Japan: Guidance on tax treatment of carried interest
Japan’s Financial Services Agency released information regarding the tax treatment of “carried interest”
Information regarding the tax treatment of “carried interest”
Japan’s Financial Services Agency on 22 April 2021 released information, in English, regarding the tax treatment of “carried interest.”
The government ruling coalition in December 2020 agreed to an outline of tax reform proposals for 2021—including clarification of the income tax treatment of distributions of profit received by fund managers (carried interest). The proposals described when there is “economic reality” regarding the carried interest distribution ratio that fund managers receive from a partnership whose business is a transfer of shares (or similar items) and in which the fund managers have an equity interest, then the carried interest would not be subject to tax as consideration for the provision of services, but would be subject to separate taxation as a gain on the transfer of shares. Read a KPMG report [PDF 367 KB]
To provide guidance regarding carried interest, the Financial Services Agency released a notice that defines certain basic concepts such as what is “economic rationality” and that describes what would be the approach generally to situations subject to the carried interest rules. The guidance also confirms the position of the Financial Services Agency and of the national tax administration (that is, the tax authority responded that it did not object to the notice).
Read an April 2021 report [PDF 227 KB] prepared by the KPMG member firm in Japan
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.