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

Significant 2012 deferred tax write downs for Japanese companies

May 31, 2012  |  Developments, News  |  No Comments

News, information

On the 30th of May, 2012, the Nikkei Newspaper reported on the extent to which leading Japanese companies were required to mark down deferred tax assets for Japanese financial reporting purposes in the year to 31 March 2012.

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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

Tax incentive zones for foreign investors

May 25, 2012  |  Incentives  |  No Comments

Mount Iwaki-san, a dormant volcano in Aomori-ken to the far north of the main island in Japan.

In June 1011 the Japanese Diet passed 2011 tax reform legislation delayed by the March earthquake including tax incentives for foreign investors.

Although not generous when compared with other Asian countries, this represents the first time the Japanese government has passed a meaningful set of tax incentives targeting inbound investment.

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Audits of Japanese Corporate Reorganizations.

August 28, 2011  |  Developments, News  |  No Comments

News, information

In recent months the Japanese specialist tax press has reported on the increasing number of Japanese tax audits focusing on Japanese tax preferred corporate reorganizations (below “Japanese TPCRs’) . Please see the corporate reorganization section for details 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

Japanese taxation of a US Spin-off

August 6, 2011  |  Court, Dividend Taxation  |  No Comments

Japanese judicial decisions

On 21 April 2011 the Tokyo High Court handed down a decision concerning whether shares acquired by a Japanese resident individual further to a spin off by an American company should be treated as dividend income for Japanese income tax purposes. Read More

Distributions: Income or capital gains for the shareholder?

August 4, 2011  |  Dividend Taxation  |  No Comments

Preparations for the tea ceremony

A lady tends to the charcoal brazier in preparation for the tea ceremony.

An issue common to many tax systems is whether a distribution made by a company to its shareholders in respect of their shares should be treated as a return of capital to those shareholders or alternatively as an item of income. Shareholder taxation will, of course, often vary dramatically depending on the characterization of such a distribution as an item of income or return of capital. Read More