In a tokumei kumiai agreement, “anonymous (or silent) partners” (組員, tokumei kumiai`in) invest in a company run by a manager (営, eigy-sha).  The company itself does not have a legal personality. All assets of the partnership are owned by the manager; However, anonymous partners are entitled to a share of the company`s profits, as stipulated in the partnership agreement. Anonymous partners are only limitedly responsible for the company`s debt, provided they are anonymous. If an anonymous partner authorizes the use of its name in the manager`s name or in the name of the partnership, the anonymous partner loses its limited liability.  Tokumei kumiai (組, literally “anonymous partnerships,” is a Japanese bilateral treaty subject to Japan`s code of commerce, Article 535 and subsequent. In many ways, they are similar to common law limited partnerships. Tokumei Kumiai is an agreement under Article 535 of the Japanese Code of Commerce, i.e. the investor (TK Investor) promises to contribute to an economic operator (TK) and the trader promises to distribute the profits of his activities (TK-Distribution) to the investor. Tokumei kumiai are often used for investment funds. A structure known as the “Dutch TK” was once popular with foreign investors in Japan, as it was possible to recognize Japan`s income through an anonymous Dutch partner in a kummeiiai tokumei without paying Japanese income or withholding tax under the 1970 tax treaty.
This loophole was created in August 2010 by a new tax treaty providing for a 20% withholding tax on distributions via these structures.  More recently, it has become popular to use a Tokumei kumiai with a Kaisha Godo to keep a loyal beneficial interest in real estate known as the “TK/GK scheme”.  Standard TK-GK Structure is presented as follows: When TK is used to invest in Real Estate or Japanese Solar Panels, the Japanese Godo Kaisha (GK) is often considered a TK operator. The structure with TK and GK is sometimes called the “TK-GK structure.” When a resident receives the TK distribution, he or she must generally declare the distribution as “other income” by filing the income tax return. The progressive tax rate of up to 56% (including taxes and local taxes) is applied to other income with other income categories, such as income from wages or rents, etc. In the event that the TK agreement expires before the Kasha Bunkatsu date, the parties agree to take all necessary measures to achieve the same economic effect for each party, as if the TK agreement were fully in force and would be effective until the date when the Kaisha Bunkatsu takes place. In general, Japan`s tax treaties will not reduce the taxation of the distribution of TK to non-residents or be tax-exempt (although some tax treaties may still be tax-exempt). The withholding tax is charged on the annual individual tax or corporation tax calculated on the return. Under the TK agreement, the purchase price of the property of JPY 1,500 million (approximately 53.6 million.RM) is injected by operator TK into operator TK to facilitate the acquisition of a care rehabilitation facility by operator TK. . If the TK operator were to become insolvent, the attorney`s right to distribution under the TK contract would be considered a right to bankruptcy and would classify all obligations owed by the TK operator to a secondary ranking rank. In the case of a resident company, TK Distribution is subject to Japanese corporate tax at the investor level.
The effective corporate tax rate is about 30% if the company`s share capital exceeds JPY 100 million. All other funds to be paid by the BKK to Edwards YK as part of the termination of the TK contract will be paid in accordance with the terms of TK`s termination agreement.