An overseas investor's overall victory in a tax litigation concerning a tokumei-kumiai (silent partnership) transaction has become final and binding. The investor's counsel consisted of Mitsuo Sasaki, Kenichi Nakano, Koji Fujita, Shinji Nakamura, Yoshinori Aoyagi and Mariko Onishi.

Kenichi NakanoKoji FujitaShinji NakamuraYoshinori Aoyagi
2008. 06. 30
Deals and Cases

The Tokyo Regional Taxation Bureau assessed corporate income tax on receipt of distribution of profits from a Japanese company (business operator) by a Dutch company (tokumei-kumiai investor) under a tokumei-kumiai contract, alleging that the partnership constituted a permanent establishment of the off-shore investor. The courts, in both the first and second instance, reversed the tax assessment on the distribution of Tokumei-kumiai profits. The courts held that the contract between the two companies was a valid tokumei-kumiai contract, that tokumei-kumiai profits fell within the scope of Article 23 of the Japan-Netherlands Tax Convention and that there was no legal basis for imposing corporate income tax on the investor's receipt of distribution of tokumei-kumiai profits. The tax authority further appealed to the Supreme Court, but the Supreme Court did not accept the appeal and the taxpayer's overall victory became final and binding on 5 June, 2008. To our knowledge, this is the first judicial case in which the court reversed tax assessment concerning a tokumei-kumiai transaction. Our partners, Mitsuo Sasaki, Kenichi Nakano, Koji Fujita and our associates, Shinji Nakamura, Yoshinori Aoyagi and Mariko Onishi represented the investor in this matter.