Special relationship to an individual

August 30, 2010  |  basics

Diagram of family relationship under the Japanese Civil Code

This article explains the definition of ‘Special Relationship’ (特殊の関係) for Japanese tax purposes as applied to individuals.  This definition is used in different contexts in the Japanese tax law, for example as part of the process of determining whether or not a company is Family Company for Japanese tax purposes.

The definition identifies certain close blood or spousal relatives of the individual concerned (below, the ‘Tested Individual’) as well as other individuals who are dependent on the Tested Individual as being related to him or her.  The definition can be found in (links in Japanese) CTLEO 4-1 and 4 no 2 and references to family are interpreted according to the brief Japanese definition in Civil Law at Article 725.

Other articles will cross reference this diagram and definition below when required.

Definition of Special Relationship

The term Special Relationship includes the following classes of individuals related to the Tested Individual.

  • Family of the Tested Individual as defined under the Japanese Civil Code Article 725.  This relationship is illustrated in the diagram and in principle includes blood relations with six degrees of separation and spousal family relations through three degrees of separation.
  • A person who not married to the Tested Individual but who in substance has as relationship of the same sort as a married relationship (i.e. a common law spouse).
  • Employees of the Tested Individual.
  • Persons other than those in the three categories above who are in receipt of money or other assets in order to maintain their day to day living costs.
  • The family of those persons from one to four above who are also dependents whose livelihood is therefore combined with the Tested Individual.

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