Archive for June, 2010

Definitions of Japanese tax, legal and other terms

A well known landmark in a passageway under Shinjuku Station

When interpreting tax matters it is critical to have a proper understanding of the terms used in Japanese legislation, accounting standards or similar technical documents. In order to help users of the Japan Tax Site get such an understanding the Site has developed a searchable database (the ‘Tax Definitions Database‘) of translations and explanations of Japanese technical terms Read More

Japan 2010 tax reform – deferral of tax on intra group transactions

June 22, 2010  |  basics, Business combinations  |  No Comments

Pine trees are typically planted at the gate to large shrines.

This post outlines the rules introduced in the Japanese 2010 tax reform that allow sales of certain assets to be made between defined Japanese entities within a group of wholly owned companies without immediately recognizing taxable gain or loss.  This system is referred to in Japanese as the グループ内取引等に関する税制・guruupu nai torihiki tou ni kansuru zeisei, translated below as the ‘Intra Group Transactions Tax System’ abbreviated as IGTS.  The system should apply to transactions from 1 October 2010 onwards but professional advice from qualified Japanese tax professionals must be taken to confirm how the system can be applied. Read More

Japanese trust taxation – introduction

June 15, 2010  |  Transactions, Trusts  |  No Comments

A picture of five geisha taken in the Meiji era

This post is an introduction to the taxation of Japanese trusts.  Japanese trust taxation is a confusing area because of the large number of different trust forms which have a range of similar sounding names.  An understanding of Japanese trusts and their taxation is, however, useful when understanding many of the different financial products available in the Japanese market and their treatment for Japanese individual tax purposes.  Furthermore, transactions involving the use of trusts created for securitisation or similar financing purposes are gaining in popularity in the Japanese capital markets.  Examples include the  March 2010 Mitsubish Sumitomo Bank loan securitisation or Softbank’s  use of trusts in whole business securitisations .  This is a promising area for the future. Read More

Japanese international tax – FAQs

June 12, 2010  |  Featured, International Taxation  |  No Comments

A statue of the Buddha in Yanaka, Tokyo near Nippori station

This post collates together frequently asked questions relating to Japanese international tax issues.   Common issues in international tax include identifying whether income has a source in a particular country and hence may be within the scope of the taxing jurisdiction of the authorities of the country concerned; whether tax treaties amend or alter the scope of such jurisdiction or mitigate the rate of tax paid and how the matters intrinsic to an enterprise – for example their residence or whether or not they fiscally transparent – impacts the rights of a country to impose tax.  This and other issues are discussed in the international tax section (see the drop down menu) but to start off with below are a series of Japanese international tax FAQs. Read More

Corporations, carry back of tax losses

June 10, 2010  |  Corporate tax administration  |  No Comments

Akihabara by night, the heart of Japanese 'Otaku' culture

In principle the Japanese tax system allows the carry back of tax losses to a prior tax year.   Regrettably however such loss carry back has been suspended since 1992 except in certain special circumstances discussed below.  This post discusses briefly the circumstances where a carry back of losses may be allowed for a company for Japanese tax purposes.  It also includes a translation of an article from the Japanese tax authority web site explaining in more detail critera, timing and other matters related to tax loss carry back.   If you are considering whether your company may be able to carry back losses it is essential that you plan well in advance, pay attention to time limits and also get proper professional advice (and not not rely solely on this site). Read More

“Blue form” filing status

"Blue Impulse" - the Japanese Air Self Defense Force formation flying group

This post gives an overview of the role of the “blue form tax return” in the Japanese tax system. A Japanese taxpayer becomes a “blue form” tax filer by submitting an election to the authorities and then maintaining their accounting records to an acceptable standard. Read More

Japanese tax treaty forms on the web

June 6, 2010  |  Tax Treaties  |  No Comments
Torii in Miyajma shrine, one of the best known scenic spots in Japan.

Torii in Miyajma shrine, one of the best known scenic spots in Japan.

The Japanese tax authority website allows the download of PDFs of the forms (”Treaty Forms’) that must be completed to claim reduction or exemption from Japanese taxes under Japan’s tax treaties (to claim ‘Treaty Benefits’).  Typical Treaty Benefits are reductions in the rate of Japanese withholding taxes on income or dividends.

Read More

M&A – allocating price to intangible assets

Entrance to a snow covered shrine in Hirotaka, Northern Japan

This post reviews principles behind allocating cost to intangible assets under Japanese purchase accounting for business combinations.

As part of Japan’s convergence with International Financial Reporting Standards (IFRS) Japanese  merger accounting (持分プーリング in Japanese, best translated as “pooling of interests”) is no longer available from 1 April 2010.  Also the Japanese Accounting Standards Board (‘JASB’) intends examining in Step 2 of its IFRS convergence process whether Japan’s current approach – amortisation of goodwill over a set period – should be brought closer to the IFRS approach (namely separately identifying intangible assets and goodwill and then periodically reviewing the value of such goodwill).  The JASBs request for public comment on accounting for business combinations is here and the related paper here. Read More

How to make a claim under the Japan US treaty

June 2, 2010  |  Tax Treaties  |  No Comments

Everything to make a claim under the US Japan tax treaty.

Read More