A foreign investor (“investor”) and a participant enter into an agreement on co-location services under which the participant provides a high-speed order platform (kosoku na hatchyu kankyo) on which the investor can trade securities through the TSE. The participant owns or leases the server on which the investor`s trades are executed. The investor will not own or sub-lease the server and will not be able to freely use the server (rent, use to provide similar services such as subscribers, etc.), get rid (sell, offer, destroy, etc. as collateral), receive server delivery or have the right of possession. A single server can be used to execute a single investor`s trades, or a single server can be used to execute trades from multiple investors. Activities other than the distribution or purchase of goods for companies other than companies are called Juntoiya and the supply of Toiya applies mutatis mutandis (Article 558 of the Code of Commerce). That`s the way it is. The requirement provides the following situation regarding the co-location service. EST rents space for servers at its main location in Japan. A Japanese investment firm that is a member of the EST (“participant”) will lease the storage space of the EST server.
The participant provides transactions for foreign investors, but the sale of securities made through the participant on behalf of foreign investors is carried out on behalf of the participant under a Commissionary Agreement (toiya). (A Toiya agreement is an undisclosed agreement in principle/agent.) Ton`ya (), called toiya outside Edo, were commercial brokers in Japan, mainly wholesalers, warehouse managers and shipping managers; the term applies to both merchants themselves and their stores or warehouses. As early as the 12th century, ton`ya played a decisive role in the economy of the Edo period (1603-1867). In May 2009, EST launched the “TSE Co-Location Service” on the primary TSE site. However, concerns have been expressed that trading through the co-location system will carry the risk of being subject to Japanese tax on revenues and profits from transactions on the faster platform. As a general rule, foreign persons are subject to Japanese tax when they regularly engage in commercial activities through a physical presence in Japan (permanent institution or “PE”). Since the servers used in the co-location platform must be physically located next to the stock exchange (to minimize latency) in Tokyo, trading on the server may constitute an MOU and subject foreign investors to Japanese tax on the income and profits of such a business activity. Analysis. Japanese tax law does not specifically address whether server transactions constitute a taxable presence (permanent institution) in Japan. However, according to the OECD`s commentary on the tax treaty model (Article 5, paragraphs 42.2 and 42.3) (the “comment”) with stable institutions (“EP”) and Internet transactions made via a server, the question of whether a server constitutes a physical presence (which could represent an MOU depending on the activity carried out by such a physical presence) depends on the server`s ability to be available to the taxpayer. The investor can download, install and store his own trading program and his own settings (and other data) on the server. The program and parameters are held by the investor and are created and implemented by the investor outside Japan.
To create parameters, certain investment decisions must be made and those decisions are made by the investor outside Japan. The investor can change the settings at any time from outside Japan. Orders are executed exclusively by the program and settings. No one in Japan is involved in decisions regarding these markets. (3) No PE agent. The server itself is not a person and therefore cannot be an agent (which could create a PE agent). In addition, the participant acts as a third-party broker, not as a representative of the