You Asked Us – How Do I Declare My Japanese Properties on My Taxes?

Japan Investment Properties

Japan Real Estate

29 Oct, 2019 –

It’s tax time in various parts of the world. Some of our clients have been asking how to declare taxes — Japan or their home country — and what is the process.

Most western countries have a tax treaty with Japan. To prevent double taxation, you should confirm the existence of such a treaty between Japan and your country of residence prior to deciding whether a Japanese investment property portfolio would be profitable for you. If so, the way it usually works is declaring first in Japan, then submitting your tax statement to the tax authorities of your home country, who will tax you on the difference, if any.

For example, if you have a single property generating less than the minimum reporting threshold here in Japan (385,000 JPY NET annually, with all purchase and running costs fully deductible), your tax obligations in Japan are non-existent. As such, you can simply submit your annual income and expense statements, received from us, to your accountant in the country you are in as is. There is no Japanese tax advice to attach, as you’re not paying income tax in Japan.

If, however, you plan to expand your portfolio in the next two years to a level which would take you far beyond that minimum reporting threshold in Japan, it might make sense to hire a local accountant here in advance, for them to be able to file expenses claims on your behalf ahead of any tax duties which might occur in the near future. As mentioned, though, all purchase and running costs are deductible and can be carried forward 3 years, so if you’re only planning to be purchasing another 1-2 similarly priced units, it’s unlikely that the annual expense for an accountant’s services will be necessary. They charge about 15,000 JPY per person, plus 20,000 JPY per property (in the first year of declaring the purchase) or 5,000 JPY per property (in subsequent years) to file tax returns and claim depreciation and expenses on your behalf. Therefore, unless your NET tax duties will potentially reach this expense level, nothing to concern yourself with.

As for reporting in your home country, once you reach the income tax payment minimum threshold (see below), you will be required to hire the services of a local accountant to submit your tax statements, claim any deductions, etc. Therefore it is best to seek advise from a local accountant who will guide you based on your current financials.

(Source – Priti Donnelly, Nippon Tradings International”)

This entry was posted in Japan Real Estate and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.