Investor Presentaiton
TK Structure-Some Key Features
What is a TK?
A TK is a contractual arrangement under which one or more silent investors (the "TK investor" or kumiai-in) makes a contribution to a Japanese
operating company (the "TK operator" or eigyosha) in return for a share in the profit/loss of a specified business conducted by the TK operator
(the "TK business").
The investment by the TK investor does not represent equity in the TK operator, nor does the TK investor gain any ownership interest in the
underlying assets of the TK operator. Furthermore, the TK investor is not permitted to participate in the management or operation of the TK
business, but is intended to take a passive investment role ("Tokumei Kumiai" translates as "anonymous partnership", and is often referred to as
a silent partnership).
● Typically, special purpose TK operators (i.e. TK operators established to undertake a specific investment, or to achieve bankruptcy remoteness)
take the form of a godo kaisha ("GK"). A GK is a form of Japanese limited liability company.
Why is a TK tax efficient?
The TK operator is a standard taxable company in Japan, subject to the full Japanese effective corporate tax rate (at approximately 31-35%),
but where the TK is bona fide, the TK operator is permitted a tax deduction for profits allocated to the TK investor. Accordingly, TK operator
level taxable income will ordinarily be significantly reduced.
For a non-resident TK investor with no permanent establishment (PE) in Japan, withholding tax of 20.42% arises at the time of distribution of
allocated profits. This should be the final Japanese tax on such profits.
A very limited number of Japan's tax treaties provide for complete exemption from this withholding tax. The Japan-Korea tax treaty is one
such example that does.
If the TK is not viewed as bona fide, this could result in the TK investor being deemed to have a general partnership with the TK operator in
Japan, resulting in taxation on the TK investor's profits at the full Japanese effective corporate tax rate. Where for example, the Japan -
Korea tax treaty is sought to be applied this would need to be considered very carefully as would of course the residency of the Korean
investor and the commercial rationale for the use of Korea to invest into Japan.
KPMG
© 2023 KPMG Tax Corporation, a tax corporation incorporated under the Japanese CPTA Law and a member firm of the KPMG global
organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
All rights reserved.
Document Classification: KPMG Confidential
15View entire presentation