• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/5/2014

Japan - Possible BEPS-related implications under foreign dividend exclusion rule 

May 5: The Japanese Cabinet Office (Naikaku-fu) in late April 2014 posted a discussion paper (Japanese) [PDF 345 KB] used by the Tax Commission (Zei-Cho), and outlining certain tax issues for consultation—specifically, the Japanese government's response to a global tax debate and reforms concerning base erosion and profit shifting (BEPS).

The discussion paper identifies the double non-taxation resulting from issuance of certain redeemable preference shares (RPS) by Australian subsidiaries of Japanese multinationals as an area for review in terms of BEPS Action 2 (Neutralise the Effects of Hybrid Mismatch Arrangements).

Although not yet been formally decided, there is a possibility that the Japanese foreign dividend exclusion currently available on RPS dividends that qualify as tax deductible debt in Australia (i.e., hybrid treatment) could be removed.

Read a May 2014 report prepared by the KPMG member firm in Australia: Change afoot impacting RPS funding from Japan

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