Bloomberg News

U.S. to Exempt Samurais From Tax Until 2013, Linklaters Says

March 12, 2012

The U.S. government will give tax- free status to Japanese holders of Samurai bonds issued by American borrowers until the end of next year, according to law firm Linklaters Tokyo.

Buyers of yen-denominated notes sold by U.S. borrowers in Japan including JPMorgan Chase & Co. (JPM) and General Electric Capital Corp. in the period will be able to sidestep the 30 percent tax withheld from interest payments in the new measure from March 18, Kozo Sasaki, a partner at Linklaters Tokyo, said today.

JPMorgan last month sold 161.5 billion yen ($1.96 billion) of yen-denominated notes, the biggest corporate Samurai issue in three years, and Goldman Sachs Group Inc. (GS) offered its first such notes in four years, according to data compiled by Bloomberg. The U.S. this month ends an exceptional measure of the Tax Equity and Fiscal Responsibility Act, or TEFRA, which has given tax-free status to Samurais.

“I’m very happy that we can avoid losing the Samurai bond market suddenly,” Sasaki said in a telephone interview. “This is a still temporary measure. The fundamental problem remains” that the securities may be taxed in future.

JPMorgan and Goldman Sachs offered a total of 243.5 billion yen of Samurai bonds this year, making it the busiest quarter for U.S. issuers since the period ended June 2008, ahead of the rule change, data compiled by Bloomberg show. Goldman raised 82 billion yen Feb. 21 in its first sale of the bonds since 2008.

The new offerings will fall under “foreign-targeted registered obligations,” a rule that had granted tax exemption until the end of 2008, Sasaki said.

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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