Tax Treatment of Foreign Investors Who Use TOCOM's Proximity Service



The Tokyo Commodity Exchange, Inc. (“the Exchange” or TOCOM) announced today that the National Tax Agency (NTA) of Japan has confirmed that foreign investors using the TOCOM proximity service, that do not have physical presence for conducting a business in Japan, will not be subject to corporation tax or income tax for using the TOCOM proximity service.

The Exchange recently received from NTA a response to the inquiry regarding the tax treatment of foreign investors who use theTOCOM proximity service*1. NTA’s response was that "if a foreign investor installs computer programs and other data to be used for placing orders to buy or sell commodities on the server owned by a TOCOM Member or a Vender*2, solely on the basis of such facts, such foreign investor will not be treated as having a permanent establishment in Japan.” That is to say that a non-resident individual or a foreign corporation having no permanent establishment will not be subject to corporate tax, or income tax, with respect to setting up and saving trading programs and other data on a server provided by a TOCOM Member or a Vender in utilizing the TOCOM proximity service.

The proximity service is provided by the exchange in cooperation with a system developer, designated by the exchange, in order to offer a high-speed, low latency trading environment. This is for market participants who have installed a computer server at a Vendor’s data center and connected the server with the exchange’s data center via high-speed communication channels.*3 TOCOM started providing proximity services on September 9, 2011

*1 Reference translation of the inquiry that TOCOM made to NTA is available here.

*2 A system developer designated by the Exchange to provide proximity service

*3 Basic concept of TOCOM Proximity Service