Japan: Tax treatment of income from U.S. limited partnerships

Japan: Tax treatment of income

Japan’s National Tax Agency (NTA) today released a statement concerning the tax treatment of income derived through a U.S. limited partnership by Japanese resident partners.

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The statement (English) [PDF 8 KB] was posted on the tax agency’s website, and was released in response to concerns that a U.S. limited partnership would be treated as an “opaque entity” after a 2015 decision of Japan’s Supreme Court. In that decision, the Supreme Court held that a U.S. Delaware limited partnership was to be treated as a corporation for Japanese tax purposes.

In today’s statement, the NTA clarified:

  • That it would treat a U.S. limited partnership that has not made an election to be classified as a corporation for U.S. federal tax purposes as a fiscally transparent entity; and 
  • That a Japanese resident (1) that derives income through a U.S. limited partnership, and (2) that meets all other requirements under the income tax treaty between Japan and the United States would be eligible to claim treaty benefits.

 

Read a February 2017 report [PDF 94 KB] prepared by the KPMG member firm in Japan

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