Japan's National Tax Agency (NTA) has penalized the Japanese affiliate of a United States-based investment fund, Prospect Asset Management Inc., for failing to withhold taxes on income distributed to foreign investors. The Japanese affiliate, Prospect Funding Corp., formed a tokumei kumiai (TK) arrangement with foreign investors (including a Bahamas-based company) and invested in Japanese real estate. A TK is a popular investment vehicle for private real estate funds. Under Japanese domestic law, a TK's profit distribution to non-residents is subject to withholding tax of 20%, but there may be an exemption if the non-resident investor's residence state has signed a...