Prospectus Supplement dated January 3, 1994 Rule 424(b)(3)
(To Prospectus dated September 1, 1992 and File No. 33-50674
Prospectus Supplement dated September 1, 1992)
TOYOTA MOTOR CREDIT CORPORATION
Medium-Term Notes
Due Nine Months or More from Date of Issue
The following summary of certain U.S. federal income tax
considerations replaces in its entirety the summary included in the
Prospectus Supplement dated September 1, 1992 under the caption "UNITED
STATES TAXATION." Capitalized terms used but not defined herein have the
meanings given to them in the Prospectus Supplement dated September 1,
1992.
UNITED STATES TAXATION
Set forth below is a summary of certain U.S. federal income tax
considerations of importance to Holders of the Notes. The summary
concerns Holders who hold the Notes as capital assets and not special
classes of Holders, such as dealers in securities or currencies,
financial institutions, insurance companies, regulated investment
companies, persons who hold the Notes as a hedge against currency risks
or who hedge any currency risks of holding the Notes, tax-exempt
investors or U.S. Holders (as defined below) whose functional currency
is other than the U.S. dollar. The discussion below is based upon the
United States Internal Revenue Code of 1986, as amended (the "Code"), and
final, temporary and proposed U.S. Treasury Regulations, which are
subject to change possibly with retroactive effect. The following
discussion is consistent with the proposed U.S. Treasury Regulations
released by the Internal Revenue Service on December 21, 1992 concerning
original issue discount ("OID"). These regulations (the "Proposed OID
Regulations"), which are not proposed to be retroactive could apply to
debt instruments issued 60 days or more after the date such Proposed OID
Regulations are made final. Thus, the application of Proposed OID
Regulations to a particular issue of Notes is uncertain. Persons
considering the purchase of the Notes should consult their own tax
advisors concerning the application of U.S. federal income tax laws to
their particular situations as well as any consequences arising under the
laws of any other taxing jurisdiction.
U.S. Tax Considerations for U.S. Holders
General
As used herein, "U.S. Holder" means a Holder of a Note who is a
citizen or resident of the United States, a corporation or partnership
(including an entity treated as a corporation or partnership for U.S. tax
purposes) or other entity created or organized in or under the laws of
the United States or any political subdivision thereof, an estate or
trust the income of which is subject to U.S. federal income taxation
regardless of its source, and any other Holder whose ownership of a Note
is effectively connected with the conduct of a trade or business in the
United States.
Interest on the Notes generally will be taxable to a U.S. Holder as
ordinary interest income at the time it is accrued or paid, depending in
part on the U.S. Holder's method of accounting for tax purposes.
Original Issue Discount
General. Notes with a term greater than one year may be issued with
OID for U.S. federal income tax purposes. OID is the excess of the
"stated redemption price at maturity" of a Note over its "issue price."
If this excess is less than 0.25% of the Note's stated redemption price
at maturity multiplied by the number of complete years to its maturity
(a "de minimis amount"), the amount of OID is considered to be zero. The
"stated redemption price at maturity" of a Note is all amounts payable
on the Note however designated other than payments of "qualified stated
interest." "Issue price" is defined as the first offering price to the
public at which a substantial amount of an issue of Notes have been sold,
or if not issued to the public, the price paid by the first purchaser of
the Notes. "Qualified stated interest" is stated interest that is
unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate (a
single fixed rate is a rate that takes into account the length of time
between payments). If a Note has certain interest payment
characteristics (e.g., interest holidays, interest payable in additional
Notes, or stepped interest rates), then the Notes may also be treated as
having OID for federal income tax purposes even if such Notes were issued
at an issue price which does not otherwise result in OID.
Accrual of OID. U.S. Holders are required to include OID in income
before the receipt of cash attributable to such income, regardless of
such U.S. holder's method of accounting for tax purposes. The amount of
OID includible in income by the initial U.S. Holder of a Note is the sum
of the daily portions of OID with respect to such Note for each day
during the taxable year or portion of the taxable year in which such U.S.
Holder held such Note. The amount of OID which accrues in an accrual
period is an amount equal to the excess (if any) of (a) the product of
the Note's "adjusted issue price" at the beginning of such accrual period
and its yield to maturity (determined on the basis of compounding at the
end of each accrual period and appropriately adjusted to take into
account the length of the particular accrual period), over (b) the sum
of the qualified stated interest payments, if any, allocable to the
accrual period. The daily portion of OID is determined by allocating to
each day in any accrual period a ratable portion of the amount of OID
which accrues during the accrual period. The "adjusted issue price" of
a Note at the beginning of any accrual period is the sum of the issue
price of such Note plus the OID allocable to all prior accrual periods
reduced by payments on the Note other than qualified stated interest.
An "accrual period" may be of any length and the accrual periods may even
vary in length over the term of the debt instrument, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs at the end of an accrual period. Under
these rules, U.S. Holders will generally have to include in income
increasingly greater amounts of OID in successive accrual periods.
Floating Rate Notes. OID for any accrual period on a Floating Rate
Note is determined under special rules. The application, if any, of
these rules will be described in an applicable Pricing Supplement.
Contingent Notes. Notes may be issued under circumstances in which
the amount and/or timing of interest and principal on the Notes is
subject to a contingency ("Contingent Notes"). For example, TMCC may
issue Indexed Notes under which interest and/or principal is determined
by reference to the value of specified stocks, commodities, foreign
currencies or other property. OID for any accrual period on a Contingent
Note is determined under special rules. The application, if any, of
these rules will be described in the related Pricing Supplement.
Acquisition Discount on Short Term Notes
Notes that have a fixed maturity of one year or less may be issued
with acquisition discount. U.S. Holders who are accrual basis taxpayers,
cash basis taxpayers making an appropriate election under the Code and
taxpayers in certain specified classes will be required to include
acquisition discount in income currently in an amount and manner similar
to that applicable to OID. Individuals and non-electing cash basis
taxpayers holding such Notes are not required to include accrued
acquisition discount in income until the cash payments attributable to
such discount are received, which payments will be treated as ordinary
income. A U.S. Holder who does not recognize acquisition discount
currently may be subject to limitations on the deductibility of interest
on indebtedness incurred to purchase or carry such Notes.
Market Discount and Premium
If a U.S. Holder acquires a Note at a price below both its issue
price and its stated redemption price at maturity, or acquires a Note
issued with OID at a price below the issue price plus the aggregate
amount of OID includible in the gross income of all prior Holders to the
date of acquisition, such U.S. Holder is considered to have acquired the
Note at a "market discount." If the market discount exceeds a de minimis
amount, any gain on the sale, exchange or retirement of the Note is
treated as ordinary interest income at the time of the disposition to the
extent of the accrued market discount, unless the U.S. Holder elects to
accrue market discount in income on a current basis. In addition, a U.S.
Holder is required to defer deductions for a portion of such Holder's
interest expense on any indebtedness incurred to purchase or carry such
Note. Market discount is normally accrued on a straight-line basis, but
a Holder may elect to use a constant yield method of accrual.
A U.S. Holder who purchases a Note at an acquisition premium (i.e.,
at a cost greater than its adjusted issue price) amortizes such premium
over the remaining life of the Note (using a constant yield method) as
an offset to the amount of any OID otherwise includible in the U.S.
Holder's income.
If a U.S. Holder purchases a Note for an amount that is greater than
its stated redemption price at maturity, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium"
equal in amount to such excess. A U.S. Holder may elect to amortize such
premium using a constant yield method over the remaining term of the Note
and may offset interest otherwise required to be included in respect of
the Note during any taxable year by the amortized amount of such excess
for the taxable year. However, if the Note may be optionally redeemed
after the U.S. Holder acquires it at a price in excess of its stated
redemption price at maturity, special rules would apply which results in
a deferral of the amortization of some bond premium until later in the
term of the Note.
Election to Treat all Interest and Premium as OID
U.S. holders utilizing the accrual method of accounting may
generally elect to include all interest and discount (including stated
interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium on a debt instrument) in
income by using the constant yield method applicable to OID, subject to
certain limitations and exceptions.
Disposition of a Note
U.S. Holders of Notes recognize gain or loss on the sale,
redemption, exchange or other disposition of the Note. This gain or loss
is measured by the difference between the amount of cash received (except
to the extent attributable to accrued interest) and the U.S. Holder's
adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis for
determining gain or loss on a sale or disposition of a Note generally
will be such Holder's cost increased by any amounts included in income,
other than qualified stated interest, and reduced by any amortized
premium and cash received other than qualified stated interest. Gain or
loss on the sale, exchange or redemption of a Note generally will be
long-term capital gain or loss if the Note has been held for more than
one year, except to the extent that gain represents accrued market
discount or acquisition discount not previously included in the U.S.
Holder's income.
Foreign Currency Notes
Notes may be denominated in, or interest or principal on the Notes
may be determined by reference to, a foreign currency or foreign currency
unit (e.g., the ECU) ("Foreign Currency Notes"). In this case, for U.S.
federal income tax purposes, U.S. Holders of Foreign Currency Notes may
need to determine the U.S. dollar equivalent of amounts includible in
income and separately calculate any foreign exchange gain or loss arising
from holding a Foreign Currency Note.
Treatment of Interest Income and OID. With respect to interest
income and OID, a U.S. Holder of a Foreign Currency Note who is an
accrual-basis taxpayer will generally be required to translate the
interest income or OID for an accrual period into U.S. dollars at the
average exchange rate for such accrual period. Alternatively, a U.S.
Holder may elect to translate accrued interest income or OID into U.S.
dollars at the spot rate in effect on the last day of such accrual
period. If elected, this alternative method must be applied consistently
to all debt instruments from year to year.
A U.S. Holder of a Foreign Currency Note who is an accrual basis
taxpayer recognizes foreign exchange gain or loss on the receipt of a
payment of accrued interest income. Such exchange gain or loss will
generally be measured by the difference between (a) the U.S. dollar
equivalent of the interest received translated at the spot rate in effect
on the date of payment, and (b) the U.S. dollar equivalent of the accrued
interest income translated at the average exchange rates used to include
such accrued interest in income. Cash basis taxpayers will generally
translate interest income and OID into U.S. dollars at the spot exchange
rate in effect on the date of payment. No foreign exchange gain or loss
will be realized with respect to the receipt of such interest income or
OID (other than the gain or loss which may be realized upon disposition
of any foreign currency received).
Treatment of Principal. With respect to payments of principal on
a Foreign Currency Note, a U.S. Holder (regardless of such U.S. Holder's
method of accounting) recognizes foreign exchange gain or loss measured
by the difference between (a) the U.S. dollar equivalent of the principal
payment received translated at the spot rate on the date of each payment,
and (b) the U.S. dollar equivalent of the principal amount paid
translated at the spot rate in effect on the date such U.S. Holder
acquired the Note.
Market Discount. Market discount on a Foreign Currency Note is
first determined in the relevant foreign currency. Accrued market
discount which, under the rules discussed above, is taken into income
upon the receipt of a principal payment or upon the retirement or
disposition of the Foreign Currency Note, is translated into U.S. dollars
on the disposition date and no part of such accrued market discount is
treated as exchange gain or loss. Where a U.S. Holder makes an election
to include accrued market discount on a current basis, the market
discount is translated into U.S. dollars on the basis of the average
exchange rate in effect during such accrual period, and the exchange gain
or loss is determined upon the receipt of any principal payment or upon
the disposition of the Foreign Currency Note in a manner similar to that
described above with respect to accrued interest.
Acquisition Premium. Acquisition premium is computed in the
relevant foreign currency, and reduces OID accordingly. Exchange gain
or loss is realized with respect to such acquisition premium by treating
the portion of premium amortized with respect to any period as a return
of principal. Accordingly, exchange gain or loss will be computed by
comparing the relevant exchange rate at the date of purchase and the
dates on which the acquisition premium reduces OID.
Treatment of Foreign Exchange Gains and Losses. In general, foreign
exchange gain realized under the rules described above will be considered
ordinary income and includible in the taxable income of a U.S. Holder as
interest income. Foreign exchange loss realized under the rules
described above will generally be considered an ordinary loss deductible
from taxable income as interest expense to the extent otherwise provided
for in the Code.
Dispositions of Foreign Currency. Foreign currency received by a
U.S.Holder with respect to a Foreign Currency Note will have a tax basis
equal to its U.S. dollar value at the time such foreign currency is
received. Foreign currency that is purchased will generally have a tax
basis equal to its U.S. dollar cost of acquisition. Any gain or loss
recognized on a sale or disposition of foreign currency will be ordinary
income or loss.
Dual and Multi-Currency Notes. Notes may be issued in
circumstances where interest payments on the Notes are denominated in or
determined by reference to one currency and the principal portion of the
Notes may be denominated in or determined by reference to another
currency ("Dual Currency Notes"). In addition, Notes may be issued in
circumstances where interest or principal are denominated in or deter-
mined by reference to more than one currency ("Multi-Currency Notes").
The federal income tax treatment of Dual and Multi-Currency Notes will
be described in an applicable Pricing Supplement.
U.S. Tax Considerations for Foreign Purchasers
Set forth below is a summary of certain U.S. federal income tax
consequences for U.S. Alien Holders of the Notes. For purposes of this
discussion, "U.S. Alien" means any person who, for U.S. federal income
tax purposes, is a foreign corporation, a nonresident alien individual,
a nonresident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, for U.S. federal
income tax purposes, a foreign corporation, a nonresident alien
individual, or a nonresident alien fiduciary of a foreign estate or
trust.
Assuming certain certification requirements are satisfied (which
generally can be satisfied by providing Internal Revenue Service Form
W-8, identifying the beneficial owner of the instrument as a U.S. Alien
and disclosing the U.S. Alien's name and address), under current U.S.
federal income and estate tax laws:
(i) Payments of principal and interest (including OID) on a
Note to a Holder of a Note who is a U.S. Alien will not be subject
to U.S. federal income tax or withholding tax, provided that, in the
case of interest and OID, (a) the payments are not effectively
connected with a U.S. trade or business, (b) the Holder does not
actually or constructively own 10% or more of the total combined
voting power of all classes of stock of TMCC entitled to vote,
(c) the Holder is not a controlled foreign corporation related to
TMCC through stock ownership, and (d) the Holder is not a bank
receiving interest pursuant to a loan agreement entered into in the
ordinary course of its trade or business;
(ii) A U.S. Alien Holder of a Note will not be subject to U.S.
federal income tax on gain realized on the sale, exchange or
redemption of a Note if such gain is not effectively connected with
a U.S. trade or business and, in the case of a U.S. Alien Holder who
is an individual, such Holder is not present in the United States
for a total of 183 days or more during the taxable year in which
such gain is realized; and
(iii) A Note held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject
to U.S. federal estate tax as a result of such individual's death,
unless the individual actually or constructively owns 10% or more
of the total combined voting power of all classes of stock of TMCC
entitled to vote or the interest received on such Note is
effectively connected with the conduct by such Holder of a U.S.
trade or business.
Backup Withholding
Under current U.S. federal income tax law, a 31% "backup"
withholding tax is applied to certain interest and principal payments
made to, and to the proceeds of sales before maturity by, certain U.S.
persons if such persons fail to supply taxpayer identification numbers
and other information. Interest paid with respect to a Note and received
by a U.S. Alien will not be subject to backup withholding if the person
required to withhold has received appropriate certification statements.
The applicable certification procedures require that the Holder certify
as to its status as a U.S. Alien and provide its name and address.
