstream.com. The original is not required. The guide to complete the Application Form for Amendment concerning Withholding Tax Exemption is available in the section Guidance for the use and completion of tax forms – Application forms |
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.