Tax Consulting (Fee Determined on a Case-by-Case Basis）
Transfer Declaration
The income generated from transfer of lands, buildings, stocks etc., is called capital gain. Transfer means handing properties to other people with or without compensation, such as sale, exchange, expropriation etc. However, transfers involving money such as the inventory, loans and the accounts receivables for business are not included.
For example, when profit are realized from selling your own house, “Special Case of Special Deduction of JPY 30 Million for Residential Property,” “Special Case of Reduced Tax Rate” could be applied to. When loss occurs, special case like “Aggregation of Profit and Loss as well as Loss Carryforward of Capital Loss on Specific Residential Property” could be applied to. Certain criteria must be met when applying to these special cases. Therefore, please feel free to contact us and have a tax consulting before transferring your property.
Consumption Tax
When paying tax for your business, you must file the income tax return as well as the consumption tax return. There are some differences between sole proprietorship and corporation when it comes to filing a tax return.
Not all of the business owner must pay consumption tax. First of all, it requires judgement to decide whether one is liable to pay tax. For those sole proprietors and corporations (under certain condition) whose taxable sales revenue is under JPY 10 million during base period do not need to pay tax. The base period means a period used for judging whether one is obligated to pay tax or not. The base period here is the year before last fiscal year.
However, even if the taxable sales revenue is under JPY 10 million two years ago, the sole proprietorship or the corporation is liable to pay tax in the case of having taxable sales revenue over JPY 10 million during a certain period of time (from last January 1st to June 30th.) “Simplified Tax System” can be used when taxable sales revenue is under JPY 50 million during the base period. “Simplified Tax System” is a system that simplifies the complicated calculation of tax amount through multiplying sales by a certain ratio (minashi shiireritsu) When using this system, it is required to submit “Selection of the Simplified Tax System for Consumption Tax” before the fiscal year in which the company intends to use the system. Please be noted that if the submission is late, the system cannot be used.
Inheritance Tax Declaration
Regarding the inheritance tax declaration in Japan, the taxation differs based on the nationality and asset location of the heir and the decedent.
It is required to file inheritance tax in the following cases.
（1）Both decedent and heir are non-residents (foreign nationalities), and possess domestic assets.
（2）Both decedent and heir are residents (foreign nationalities), and possess foreign assets.
We can help you to file inheritance tax return if you are non-resident (foreign nationalities).
Exit Tax
Exit tax is a sort of income tax and special income tax for reconstruction, applying to any person with assets over JPY 100 million who expatriates from Japan on and after July 1, 2015. Under the exit tax regime, he/she will be subject to tax on unrealized gain from the taxable assets. Exit tax also applies to the case that people with assets over JPY 100 million residing in Japan transfer taxable assets by gift or inheritance to family members residing overseas.
In the case that a resident (resides in Japan for a period of time exceeding five out of the last 10 years prior to expatriation) who expatriates from Japan, possesses taxable assets (securities, derivatives, margin trading) with a combined value of at least JPY 100 million in fair market value, the taxable assets will be calculated as capital gains if those are deemed to have been transferred upon expatriation.
Regarding the fair market value, when a taxpayer has filed an application appointing a tax representative, the fair market value will be on the date of expatriation from Japan; in the case of not filing an application appointing a tax representative, the fair market value will be on the date three months prior to expatriation from Japan. When an individual who was taxed under the exit tax repatriates to Japan and if such individual still owns the taxable assets, the individual can apply to have the exit tax cancelled.
The tax authorities may grant a taxpayer who has a tax liability as a result of the exit tax regime a five-year grace period if the taxpayer provides the tax authorities by the deadline with individual income tax returns covering the year of expatriation, collateral covering the amount of tax due. The grace period may be extended to 10 years if a taxpayer requests an extension. When the taxpayer transfers taxable assets during the grace period, the deadline for payment of the exit tax will be four months after the transfer date. If the actual transfer price of the assets is lower than the deemed transfer price of the assets upon which the exit tax was calculated upon expatriation, exit tax liability can be reduced to the extent of the liability computed by the actual transfer price by filling a request for a correction. Likewise, in the case of double taxation the taxpayer may file a request for correction.
The exit tax regime will apply to any person who:
(1) Expatriates from Japan on and after July 1, 2015 with taxable assets with a combined value of at least JPY 100 million.
(2) Resides in Japan for a period of time exceeding five out of the last 10 years prior to expatriation.
If the qualified person appoints a tax representative prior to expatriation, he/she does not have to file income tax return upon the expatriation. However, if the qualified person does not appoint a tax representative, he/she has to file individual income tax return on the unrealized gain prior to expatriation.
