JAPAN Law and Practice Contributed by: Kunihiko Morishita, Masayuki Hashimoto and Koichi Miyamoto, Anderson Mori & Tomotsune
4. Legal, Regulatory or Tax Changes 4.1 Recent Developments and Proposals for Reform Although there are no laws or regulations in Japan that prohibit an investment trust from investing in unlisted stocks, until recently there had been no investment trusts investing in unlisted stocks partly because the clear valu - ation method of unlisted stocks had not been established. In particular, it had been difficult for publicly offered investment trusts, which normal - ly calculate the net asset value and allow inves - tors to purchase and sell the units on a daily basis, to invest in illiquid unlisted stocks. However, in December 2023, the government of Japan published the “Policy Plan for Promoting Japan as a Leading Asset Management Centre”, with the aim of reforming Japan’s asset manage - ment sector and asset ownership. As a part of this initiative, it is now required to activate the provision of growth funds to start-up compa - nies, which is deemed essential for sustainable economic growth, through stock investment. In line with this, the rules of the ITAJ have been amended to make it possible for publicly offered investment trusts to invest in unlisted stocks in practice, in an attempt to facilitate the smooth provision of funds to unlisted companies, includ - ing start-up companies, and provide various investment opportunities to investors. Pursuant to the amended ITAJ rules, in general, an investment trust may invest up to 15% of its total net assets in unlisted stocks. Furthermore, it may invest more than 15% in them, provided that, from the viewpoint of investor protection, it: • takes measures to ensure liquidity and con - sider equality among unitholders and, there -
A publicly offered foreign investment trust may borrow up to 10% of the net asset value. 3.6 Tax Regime The taxation of publicly offered investment funds is basically the same as for privately placed investment funds. Nonetheless, for individual investors, in respect of stock investment trusts, ordinary distributions are subject to a withholding tax at the rate of 20.315%; thereafter, the taxpayer may select an aggregate taxation, a separate self-assessed taxation or a separate taxation at source. If sepa - rate taxation at source is selected, the taxpayer’s tax obligations are thereby fulfilled. Capital gains are subject to a separate self- assessed taxation at the rate of 20.315%. In respect of public and corporate bond invest - ment trusts, ordinary distributions are subject to a withholding tax at the rate of 20.315%; thereafter, the taxpayer may select a separate self-assessed taxation or a separate taxation at source. Capital gains are subject to a separate self-assessed taxation at the rate of 20.315%. In respect of investment corporations, ordinary distributions are subject to a withholding tax at the rate of 20.315%; thereafter, the taxpayer may select an aggregate taxation, a separate self-assessed taxation or a separate taxation at source. Capital gains are subject to a separate self-assessed taxation at the rate of 20.315%.
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