Japan rejigs tax code to entice foreign funds

Japan has relaxed its tax code so foreign asset managers and hedge funds can avoid dual taxation, as part of Tokyo's push to revive itself as a global finance centre according to a recent report by Reuters.

In a two-step process that began in April with the revision of a cabinet order and finished in early July, the government has retooled tax rules so offshore funds can avoid being classified as having a "permanent establishment" in Japan.

Commonly referred to as a "PE" in tax law, the classification would force offshore funds - which already pay taxes in their home countries - to pay domestic taxes on any returns made in Japan. Faced with sluggish growth and a rapidly shrinking population, the world's second-largest economy is desperate for foreign investment and is especially keen to woo hedge funds, which have an estimated worth of $2 trillion globally.