{"id":858,"date":"2018-01-22T08:05:13","date_gmt":"2018-01-21T23:05:13","guid":{"rendered":"https:\/\/suga-taxfirm.com\/?p=858"},"modified":"2024-04-22T17:04:58","modified_gmt":"2024-04-22T08:04:58","slug":"japan-2018-tax-reform-real-estate-holding-corporation-rule","status":"publish","type":"post","link":"https:\/\/suga-taxfirm.com\/en\/blogpost\/japan-2018-tax-reform-real-estate-holding-corporation-rule\/","title":{"rendered":"Japan 2018 Tax Reform Proposal on Real Estate Holding Corporation"},"content":{"rendered":"

In general, a foreign corporation without a permanent establishment (PE<\/strong>) in Japan is not subject to capital gains tax on the disposal of shares in a Japanese company.<\/p>\n

However, there are some exceptions to the general rule.<\/p>\n

The Japan 2018 Tax Reform Proposal amends one of the exceptions as summarized below.<\/p>\n

One of the exceptions to the general rule on capital gain tax is that a foreign corporation without PE in Japan is subject to Japanese income tax for capital gain on disposal of shares at approximately a 25% rate by filing a corporation tax return if:<\/p>\n

    \n
  1. a company sold falls under the category of a “Real Estate Holding Corporation”; and<\/li>\n
  2. the foreign corporation (together with special related persons) owned more than 2% (5% if listed) of the shares in the Real Estate Holding Corporation at the end of the fiscal year immediately before the year of sale.<\/li>\n<\/ol>\n

    A “Real Estate Holding Corporation” is a corporation in which 50% or more of its assets are real estate in Japan, including equities in other Real Estate Holding Corporations (50% Test<\/strong>).<\/p>\n

    Real Estate Holding Corporations are not limited to Japanese corporations.\u00a0 A\u00a0foreign corporation can also be treated as a Real Estate Holding Corporation if it meets the 50% Test.<\/p>\n

    Therefore, all corporations as illustrated below are treated as\u00a0Real Estate Holding Corporation under the Japanese domestic tax law.<\/p>\n

    \"Real<\/p>\n

    Currently, the 50% Test above is determined at the time of disposal.<\/p>\n

    However, under the 2018 Tax Reform Proposal, the determination period expands.<\/p>\n

    A company is treated as a Real Estate Holding Corporation if it meets the 50% Test at any time in the 365 days before the date of disposal.<\/p>\n

    Please note the 2018 Tax Reform Proposal is expected to be approved by the end of March 2018 and is not effective at the time of this post.<\/p>\n

    ————<\/p>\n

    This post is a summary based on the applicable tax laws and regulations of Japan effective as at the date hereof.<\/p>\n","protected":false},"excerpt":{"rendered":"In general, a foreign corporation without a permanent establishment (PE) in Japan is not subject to […]","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-858","post","type-post","status-publish","format-standard","hentry","category-corp-tax-en"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\n\t\t\n