Authorities challenge real estate loss deduction

News, information

On 5 December 2010 the Asahi Shimbun reported on an investigation by the Tokyo tax authorities into tax relief claimed on losses from a partnership investing in US real estate.  The investors in the partnership (below the ‘Investors’) were, according to the article, a group of around ten former Japanese baseball players Read More

Introduction to JREITs and the Japanese Investment Company

December 1, 2010  |  Entities, Real Estate  |  No Comments

Preparing tai-yaki, a sweet fish shaped sweet often eaten at Japanese festivals recently recovering its popularity in Japan.

In May 2005, the Japanese ‘Law Concerning Investment Trusts and Investment Companies’ (link in Japanese – the ‘投資信託及び投資法人に関する法律’ or ‘toushi shintaku oyobi toushi houjin ni kan suru houritsu’, referred to below as the ‘ITL’) was revised to allow entities covered by the law to invest in real estate.

The law also introduced a new entity, the ‘Japanese Investment Company’ (in Japanese ‘投資法人’ or ‘toushi houjin’ abbreviated below as ‘JIC’) Read More

Introduction to TMK taxation – the Japanese real estate SPC

November 23, 2010  |  Entities, Real Estate, TMK  |  No Comments

Detail taken from a 'mikoshi' or Japanese portable shrine kept for use in local festivals.

The ‘TMK’ (in Japanese the ‘特定目的会社’ or ‘tokutei mokuteki kaisha’ )、a special purpose entity commonly used in Japanese real estate transactions, is regarded as having a corporate nature for Japanese tax purposes and hence is taxed as a corporation rather than as a fiscally transparent entity.

However, a number of special tax provisions apply to the entity introduced in order to help promote the securitization of assets held under the TMK structure. Read More

Introduction to the Japanese Real Estate SPC or ‘TMK’

November 22, 2010  |  Entities, Real Estate, TMK  |  No Comments

A sumo wrestler preparing the training ring in the sumo training house or 'Sumo Beya'

The Japanese authorities first took steps to help encourage liquidity in the Japanese real estate market through the introduction of a conduit entity that could be used in real estate transactions prior to 2000, when the ‘Law Concerning the Liquidation of Specified through a Special Purposes Company’ (in Japanese the ‘特定目的会社による特定資産の流動化に関する法律’ or ‘or tokutei mokuteki kaisha ni yoru tokutei no shisan non ryudouka ni kansuru houritsu’ and referred to be low as the ‘SPC Law’) Read More

Japanese trusts in real estate transactions

November 20, 2010  |  Real Estate, Trusts  |  No Comments

Osaka real estate in need of some redevelopment.

In Japanese real estate transactions rather than owning real estate directly, it is common for a real estate special purpose company (‘SPC’) to own a real estate trust beneficiary certificate (referred to below as a ‘Trust Certificate’) which evidences ownership of an interest in a trust whose underlying asset is Japanese real estate. Read More

Interest and depreciation as deductible real estate expenses

November 16, 2010  |  Individual, Real Estate  |  No Comments
The eves of one of the Byoudoin Temple buildings in Kyoto.

The eves of one of the Byoudoin Temple buildings in Kyoto.

Interest costs and fixed asset depreciation costs are two material real estate related costs that can be treated as ‘Necessary Expenses’ under the Japanese Income Tax Law (‘ITL’) article 37 and hence which are deductible for Japanese tax purposes when calculating individual real estate income.  This article looks at how such tax deductible interest and depreciation are calculated and some of the special considerations that which apply. Read More

Necessary Expenses for Japanese real estate and business income

November 15, 2010  |  Individual, Real Estate  |  No Comments

Japanese persimmons or kaki being dried for consumption in the winter - a common site in the Japanese countryside in the Autumn.

“Necessary Expenses” (in Japanese ‘必要経費’ or ‘hitsuyou keihi’) are deductible for Japanese individual income tax purposes when calculating Japanese Real Estate Income, Business Income, Forestry Income and Sundry Income (in Japanese respectively ‘不動産所得’ or ‘fudousan shotoku’; ‘事業所得’ or ‘jigyou shotoku’; ‘山林所得’ or ‘shinrin shotoku’ and lastly ‘雑所得’ or ‘zasshotoku’). Read More

Recognising revenue from Japanese real estate

November 11, 2010  |  Individual, Real Estate  |  No Comments

Cruise boats in Tokyo Bay with Tokyo Bay Bridge in the background.

An individual’s taxable Japanese real estate income is the total of “revenue from real estate” less “necessary expenses” less a deduction available for individuals filing a blue form real estate tax return.

This article looks in more detail at how to calculate the first of these amounts, revenue from real estate for Japanese tax purposes. A key issue here is the timing of when rental or other real estate income is subject to Japanese tax. Read More

The Japanese taxation of real estate income for individuals

November 9, 2010  |  Individual, Real Estate  |  No Comments

Snowmen made by visitors to Sato Land, an amusement center near Sapporo in Hokkaido.

Expatriates coming to work in Japan will frequently maintain a property in their home country and hence may have to address how Japanese tax applies to rental or other income they earn from the property concerned.  If the property is sold while they are in Japan they may also have to address the Japanese taxation of any capital gain or loss arising on the sale.  An expatriate may also earn rental income from buying an investment property in Japan. Read More

Japanese land values – resources

August 16, 2010  |  Real Estate  |  No Comments

The new Modern Art Museum near Roppongi

This article collates together some of the resources on the web that can be used to help assess Japanese land values. Land valuation in Japan is made complicated by the different agencies that issue data on land value combined with the relative lack of liquidity in real estate. Read More