The methods for collecting funds from foreign subsidiaries are various, such as dividends, royalties, consideration for services rendered, sales of machinery and equipment, materials, products, etc., and interest on loans.

In determining these collection methods, please be aware that the tax treatments of the foreign subsidiary are different in each country.

As one of these collection  methods, there is a dividend.

The foreign subsidiary dividend exclusion scheme practiced in Japan is that the domestic entity excludes the dividends from its taxable income calculation in the each fiscal year.

In order to create an environment that reflux the profits of foreign subsidiaries acquired in the overseas market to the home country at a right amount in the right time, it has been introduced in the tax reform of 2009.

More specifically, this is the system for purposes of calculating the taxable income of the parent company, and the exclusion amount equivalent to 95% of the parent company receives from the foreign subsidiary.

Points of foreign subsidiary dividend exclusion system are as follow, but it must be noted on the judgment of the special case, by the tax treaty.

Having more than 25% of the outstanding shares of the foreign corporation and continued to directly hold it for more than six months prior to the date of payment obligations of dividends declared

·The amount subject to be nontaxable is 95% and 5% is taxable.

• Foreign withholding taxes are not deductible if they are related to the dividend income on which taxpayers are seeking the application for the foreign subsidiary dividend exclusion system

・Foreign tax credit related to the foreign withholding tax does not apply to it either.