Offsetting individual tax losses – example

June 4, 2012  |  Individual  |  No Comments

The Japanese one thousand yen note includes a view of Mount Fuji from one of its five nearby lakes.

The ability to offset tax losses arising from one source of income against taxable profits arising from another is often critical for tax planning purposes, for example through ensuring that a taxpayer is taxed on his overall economic gain.

The Japanese individual tax system has a rules that govern such loss offset which are discussed in this article. Below is a worked example of how these rules apply in practice so it is helpful to read it together with the earlier referenced article.

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Individual tax and setting off tax losses

June 1, 2012  |  Individual  |  No Comments

A path through the Japanese "Southern Alps" - a range of mountains between Tokyo and Osaka.

The ability to offset tax losses against taxable income having a different source is often a key issue in tax planning.

Where such offset is not available a taxpayer may find themselves carrying forward a tax loss that they cannot use or losing the benefit of a tax loss altogether, hence paying tax on an amount of income greater than their overall economic gains. Read More

2012 tax reform and reporting foreign assets

May 29, 2012  |  Individual  |  No Comments

One of very few remaining terraced rice fields which in Japan are known as "senmeidai" or one thousand step fields

The Japanese tax authorities have increased their focus on the audit of income or gains from assets that have not been declared to the tax authorities and which are held by Japanese tax residents outside Japan.

As part of this focus the authorities have widened their network of information exchange agreements and have focused on inheritance tax audits as well as audits of income tax filings.

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2012 tax reform and reporting foreign stock compensation

May 28, 2012  |  Compensation, Individual  |  No Comments

A stall selling oden - a variety of small dishes often based on fish past usually eaten in the winter.

In recent years the Japanese tax authorities have been auditing the declaration by Japanese resident individuals of awards of share options, restricted stock awards or similar stock based compensation made to them by the foreign parent company of their Japanese employer.

Restricted stock awards with a vesting periods of around three to five years have often been part of the compensation of Japan based employees of foreign groups in the financial sector. Read More

Japanese inheritance tax audits

August 7, 2011  |  Individual  |  No Comments

A distant view of Mount Fuji

On 24 July 2011 the Nikkei newspaper reported on trends in audits of Japanese inheritance tax. The article talked about the increasing number and depth of such inheritance tax audits and explained that it was common for the tax authorities to find under-reported income during such an audit. The article also outlined some of the points that are often examined during an inheritance tax audit as well as providing guidance on how to deal with an audit if one takes place. 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

Individuals becoming non-Japanese resident

November 4, 2010  |  Court, Individual  |  No Comments

Japanese judicial decisions

The Japanese Tax Tribunal web site summarizes the results of an appeal dated 10 September 2009 concerning tax residence for an individual who went to work outside Japan while his family, whom he visited relatively regularly, remained living in Japan. Read More