NEWS

Hello everyone!

Today we are back again with some information about the investment real estate that is all the rage right now.

This is a case that has been bothering many foreigners who are owners of real estate in Japan. So, this will be a series of introductions regarding personal income tax returns for real estate income of foreigners.

It is very complicated, but it is something that must be done.

Let's go over the details together.

Final income tax return for transfer income from the sale of real estate
As with real estate rental income (real estate income), you are required to file an income tax return in Japan if you have earned transfer income from the sale of real estate. Here, too, a “tax payment administrator” will file an income tax return and pay taxes (refund) on your behalf.

Do I need to file a tax return? What is the taxation method?
As mentioned above in the scope of domestic source income for non-residents, income from the sale of real estate by a non-resident falls under the category of domestic source income as “consideration from the transfer of land, rights on land, buildings, and auxiliary equipment or structures of buildings located in Japan,” and thus requires an income tax return in Japan.

The income will be taxed separately from other income (separate taxation), since it is calculated in the same way as income received by a resident. The aforementioned real estate income is subject to comprehensive taxation, but transfer income is taxed separately from other income, as is the case for residents.

What is the tax rate?
In principle, the special provisions for taxation of long-term transfer income also apply to non-residents, so the income is divided into long-term transfer income and short-term transfer income according to the period of ownership, and the tax is calculated separately.

Long-term transfer income (for which the ownership period exceeds 5 years as of January 1 of the year of transfer): 15.315%.

Short-term transfer income (for which the ownership period is 5 years or less as of January 1 of the year of transfer): 30.63%.

Tax withheld at source (in principle)
Under the Japanese Income Tax Law, a person who purchases land, etc. located in Japan from a nonresident or foreign corporation (“nonresident, etc.”) and pays the consideration for the transfer in Japan must withhold income tax and special income tax for recovery at the rate of 10.21% when paying the consideration to the nonresident, etc.

Land, etc.” in Japan includes, in addition to land, rights existing on land, buildings and their auxiliary equipment, and structures. However, mining rights (including mining lease rights, quarrying rights, and other rights to mine or extract earth and stones), rights to use hot springs, rights to lease land, and rights to use land for the purpose of mining, etc., are not included. However, mining rights (including mining lease rights, quarrying rights, and other rights to mine or extract earth and stones), rights to use hot springs, leasehold rights, and earth and stones (sand) are not included.

Note that since the withholding agent in this case is “the person who pays the consideration for the transfer of land, etc.,” it does not matter whether the withholding agent is the payer of salary or not, general salaried employees, etc. are also withholding agents in principle when they pay consideration for the transfer of land, etc. to a non-resident.

However, there is an “exception” as described below. Practically speaking, there are many cases that fall under these “exceptions,” and in such cases, withholding is not imposed.

Cases in which withholding tax is not withheld (exceptions)
If any of the following applies, the individual is not required to withhold tax at source.

The individual purchases land, etc. from a non-resident to use for his/her own residence or that of his/her relatives,

The consideration for the transfer of the land, etc. is 100 million yen or less.

Therefore, if the individual is a corporation, withholding tax is always required.

In determining whether the amount exceeds 100 million yen, for example, in the case where the land, etc. is paid by an individual who receives the land, etc. for residential use and non-residential use, the total amount of the consideration for the portion used for residential use and the consideration for the portion used for non-residential use will be used to determine whether the amount exceeds 100 million yen. In this case, the amount of the consideration for the part used for residential purpose and the amount of consideration for the part used for non-residential purpose shall be determined.

Deduction for Nonresidents
As mentioned above, even non-residents are required to file income tax returns in Japan for real estate income and transfer income, but are all the various income tax exemptions applicable to non-residents as they are to residents?

The answer is no. The income deductions that can be applied by non-residents are limited to the following three.

Deduction for miscellaneous losses

Deduction for donations

Basic deduction

Appointment of a tax manager and deadline for filing tax returns (Who files by when?)

Please note that a tax agent must be appointed and a “Notification of Tax Agent for Income Tax” must be submitted to the district director of the tax office with jurisdiction over the place of tax payment.

As with resident taxpayers, the due date for filing and payment is March 15 of the following year.

What is a Tax Agent for Nonresidents?
Filing for Refund

As mentioned above, even non-residents are required to file a tax return in Japan, but this is not only a disadvantage of the hassle of filing a tax return. By filing an income tax return, there is a possibility of receiving a tax refund.

As mentioned above, depending on the amount of the property sold or leased, the renter/buyer situation, etc., the nonresident may have withholding tax with respect to the amount sold or leased. Usually, it is highly likely that more tax is withheld than the final tax amount, and in many cases, a refund can be obtained by filing a tax return.

Residential tax is not levied since you are a non-resident.

Resident tax is levied on the “income of the previous year” of a person who has a domicile in Japan as of January 1 of each year.

Therefore, if you are not domiciled in Japan as of January 1 of the year following the year in which you receive rent or transfer income, you will not be subject to inhabitant tax on such income.


 That was a difficult one, wasn't it?

However, there are many advantages in Japan if you file your tax returns properly.

Next week, we will introduce a new topic.

Let's increase your knowledge together!


Instagram

instagram


realestatejapan

realestatejapan