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 English-language guidance is provided on a webpage and includes an English version of a previously released notice [PDF 465 KB] addressing 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



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