{"url_path":"/sec/payp/10-k/2026/item-10","section_key":"item-10","section_title":"Item 10 Additional Information","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-30","source_url":"https://www.sec.gov/Archives/edgar/data/2080845/0001193125-26-289382-index.html","accession_number":"0001193125-26-289382","cik":"0002080845","ticker":"PAYP","issuer_name":"PayPay Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/2080845/0001193125-26-289382-index.html","primary_entity_key":"0002080845","primary_entity_name":"PayPay Corp"},"word_count":9800,"has_tables":true,"body_markdown":"Item 10. Additional Information\n\nA Share capital\n\nNot applicable.\n\nB Memorandum and articles of association\n\nObjects and Purposes\n\nArticle 2 of our articles of incorporation provides that our purposes are to engage in various businesses, including planning, sales, consultancy, and customer support services related to settlement business and O2O business, information processing and provision services, financial services, including the issuance of prepaid payment instruments and funds transfer services, bank agency business, electronic payment services, money lending, credit card-related services, financial instruments intermediary business, and Type I and Type II financial instruments business and any other business incidental or relating to these activities.\n\n \n\nGeneral\n\nWe are registered in the commercial register maintained by the Tokyo Legal Affairs Bureau under registry number 0100-01-192707. Our registered head office is located in Chiyoda-ku, Tokyo. Our articles of incorporation provide for a total number of authorized shares of 1,600,000,00 shares. As of May 31, 2026, 677,143,135 common shares were issued and outstanding. All issued common shares are fully-paid and non-assessable and generally transferable.\n\nOur common shares are not subject to redemption or sinking fund provisions, and holders of our common shares are not liable to further capital calls by us. Our articles of incorporation do not contain any provision that discriminates against any existing or prospective holder of our common shares as a result of such holder owning a substantial number of shares.\n\nDirectors\n\nOur articles of incorporation provide for a board of directors consisting of at most ten directors who are not Audit and Supervisory Committee members and at most five directors who are Audit and Supervisory Committee members. The term of office for directors who are not Audit and Supervisory Committee members expires at the close\n\n112\n\n[Table of Contents](#toc_page)\n\n \n\nof the ordinary general meeting of shareholders held relating to the last fiscal year ending within one year after their election. The term of office for directors who are Audit and Supervisory Committee members expires at the close of the ordinary general meeting of shareholders held relating to the last fiscal year ending within two years after their election. The election of directors shall not be based on cumulative voting. Under our Board of Directors Rules, directors with any special interest in a resolution of the board of directors may not participate in the vote on such resolution. The aggregate amount of compensation payable to directors is determined by a resolution of the general meeting of shareholders, separately for directors who are Audit and Supervisory Committee members and directors who are not Audit and Supervisory Committee members. Within the applicable aggregate amount approved by shareholders, individual compensation of directors who are not Audit and Supervisory Committee members, is determined by the President and Representative Director pursuant to delegation by the board of directors and based on recommendations of the Compensation Committee described under “Item 6. Directors, Senior Management and Employees—C. Board Practices” while individual compensation of directors who are Audit and Supervisory Committee members is determined through consultation among such directors. Our articles of incorporation do not set any specific borrowing powers or borrowing limits for directors and do not impose any retirement age or shareholding qualification for directors. Under the Companies Act and our articles of incorporation, we may, by resolution of the board of directors, exempt our directors (including former directors) from liability to us arising from neglect of their duties, if they acted in good faith and without gross negligence, within the limits permitted by applicable laws and regulations. In addition, pursuant to the Companies Act and our articles of incorporation, we have entered into agreements with each of our non-executive directors limiting such directors’ liability to us arising from neglect of their duties, if they acted in good faith and without gross negligence, to the minimum liability amount permitted by applicable laws and regulations.\n\nDistribution of Surplus\n\nUnder our articles of incorporation, the board of directors has the authority to decide to make distributions of surplus without requiring a resolution of the general meeting of shareholders, unless otherwise provided by law. The record dates for year-end and interim dividends are March 31 and September 30 of each year, respectively. We are relieved of our obligation to pay any monetary dividends that remain unclaimed for three years after the date of the commencement of payment.\n\nUnit Share System\n\nOur articles of incorporation provide that 100 shares constitute one unit of shares. Shareholders may not exercise any rights pertaining to shares constituting less than one unit other than certain specific rights stipulated in the Companies Act and our articles of incorporation.\n\nHolders of our common shares are entitled to one voting right for each unit of shares they hold, and shares constituting less than one full unit do not carry voting rights. Under the Companies Act and our articles of incorporation, holders of shares constituting less than one unit may not exercise rights with respect to such shares, other than rights specified in the Companies Act and our articles of incorporation, including rights listed in each item of Article 189, Paragraph 2 of the Companies Act (such as the right to receive dividends, and the right to receive cash or other assets in the case of a consolidation of shares, stock split, share exchange, share transfer, or merger) and the right to receive allotments of offered shares and offered stock acquisition rights in proportion to the number of shares they hold.\n\nHolders of shares constituting less than one unit may require us to purchase such shares in accordance with the Companies Act and our Share Handling Regulations. Our articles of incorporation do not provide holders of shares constituting less than one unit with the right to require us to sell additional shares to them in order to make their holdings constitute one full unit.\n\nFor risks relating to the limited rights and limited liquidity of holders of shares constituting less than one unit, see “Item 3. Key Information—D. Risk Factors—Investors holding less than one “unit” of shares of our common stock will have limited rights as shareholders.”\n\nGeneral Meetings of Shareholders\n\nOur ordinary general meeting of shareholders is convened in June of each year by our President and Representative Director pursuant to a resolution of the board of directors, unless otherwise provided by law. The record date for determining the shareholders entitled to exercise their rights at the ordinary general meeting of shareholders is March 31 of each year.\n\nExtraordinary general meetings of shareholders may be convened whenever necessary pursuant to a resolution of the board of directors, unless otherwise provided by law. In addition, if it is necessary to determine shareholders or registered share pledgees entitled to exercise rights, we may set a temporary record date by public notice in advance pursuant to a resolution of the board of directors.\n\n113\n\n[Table of Contents](#toc_page)\n\n \n\nOther than being recorded as a shareholder entitled to exercise voting rights as of the applicable record date and complying with the proxy requirements described below, our articles of incorporation and Share Handling Regulations do not impose any special conditions of admission to general meetings of shareholders\n\nVoting Rights\n\nShareholders have one voting right for each unit of shares held. Unless otherwise provided by law or our articles of incorporation, a resolution of the general meeting of shareholders is adopted by a majority of the voting rights of the shareholders present who are entitled to exercise their voting rights. Resolutions of the general meeting of shareholders requiring a “special resolution” under the Companies Act (such as amendments to the articles of incorporation) require the attendance of shareholders holding one-third or more of the voting rights and must be adopted by two-thirds or more of the voting rights of the shareholders present. The quorum for the election of directors is one-third or more of the voting rights of shareholders entitled to exercise their voting rights. A shareholder may exercise voting rights by proxy only by appointing another shareholder having voting rights in our company. In such case, the shareholder or proxy must submit a document certifying the authority of representation at each general meeting of shareholders.\n\nChanges in Shareholders’ Rights\n\nOur articles of incorporation may be amended by a special resolution of a general meeting of shareholders. Under the Companies Act and our articles of incorporation, a special resolution generally requires the attendance of shareholders holding one-third or more of the voting rights of shareholders entitled to exercise voting rights and approval by two-thirds or more of the voting rights of the shareholders present. As we have only one class of shares outstanding, no separate class meeting is currently required to change the rights of holders of our common shares. If we were to issue different classes of shares in the future, changes that would prejudice the rights of shareholders of a class may require approval at a class meeting to the extent required by the Companies Act. Our articles of incorporation do not impose any conditions to change the rights of holders of our common shares that are more significant than those required under the Companies Act.\n\nLiquidation Rights\n\nIn the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses, and taxes will be distributed among holders of our common shares in proportion to the respective numbers of shares held by them.\n\nPre-emptive Rights\n\nHolders of our common shares have no pre-emptive rights under our articles of incorporation. Under the Companies Act, the board of directors may, however, determine that shareholders be given subscription rights in connection with a particular issue of new shares. In this case, such rights must be given on uniform terms to all shareholders as of a specified record date.\n\nAcquisition of Own Shares\n\nOur articles of incorporation provide that we may acquire our own shares through market transactions or other methods by a resolution of the board of directors, pursuant to the Companies Act. This provision is intended to allow us to implement a flexible capital policy.\n\nShareholder Registry Administrator\n\nMizuho Trust & Banking Co., Ltd. is the shareholder registry administrator for our common shares.\nThe shareholder registry administrator maintains our register of shareholders and handles other business with respect to our shares.\n\nLimitations on the Rights to Own Securities\n\nOur articles of incorporation do not impose any limitations on the rights of non-resident or foreign shareholders to hold our common shares or exercise voting rights attached thereto. Under our Share Handling Regulations, however, shareholders resident outside Japan are required to appoint a standing proxy in Japan or provide us with a temporary mailing address in Japan. In addition, non-resident and foreign investors may be subject to certain reporting, prior notification and other requirements under Japanese laws and regulations, as described under “Item 10. Additional Information—D. Exchange Controls”.\n\nProvisions That Could Delay, Defer or Prevent a Change in Control\n\n114\n\n[Table of Contents](#toc_page)\n\n \n\nOur articles of incorporation do not contain any provision that would have the effect of delaying, deferring or preventing a change in control of us and that would operate only with respect to a merger, acquisition or corporate restructuring involving us or any of our subsidiaries.\n\nOwnership Threshold Disclosure\n\nOur articles of incorporation and Share Handling Regulations do not contain any provision governing an ownership threshold above which shareholder ownership must be disclosed.\n\nChanges in Capital\n\nOur articles of incorporation do not impose conditions governing changes in our capital that are more stringent than those required under the Companies Act.\n\nC Material contracts\n\nOther than the material contract described below, there were no material contracts entered into by us for the two years preceding the filing of this Annual Report that were not entered into in the ordinary course of business beyond those described in Item 7 or elsewhere in this Annual Report or filed as exhibits.\n\nShare Purchase Agreement with T&D Holdings\n\nOn June 4, 2026, we entered into a share purchase agreement with T&D Holdings, Inc. (“T&D Holdings”) in connection with our acquisition of 70.2% of the shares of T&D Financial Life Insurance Company (“T&D Financial Life”) from T&D Holdings (the “Share Acquisition”).\n\nAs of June 4, 2026, the estimated acquisition price for the shares of T&D Financial Life was ¥131,985 million, excluding estimated acquisition-related expenses of ¥2,352 million, and the final acquisition price is subject to change. The estimated acquisition-related expenses include advisory fees related to the adoption of IFRS by T&D Financial Life that will be required by the date of the closing of the Share Acquisition. The Share Acquisition is expected to be funded from PayPay’s cash on hand.\n\nOne Investment Management Ltd (“OneIM”), an asset management company, intends to acquire 14.9% of the shares of T&D Financial Life from T&D Holdings for cash consideration through OneIM Indigo Holdings Ltd (“OneIM Indigo”), an affiliate of OneIM. As of June 4, 2026, there was no agreement, arrangement or understanding between us and OneIM Indigo to jointly exercise voting rights or other rights as shareholders of T&D Financial Life, or to jointly acquire or transfer shares of T&D Financial Life.\n\nThe consummation of the Share Acquisition is subject to obtaining required approvals and permits from the relevant authorities, the implementation of an IFRS transition plan at T&D Financial Life, and the satisfaction of other conditions precedent set forth in the share purchase agreement. The closing of the Share Acquisition is scheduled for October 1, 2027, although the timing is subject to change depending on the status of satisfaction of these conditions.\n\nWith respect to the 238,400 shares (14.9%) of T&D Financial Life that will continue to be held by T&D Holdings, pursuant to a shareholders’ agreement that we plan to enter into with T&D Holdings and OneIM Indigo on the date of the closing of the Share Acquisition, it is expected that we will have a call option exercisable from and after the date of the closing of the Share Acquisition and that T&D Holdings will have a put option exercisable from and after the date that is three years from the date of the closing of the Share Acquisition.\n\nD Exchange controls\n\nJapanese Foreign Exchange Controls\n\nGeneral\n\nThe Foreign Exchange Regulations govern certain aspects, in particular, relating to the acquisition and holding of shares of our common stock by “exchange non-residents” and by “foreign investors” (each as defined below).\n\n“Exchange residents” are defined in the Foreign Exchange Regulations as:\n\n(i)\nindividuals having domicile or residence within Japan; or\n\n(ii)\ncorporations whose principal offices are located within Japan.\n\n“Exchange non-residents” are defined in the Foreign Exchange Regulations as any individuals or corporations other than exchange residents.\n\n115\n\n[Table of Contents](#toc_page)\n\n \n\nGenerally, branches and other offices of non-resident corporations that are located within Japan are regarded as exchange residents. Conversely, branches and other offices of Japanese corporations located outside Japan are regarded as exchange non-residents.\n\n“Foreign investors” are defined in the Foreign Exchange Regulations as:\n\n(i)\nindividuals who are exchange non-residents;\n\n(ii)\ncorporations or other entities that are organized under the laws of foreign countries or whose principal offices are located outside Japan (excluding partnerships falling within the definition (iv) below);\n\n(iii)\ncorporations of which 50% or more of the total voting rights are held, directly or indirectly, by individuals and/or corporations falling within the definition(s) (i) and/or (ii);\n\n(iv)\ngeneral partnerships under the Civil Code of Japan (Act No. 89 of 1896, as amended) established to invest in corporations, limited partnerships for investment under the Limited Partnership Act for Investment of Japan (Act No. 90 of 1998, as amended), or any other similar partnerships under the laws of foreign countries, where either (a) 50% or more of the total contributions are made by exchange non-residents or certain other foreign investors prescribed by the Foreign Exchange Regulations or (b) a majority of the general partners who are delegated to execute the business of such general partnerships, general partners of such limited partnerships or other similar partners of the other similar partnerships are exchange non-residents or certain other foreign investors prescribed by the Foreign Exchange Regulations; or\n\n(v)\ncorporations or other entities where a majority of either (a) directors or other officers (including those who have the same degree or more control over such corporations or such other entities as directors or other officers) or (b) directors or other officers (including those who have the same degree or more control over such corporations or such other entities as directors or other officers) having the power of representation are individuals who are exchange non-residents.\n\nAcquisition of Shares\n\nIn general, the acquisition by an exchange non-resident of shares of a Japanese corporation, such as the shares of our common stock, is not subject to any prior filing requirements. However, in the case where such acquisition constitutes an IDI the exchange non-resident may be required to file a prior notification (see “Prior Notification Requirements on Inward Direct Investment in Shares of Non-Listed Corporations” below). Also, in the case where an exchange resident transfers shares of a Japanese corporation, such as the shares of our common stock, for consideration exceeding ¥100 million, to an exchange non-resident, the exchange resident who transfers the shares is required to report the transfer to the Minister of Finance within 20 days after the later of (a) the date of the transfer or (b) the date of payment for the transfer, unless (i) the transfer was made through a bank or financial instruments business operator registered under the FIEA acting as an agent or intermediary or (ii) the transfer constitutes an IDI.\n\nPrior Notification Requirements on Inward Direct Investment in Shares of Non-Listed Corporations\n\nIf a foreign investor acquires shares of a Japanese corporation that is not listed on any Japanese stock exchange, such as the shares of our common stock, such acquisition constitutes an IDI. In general, any foreign investor intending to make an IDI in a Japanese corporation that is (whether itself or by any of its subsidiaries or certain related corporations in Japan) engaged in certain business sectors designated under the Foreign Exchange Regulations and the relevant public notice (Shitei-Gyoshu) (in which our business sectors are currently included), or the Designated Business Sectors, must, except where any of certain exemptions apply, file a prior notification of the acquisition with the Ministers.\n\nIf such prior notification is filed, the proposed acquisition may not be consummated until 30 days have passed from the date of the filing, although this period may be shortened if the proposed acquisition is determined not to raise concerns from a perspective of national security or certain other factors. On the other hand, if any concerns are recognized in the proposed acquisition from a perspective of national security or certain other factors, the Ministers may extend such period up to five months to ensure there is time for examination. The Ministers may recommend any modification or abandonment of the proposed acquisition and, if such recommendation is not accepted by the acquiring foreign investor, they may order the modification or abandonment of such acquisition.\n\nAcquisition of one or more shares of our common stock by a foreign investor from other foreign investor is also subject to similar prior notification requirements. Acquisitions of shares by foreign investors by way of stock split are not subject to the prior notification requirements.\n\nExemption for Prior Notification Requirements\n\n116\n\n[Table of Contents](#toc_page)\n\n \n\nUnder the Foreign Exchange Regulations, any foreign investors, excluding disqualified investors such as those with a record of sanctions for violation of the Foreign Exchange and Foreign Trade Act, state-owned enterprises (except those who are accredited by the authorities), and “Type-A investors,” (as defined below) (except those who are accredited by the authorities) or Eligible Foreign Investors, will be exempted from the prior notification requirements without any upper limit on the number of shares to be acquired or held, on the condition that they comply with the following exemption conditions, or the Common Exemption Conditions, unless the investment intended to be conducted by them constitutes an IDI in a Japanese corporation engaging, or its subsidiaries or certain related corporations in Japan are engaging, in certain types of the Designated Business Sectors designated under the Foreign Exchange Regulations and the relevant public notice as being a substantial threat to national security (Core-Gyoshu) (in which our business sectors are currently included), or the Core Sectors.\n\nForeign investors falling within either of the following categories are regarded as “Type-A investors”:\n\n(i)\norganizations or individuals who have obligations to cooperate with foreign governments, foreign government agencies, foreign local public entities, foreign central banks, or foreign political parties or other political organizations, or collectively, Foreign Governments, in collecting information related to Japan’s national security based on agreements with such Foreign Governments or foreign laws and regulations;\n\n(ii)\norganizations controlled by foreign investors falling within the category (i) or by Foreign Governments imposing those obligations on these investors. This control is established through (a) holding 50% or more of the total issued shares or the total voting rights of such organizations, (b) holding class shares that grant the right to veto matters to be resolved at general meetings of shareholders or by the board of directors of such organizations, (c) the appointment of one-third or more of (x) such organizations’ directors or other officers or (y) those having the power of representation, or (d) holding the right to direct such organizations regarding their IDIs or their exercise of voting rights in connection with IDIs; or\n\n(iii)\ndirectors or other officers of organizations falling within the category (i) or (ii).\n\nIn general, the “Common Exemption Conditions” are set out in the relevant public notice as follows:\n\n(i)\nforeign investors or their related persons are not to become directors of the investee corporation or its certain related corporation;\n\n(ii)\nforeign investors will not propose by themselves or through other shareholders to the general meeting of shareholders certain matters such as the transfer or disposition of the investee corporation’s business activities in the Designated Business Sectors; and\n\n(iii)\nforeign investors will not access non-public information about the investee corporation’s or its certain related corporation’s technology in relation to business activities in the Designated Business Sectors.\n\nHowever, Eligible Foreign Investors who intend to invest in a Japanese corporation engaging, or a Japanese corporation which subsidiary or certain related corporation is engaging, in the Core Sectors, which is not listed in Japan, such as us, would not be exempted from the prior notification requirements.\n\nConsent at General Meeting of Shareholders\n\nIn addition to the acquisition of shares mentioned above, if a foreign investor who holds one or more voting rights of a Japanese corporation that engages in the Designated Business Sectors intends to consent, at the general meeting of shareholders, to certain proposals having material influence on the management of such corporation, such as (i) election of such foreign investor or its related persons as directors or audit and supervisory board members of the investee corporation or (ii) transfer or discontinuation of its business activities in the Designated Business Sectors, such consent also constitutes an IDI that generally requires the filing of a prior notification with the Ministers; provided, however, that in the case of proposal (ii), the prior notification is required only where such proposal is made by such foreign investor by itself or through other shareholders. In such cases, the exemptions from the prior notification requirements described in “Exemption for Prior Notification Requirements” above are not available.\n\nPost-Investment Reports\n\nFurther to the prior notifications, under the Foreign Exchange Regulations, foreign investors conducting IDIs may be required to submit post-investment reports to the Ministers within 45 days after the transaction settlement date, once the IDIs for which prior notifications have been filed are actually made, or even if such IDIs are not subject to the prior notification requirements or are exempted from such requirements.\n\nAcquisitions of shares by foreign investors by way of stock split are not subject to the post-investment report requirements.\n\n117\n\n[Table of Contents](#toc_page)\n\n \n\nDividends and Proceeds from Sales of Shares\n\nUnder the Foreign Exchange Regulations, dividends paid on and the proceeds from sales in Japan of shares of our common stock held by exchange non-residents may generally be converted into any foreign currency and repatriated abroad. However, under the Foreign Exchange Regulations, certain procedures may be required for the transfer of funds out of Japan or such transfer of funds may be prohibited, depending on the location of the recipient, the purpose of such fund transfer and other factors.\n\nAcquisition of ADSs, Surrender of ADSs\n\nRegarding the acquisition of ADSs, the Minister of Finance has expressed its view that, provided that it should be judged in accordance with the actual situation on a case-by-case basis, in general, in the case where a Japanese corporation that is not listed on any Japanese stock exchange, such as us, lists depositary receipts issued by a foreign depository bank backed by the shares of such Japanese corporation on any foreign stock exchange, it is considered that, while such a foreign depositary bank needs to submit a prior notification of IDI upon acquiring the shares, non-residents or foreign corporations that acquire such depositary receipts do not need to submit any prior notification of IDI because the foreign depositary bank that will acquire the shares of such Japanese corporation is required to submit a prior notification. However, there is no guarantee that the Minister of Finance will maintain this view in the future. See “Item 3. Key Information—D. Risk Factors—Prior notification under the Foreign Exchange and Foreign Trade Act of Japan may be required in the case of acquisition by foreign investors of our shares.”\n\nForeign investors that intend to surrender the ADSs and thereby acquire the underlying shares of our common stock will be required to submit a prior notification to the Ministers.\n\nThe discussion above is not exhaustive of all possible foreign exchange controls considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of the ADSs, shares of our common stock or voting rights by consulting their own advisors.\n\nE Taxation\n\nThe following is a general summary of certain Japan and United States federal income tax consequences relevant to an investment in the ADSs and common shares. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The discussion is based on laws and relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change or different interpretations, possibly with retroactive effect. The discussion does not address U.S. state or local tax laws, or tax laws of jurisdictions other than Japan and the United States. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and disposition of the ADSs and common shares.\n\nJapanese Taxation\n\nThe following is a general summary of the principal Japanese tax consequences (limited to national tax) to owners of the ADSs and common shares, who are non-resident individuals of Japan or who are non-Japanese corporations without a permanent establishment in Japan (collectively, “non-resident holders”). The statements below regarding Japanese tax laws are based on the laws and treaties in force and as interpreted by the Japanese tax authorities as of the date of this Annual Report, and are subject to changes in applicable Japanese laws, tax treaties, conventions or agreements, or in the interpretation of them, occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of the ADSs and common shares, including, specifically, the tax consequences under Japanese law, under the laws of the jurisdiction of which they are resident and under any tax treaty, convention or agreement between Japan and their country of residence, by consulting their own tax advisors.\n\nGenerally, a non-resident holder will be subject to Japanese income tax collected by way of withholding on dividends (meaning in this section distributions made from our retained earnings for the Companies Act purposes) we pay with respect to the ADSs and common shares and such tax will be withheld prior to payment of dividends. Stock splits generally are not subject to Japanese income or corporation tax.\n\nIn the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of the Japanese withholding tax applicable to dividends paid by Japanese corporations on their shares of stock to non-resident holders is generally 20.42% (or 20% for dividends due and payable on or after January 1, 2038) under Japanese tax law. However, with respect to dividends paid by a Japanese corporation on listed shares (the ADSs are treated as listed shares once they are listed on the Nasdaq as planned; and our common shares are treated as listed shares if they are listed on a stock exchange) to non-resident holders, other than any non-resident holder who is an individual shareholder holding 3% or\n\n118\n\n[Table of Contents](#toc_page)\n\n \n\nmore of the total number of shares issued by the relevant Japanese corporation (to whom the aforementioned withholding tax rate will still apply), the aforementioned withholding tax rate is reduced to (i) 15.315% for dividends due and payable up to and including December 31, 2037 and (ii) 15% for dividends due and payable on or after January 1, 2038. The withholding tax rates described above include the special reconstruction surtax (2.1% multiplied by the original applicable withholding tax rate, i.e., 15% or 20%, as the case may be), which is imposed during the period from and including January 1, 2013 to and including December 31, 2037, to fund the reconstruction from the great earthquake that occurred in Japan in 2011.\n\nIf distributions were made from our capital surplus, rather than retained earnings, for the Companies Act purposes, the portion of such distributions in excess of the amount corresponding to a pro rata portion of return of capital as determined under Japanese tax laws would be deemed dividends for Japanese tax purposes, while the rest would be treated as return of capital for Japanese tax purposes. The deemed dividend portion, if any, would generally be subject to the same tax treatment as dividends as described above, and the return of capital portion would generally be treated as proceeds derived from the sale of shares and subject to the same tax treatment as sale of ADSs and common shares as described below. Distributions made in consideration of repurchase by us of our own common shares or in connection with certain reorganization transactions will, in general, be treated substantially in the same manner.\n\nAs of the date of this Annual Report, Japan has income tax treaties whereby the withholding tax rate (including the special reconstruction surtax) may be reduced, generally to 15%, for portfolio investors, with, among others, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway and Singapore, while the income tax treaties with, among others, Australia, Belgium, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the United Kingdom and the United States generally reduce the withholding tax rate to 10% for portfolio investors and the income tax treaties with, among others, Spain generally reduce the withholding tax rate to 5% for portfolio investors. In addition, under the income tax treaty between Japan and the United States, dividends paid to pension funds which are qualified United States residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the carrying on of a business, directly or indirectly, by the pension funds. Similar treatment is applicable to dividends paid to pension funds under the income tax treaties between Japan and, among others, Belgium, Denmark, the Netherlands, Spain, Switzerland and the United Kingdom. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty shall be available when such maximum rate is below the rate otherwise applicable under the Japanese tax law referred to in the second preceding paragraph with respect to the dividends to be paid by us on the ADSs and common shares.\n\nNon-resident holders who are entitled under an applicable tax treaty to a reduced rate of, or exemption from, Japanese withholding tax on any dividends on common shares, in general, are required to submit, through the withholding agent to the relevant tax authority prior to the payment of dividends, an Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends together with any required forms and documents. A standing proxy for a non-resident holder may be used in order to submit the application on a non-resident holder’s behalf. In this regard, a certain simplified special filing procedure is available for non-resident holders to claim treaty benefits of reduction of or exemption from Japanese withholding tax by submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks together with any required forms and documents. With respect to ADSs, where the depositary needs investigation to identify whether any non-resident holders of ADSs are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax, the depositary or its agent is required to submit an application form before payment of dividends so that the withholding will be suspended in connection with such holders for eight months after the record date concerning such payment of dividends. If it is proved that such holders are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax within the foregoing eight-month period, the depositary or its agent is required to submit another application form together with certain other documents so that such holder can claim exemption from or reduction of Japanese withholding tax. To claim this reduced rate or exemption, such non-resident holder of ADSs will be required to file a proof of taxpayer status, residence, and beneficial ownership, as applicable, and to provide other information or documents as may be required by the depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty), as the case may be, by complying with a certain subsequent filing procedure. We do not assume any responsibility to ensure withholding at the reduced treaty rate, or exemption therefrom, for shareholders who would be eligible under an applicable tax treaty but who do not follow the required procedures as stated above.\n\n119\n\n[Table of Contents](#toc_page)\n\n \n\nGains derived from the sale of the ADSs and common shares outside Japan by a non-resident holder that is a portfolio investor will generally not be subject to Japanese income or corporation tax.\n\nJapanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired the ADSs and common shares from another individual as a legatee, heir or donee, even if none of the acquiring individual, the decedent or the donor is a Japanese resident.\n\nCertain United States Federal Income Tax Considerations to United States Holders\n\nThe following discussion describes certain United States federal income tax consequences of the purchase, ownership and disposition of the ADSs and common shares. This discussion is applicable only to United States Holders (as defined below) (i) who are residents of the United States for purposes of the Convention between the Government of the United States of America and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income (the “Treaty”), (ii) whose ADSs or common shares are not, for purposes of the Treaty, effectively connected with a permanent establishment in Japan and (iii) who otherwise qualify for the full benefits of the Treaty. In addition, this discussion deals only with United States Holders that hold the ADSs or common shares as capital assets for United States federal income tax purposes (generally, property held for investment).\n\nAs used herein, the term “United States Holder” means a beneficial owner of the ADSs or common shares that is, for United States federal income tax purposes, any of the following:\n\n•\nan individual who is a citizen or resident of the United States;\n\n•\na corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;\n\n•\nan estate the income of which is subject to United States federal income taxation regardless of its source; or\n\n•\na trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.\n\nThis discussion is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder, as well as the Treaty, all as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income tax consequences different from those summarized below. In addition, this discussion assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.\n\nThis summary does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:\n\n•\na dealer or broker in securities or currencies;\n\n•\na financial institution;\n\n•\na regulated investment company;\n\n•\na real estate investment trust;\n\n•\nan insurance company;\n\n•\na tax-exempt organization;\n\n•\na person holding the ADSs or common shares as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;\n\n•\na trader in securities that has elected the mark-to-market method of accounting for your securities;\n\n•\na person liable for alternative minimum tax;\n\n•\na person required to accelerate the recognition of any item of gross income with respect to the ADSs or common shares as a result of such income being recognized on an applicable financial statement;\n\n•\na person who owns or is deemed to own 10% or more of our stock (by vote or value);\n\n•\na partnership or other pass-through entity for United States federal income tax purposes; or\n\n120\n\n[Table of Contents](#toc_page)\n\n \n\n•\na person whose “functional currency” is not the U.S. dollar.\n\nIf a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) holds the ADSs or common shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership holding the ADSs or common shares, you should consult your tax advisors.\n\nThis discussion does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not address the Medicare tax on net investment income, United States federal estate and gift taxes or the effects of any state, local or non-United States tax laws.\n\nIf you are considering the purchase of the ADSs or common shares, you should consult your own tax advisors concerning the particular United States federal income tax consequences to you of the purchase, ownership and disposition of the ADSs or common shares, as well as the consequences to you arising under other United States federal tax laws and the laws of any other taxing jurisdiction.\n\nADSs\n\nIf you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying common shares that are represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to United States federal income tax.\n\nTaxation of Dividends\n\nSubject to the discussion under “—Passive Foreign Investment Company” below, the gross amount of distributions on the ADSs or common shares (including any amounts withheld on account of Japanese withholding taxes) will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, the distribution will first be treated as a tax-free return of capital, causing a reduction in your tax basis in the ADSs or common shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain recognized on a sale or exchange (see “—Taxation of a Sale, Exchange or Other Disposition of ADSs or Common Shares” below). We do not, however, expect to determine earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be reported as a dividend.\n\nAny dividends that you receive (including any withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of common shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction generally allowed to corporations under the Code.\n\nSubject to applicable limitations (including a minimum holding period requirement), dividends received by non-corporate United States Holders from a qualified foreign corporation may be treated as “qualified dividend income” that is subject to reduced rates of taxation. A qualified foreign corporation includes a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States which the United States Treasury Department determines to be satisfactory for these purposes and which includes an exchange of information provision. The United States Treasury Department has determined that the Treaty meets these requirements, and we believe we will be eligible for the benefits of the Treaty. However, dividends received by non-corporate United States Holders will not be treated as “qualified dividend income” that is subject to reduced rates of taxation if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. You should consult your own tax advisors regarding the application of these rules to your particular circumstances.\n\nThe amount of any dividend paid in yen will equal the U.S. dollar value of the yen received calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you, in the case of common shares, or by the depositary, in the case of ADSs, regardless of whether the yen are converted into U.S. dollars. If the yen received as a dividend are converted into U.S. dollars on the date of receipt, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the yen received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a tax basis in the yen equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the yen will be treated as United States source ordinary income or loss.\n\nThe maximum rate of withholding tax on dividends paid to you pursuant to the Treaty is 10%. You will generally be required to properly demonstrate to the Japanese tax authorities your entitlement to the reduced rate of withholding under the Treaty. See “—Japanese Taxation” above for a discussion of the requirements for obtaining a reduced rate under the Treaty. Subject to certain conditions and limitations (including a minimum holding period requirement) and\n\n121\n\n[Table of Contents](#toc_page)\n\n \n\nthe Foreign Tax Credit Regulations (as defined below), Japanese withholding taxes on dividends (at a rate not exceeding the applicable Treaty rate) may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or common shares will be treated as income from sources outside the United States and will generally constitute passive category income. However, Treasury regulations addressing foreign tax credits (the “Foreign Tax Credit Regulations”) impose additional requirements for foreign taxes to be eligible for a foreign tax credit if the relevant taxpayer does not elect to apply the benefits of an applicable income tax treaty, and there can be no assurance that those requirements will be satisfied. The Department of the Treasury and the Internal Revenue Service (the “IRS”) are considering proposing amendments to the Foreign Tax Credit Regulations. In addition, recent notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). Instead of claiming a foreign tax credit, you may be able to deduct Japanese withholding taxes on dividends in computing your taxable income, subject to generally applicable limitations under United States law (including that you will not be eligible for a deduction for otherwise creditable foreign income taxes paid or accrued in a taxable year if you claim a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year). The rules governing the foreign tax credit and deductions for foreign taxes are complex. You are urged to consult your tax advisors regarding the Foreign Tax Credit Regulations (and the related temporary relief in the IRS notices) and the availability of a foreign tax credit or a deduction under your particular circumstances.\n\nPassive Foreign Investment Company\n\nIn general, we will be a PFIC for any taxable year in which:\n\n•\nat least 75% of our gross income is passive income, or\n\n•\nat least 50% of the value (generally determined based on a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income.\n\nFor this purpose, passive income generally includes dividends, interest, royalties and rents (other than certain interest derived in the active conduct of a banking business). In addition, cash and other assets readily convertible into cash are generally considered passive assets. If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income.\n\nWe do not expect to be a PFIC for our current taxable year or in the foreseeable future. However, our PFIC status is a factual determination that is made annually, and thus may be subject to change due to changes in our income or asset composition or in the value of our assets. Because the value of our goodwill may be determined based on the expected market value of the ADSs from time to time, a decrease in the price of the ADSs may also result in our becoming a PFIC for any taxable year. If we are a PFIC for any taxable year during which you hold the ADSs or common shares, you will be subject to special tax rules discussed below.\n\nIf we are a PFIC for any taxable year during which you hold the ADSs or common shares and you do not make a timely mark-to-market election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of the ADSs or common shares. Distributions received in a taxable year will be treated as excess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the ADSs or common shares. Under these special tax rules:\n\n•\nthe excess distribution or gain will be allocated ratably over your holding period for the ADSs or common shares,\n\n•\nthe amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and\n\n•\nthe amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year for individuals or corporations, as applicable, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.\n\nAlthough the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold the ADSs or common shares, you will generally be subject to the special tax rules described above for that year and for each subsequent year in which you hold the ADSs or common shares (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be a PFIC, you can avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if your ADSs or common shares had been sold on the\n\n122\n\n[Table of Contents](#toc_page)\n\n \n\nlast day of the last taxable year during which we were a PFIC. You are urged to consult your own tax advisor about this election.\n\nIn lieu of being subject to the special tax rules discussed above, you may make a mark-to-market election with respect to your ADSs or common shares provided such ADSs or common shares are treated as “marketable stock.” The ADSs or common shares generally will be treated as marketable stock if the ADSs or common shares are regularly traded on a “qualified exchange or other market” (within the meaning of the applicable Treasury regulations). Under current law, the mark-to-market election may be available to holders of ADSs because the ADSs will be listed on Nasdaq which constitutes a qualified exchange, although there can be no assurance that the ADSs will be “regularly traded” for purposes of the mark-to-market election. It should also be noted that it is intended that only the ADSs and not the common shares will be listed on Nasdaq. Consequently, if you are a holder of common shares that are not represented by ADSs, you generally will not be eligible to make a mark-to-market election.\n\nIf you make an effective mark-to-market election, for each taxable year that we are a PFIC you will include as ordinary income the excess of the fair market value of your ADSs or common shares at the end of the year over your adjusted tax basis in the ADSs or common shares. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the ADSs or common shares over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in the ADSs or common shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. In addition, upon the sale or other disposition of your ADSs or common shares in a taxable year that we are a PFIC, (i) any gain will be treated as ordinary income and (ii) any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market election, with any excess treated as a capital loss.\n\nIf you make a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs or common shares are no longer regularly traded on a qualified exchange, or the IRS consents to the revocation of the election. However, because a mark-to-market election cannot be made for any lower-tier PFICs that we may own (as discussed below), you may continue to be subject to the general PFIC rules discussed above with respect to your indirect interest in any such lower-tier PFIC. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.\n\nAlternatively, United States persons can sometimes avoid the special tax rules described above by electing to treat a PFIC as a “qualified electing fund” under Section 1295 of the Code. However, this option is not available to you with respect to the ADSs or common shares because we do not intend to comply with the requirements necessary to permit you to make this election.\n\nIf we are a PFIC for any taxable year during which you hold the ADSs or common shares and any of our non-United States subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the ADSs or common shares of the lower-tier PFIC for purposes of the application of the PFIC rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.\n\nYou will generally be required to file IRS Form 8621 if you hold the ADSs or common shares in any year in which we are classified as a PFIC. You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding ADSs or common shares if we are considered a PFIC in any taxable year.\n\nTaxation of a Sale, Exchange or Other Disposition of ADSs or Common Shares\n\nFor United States federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of the ADSs or common shares in an amount equal to the difference between the amount realized for the ADSs or common shares and your adjusted tax basis in the ADSs or common shares, both determined in U.S. dollars. Subject to the discussion under “—Passive Foreign Investment Company” above, such gain or loss will generally be capital gain or loss and will generally be long-term capital gain or loss if you have held the ADSs or common shares for more than one year. Long-term capital gains of non-corporate United States Holders (including individuals) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss for United States foreign tax credit purposes.\n\nInformation Reporting and Backup Withholding\n\nIn general, information reporting will apply to dividends in respect of the ADSs or common shares and the proceeds from the sale, exchange or other disposition of the ADSs or common shares that are paid to you within the United States (and in certain cases, outside the United States), unless you establish that you are an exempt recipient. A backup withholding tax may apply to such payments if you fail to provide a correct taxpayer identification number and a certification that you are not subject to backup withholding or if you fail to report in full dividend and interest\n\n123\n\n[Table of Contents](#toc_page)\n\n \n\nincome.\n\nBackup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability, provided that the required information is timely furnished to the IRS.\n\nThe above description is not intended to constitute a complete analysis of all tax consequences relating to the purchase, ownership or disposition of the ADSs or common shares. Each holder should consult such holder’s own tax advisors concerning the overall tax consequences to it, including the consequences under laws other than United States federal income tax laws, of an investment in the ADSs or common shares.\n\nF Dividends and paying agents\n\nNot applicable.\n\nG Statement by experts\n\nNot applicable.\n\nH Documents on display\n\nWe are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers, and are required to file reports and other information with the SEC. Specifically, we are required to file annually an Annual Report on Form 20-F within four months after the end of each fiscal year, which is March 31. All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the short-swing profit recovery provisions contained in Section 16 of the Exchange Act.\n\nWe will furnish the depositary of the ADSs with our Annual Reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with IFRS, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.\n\nIn accordance with Nasdaq Stock Market Rule 5250(d), we will post this Annual Report on Form 20-F on our website at https://about.paypay.ne.jp/en/. In addition, we will provide hard copies of our Annual Report free of charge to shareholders and ADS holders upon request.\n\nI Subsidiary Information\n\nNot Applicable.\n\nJ Annual Report to Security Holders\n\nNot applicable"}