Japanese National Tax Agency Clarified Tax Treatment of US LPS

This was released in response to concerns that a US LPS should be treated as an opaque entity as a consequence of the decision by the Japanese Supreme Court on 17 July 2015 that declared that a US Delaware LPS should be treated as a corporation for Japanese tax purposes.

The NTA clarified in the statement that the NTA treats a US LPS (that has not made an election to be classified as a corporation for US federal tax purposes) as a fiscally transparent entity and for the purposes of applying the US-Japan tax treaty, a Japanese resident that derives an item of income through a US LPS, and that meets all other requirements under the treaty would be eligible to claim tax treaty benefits.

Please see the original statement for more details.

The tax treatment under Japanese law of items of income derived through a U.S. Limited Partnership by Japanese resident partners (PDF 38KB)

KPMG Japan e-Tax News No.127