Japanese Tax Blog in English

日本の税務情報を英語で書くブログ by みなと国際会計事務所

Tokumei Kumiak – TK

time 2016/08/15

Tokumei Kumiai (or TK for short) is a popular structure as an investment vehicle among foreign investors. The direct translation of TK is “anonymous partnership”. It consists of Principal and investor-partner(s). All the assets and the liabilities directly belong to Principal. Investor-partners do hold any rights to its business assets nor take responsibility to its creditors. That is why the structure is called “anonymous partnership”.

There should be two reasons to use the structure but one depends on a country where the investment money comes from.

1) The first reason is its lower tax rate. It is 20.42% withholding tax only, which is better than the tax rate for a company, which is about 30%.

2) The second reason is that a TK is regarded as a “Pass Through” entity. Because TK is a kind of paratnership, loss incurred in a TK should be allowed to allocate to each investors and deductible for the investors to the partnership. Although TK is regarded as a partnership in Japan, it may not necessrily be the case in oher countries. Because TK is legally hybrid nature of a company and partnership, some countries do not regard it as a partnership and thus its loss in the partnership is not deductible.

Points to consider

1) Principal and TK investors cannot be affiliated parties.
2) TK investor should not be involved in decision making process of TK.




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