Summary of Tax Treatment


This rule is applied when a resident or domestic corporation (including a family corporation group) owns 5% or more of the issued stock or investment in a specified foreign subsidiary corporation. In the case where the specified foreign subsidiary corporation has applicable retained income, the taxable retained income among the applicable retained income is deemed as income of the domestic corporation. Then it shall be included in the taxable income of the said domestic corporation.

Applicable foreign-related company

Foreign-related company

A foreign corporation and the ratio of the total numbers or the total amount of stock (limited to voting stock) which are held directly or indirectly by domestic corporations exceeds 50 percent.

Specified foreign subsidiary corporation

Among the above-mentioned foreign-related companies, in the case where a corporation of which tax burden on income in countries or areas where its headquarters or main office exists is substantially lower compared with tax burden on corporations' income in Japan.

Taxable retained income

Applicable retained income

The adjusted amount to the tax amount on unappropriated income and dividends of profit or distribution of earnings to unappropriated income as the amount retained from unappropriated income in each accounting period beginning after April 1, 1978.

Taxable retained income

Among the applicable retained income, the amount equivalent to that calculated to be corresponding to stock of the specified foreign subsidy corporation directly or indirectly held by the domestic corporation.


In the case where a foreign corporation has issued stock without right of claim for dividends, distribution of property and other economic earnings (hereinafter referred to as "stock without right of claim"), such stock is excluded when calculating any of the above noted ownership ratios.

Intent of amendment

This amendment intends to prevent avoiding Anti-Tax Heaven rule by issuing the stock without right of claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For more specific information regarding this article, please do not hesitate to contact Kazuhiro Ashizuka at 03-3506-2433(telephone) or at 03-3506-2412(fax).