JAPAN Law and Practice Contributed by: Mikito Ishida (Mori Hamada & Matsumoto) and David Azcu (Simpson Thacher & Bartlett LLP), Mori Hamada & Matsumoto
Marketing Regulations, by making the Form 20 notice filing; • abolish the notice filing after final close; and • rely on the de minimis exemption for purposes of the Investment Management Regulations, which is beneficial to general partners as it effectively exempts them from some of the more burdensome ongoing filing and compliance obligations under the Investment Management Regulations. Foreign investor exemption A new exemption for “Specially Permitted Business for Foreign Investors” (the foreign investor exemption) was introduced in 2021, and is generally available to foreign fund managers who establish a physical office in Japan. Satisfying the requirements for this exemp - tion may be challenging for foreign fund managers; according to the FSA website, as of August 2025, only one applicant has utilised this exemption to date. In order to qualify for this exemption, a number of criteria must be satisfied, including that: • a majority of the aggregate capital contributions to the fund must be made by investors that are not Japanese residents; • the investors in the fund must meet certain criteria stipulated in the FIEA, including that any individual investors (other than sophisticated investors) in the fund must have no less than JPY300 million in net investment assets; and • the foreign fund manager must maintain a physical office in Japan. Since this exemption is intended for foreign funds with a global investor base, Japanese investors eligible to invest under this exemption are generally limited to professional investors (a “professional investor” is defined under the FIEA to include QIIs, publicly listed companies, Japanese corporations whose capital is reasonably expected to be no less than JPY500 mil - lion, and foreign legal entities). A foreign fund manager that relies on the foreign inves - tor exemption is permitted to engage in both market - ing activities and investment management activities in Japan by making a “Form 21-4” notice filing with the FSA. A foreign fund manager relying on this exemption
will be subject to regulations and ongoing obligations similar to those applicable to general partners that rely on the Article 63 Exemption. 2.3 Disclosure/Reporting Requirements Significant reforms took effect in 2016 that imposed heightened public disclosure requirements on general partners relying on the Article 63 Exemption. The main disclosure requirements are summarised below. Form 20-2 Disclosure After filing the Form 20, an Article 63 Exempted Oper - ator must, without delay, make certain information included in the Form 20 available either on its website or by other method that can be accessed easily by the public. The pro forma Form 20-2 is available on the FSA website. The FSA will publicly disclose the Form 20-2 on its website after submission. Annual Disclosure of Business reports and Disclosure Booklets Article 63 Exempted Operators are obliged to submit a “Business Report” on Form 21-2 annually within three months of the end of each fiscal year. If the only Japa - nese investors in the fund are professional investors, certain information may be omitted from the Business Report, including the composition of fund assets. The Article 63 Exempted Operator must also publicly disclose a “Disclosure Booklet” on Form 21-3 (ie, an excerpt from the Business Report) at its office in Japan, on its website or by other means, for a period of one year, commencing four months after the end of each fiscal year of the general partner. 2.4 Tax Regime for Funds The general tax treatments applicable to partnerships under Japanese tax laws (including the Income Tax Act, Corporation Tax Act, Act on Special Measures Concerning Taxation, and related cabinet orders and administrative guidelines) are summarised below. Pass-Through and Income Recognition IBLPs, NKs and LLPs receive pass-through tax treat - ment under Japanese tax law. Any tax liability is attrib - uted to the individual partners of the IBLP, NK or LLP, and not to the partnership itself. Each partner of an IBLP, NK or LLP is required to recognise its share of
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