Investor Presentaiton
Illustrative TMK Cashflow/Tax Leakage Diagram
Indicative Effective Japanese
Tax Rate
49.9% x (say) 10% + 50.1% x 35%
= 22.5% (for example)
This can be reduced by leverage at
the onshore holder of the preferred
shares (i.e. at the Japan Branch level)
and can be impacted - up or down -
by the extent of tax treaty relief
available and the branch taxation
position. With a TMK-TK hybrid
approach, ETR potentially reducible
to 12.5% to 20%.
Payment of pre-tax dividends
subject to 20.42% withholding tax.
Potentially reducible under tax treaty,
for example to 5% (Singapore) or
10% (PRC) or 15% (Australia).
TMK level taxation should be minimal
if managed correctly. Maximum
around JPY2m per year.
KPMG
SPC 1
100%
Dividends
Investor
100%
Interest is subject to 20.42% withholding tax.
Potentially reducible under tax treaty, typically to
10% at best. Deductible amount of interest
subject to "thin capitalization", earning stripping
and transfer pricing rules.
SPC 2
Interest
No tax on
repatriation
from Branch to
head office
I
Japan
Branch
TMK
Dividends
Ownership
Real estate / Trust beneficial interest
© 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.
Branch is subject to tax at approx. 31-
35% depending on circumstances.
Additional non-profit based taxation
may also apply As noted with a TK
this can potentially he reduced to low
20%. Potentially 0% for genuine
Korean resident investors, for a
genuine TK arrangement.
Offshore
Japan
Payment of pre-tax dividends subject to 20.42%
withholding tax. This is fully creditable against
tax liability of the branch (and refundable if in
excess of tax liability). Pursuant to the 2022
Japan tax reforms, the WHT obligation on
dividends payable on or after 1 October 2023 to
domestic corporate shareholders that directly
own more than one third of the total shares in a
dividend paying entity is expected to be
abolished.
Document Classification: KPMG Confidential
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