{"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":"<p>In general, a foreign corporation without a permanent establishment (<strong>PE<\/strong>) in Japan is not subject to capital gains tax on the disposal of shares in a Japanese company.<\/p>\n<p>However, there are some exceptions to the general rule.<\/p>\n<p>The Japan 2018 Tax Reform Proposal amends one of the exceptions as summarized below.<!--more--><\/p>\n<p>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<ol>\n<li>a company sold falls under the category of a &#8220;Real Estate Holding Corporation&#8221;; and<\/li>\n<li>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<p>A &#8220;Real Estate Holding Corporation&#8221; is a corporation in which 50% or more of its assets are real estate in Japan, including equities in other Real Estate Holding Corporations (<strong>50% Test<\/strong>).<\/p>\n<p>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<p>Therefore, all corporations as illustrated below are treated as\u00a0Real Estate Holding Corporation under the Japanese domestic tax law.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-873 size-full\" src=\"https:\/\/suga-taxfirm.com\/wp-content\/uploads\/2018\/01\/REHCEn.png\" alt=\"Real Estate Holding Corporation\" width=\"518\" height=\"396\" srcset=\"https:\/\/suga-taxfirm.com\/en\/wp-content\/uploads\/2018\/01\/REHCEn.png 518w, https:\/\/suga-taxfirm.com\/en\/wp-content\/uploads\/2018\/01\/REHCEn-300x229.png 300w\" sizes=\"auto, (max-width: 518px) 100vw, 518px\" \/><\/p>\n<p>Currently, the 50% Test above is determined at the time of disposal.<\/p>\n<p>However, under the 2018 Tax Reform Proposal, the determination period expands.<\/p>\n<p>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<p>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 style=\"text-align: center;\">&#8212;&#8212;&#8212;&#8212;<\/p>\n<p>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  [&hellip;]","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":[],"_links":{"self":[{"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/posts\/858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/comments?post=858"}],"version-history":[{"count":1,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/posts\/858\/revisions"}],"predecessor-version":[{"id":4403,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/posts\/858\/revisions\/4403"}],"wp:attachment":[{"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/media?parent=858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/categories?post=858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/suga-taxfirm.com\/en\/wp-json\/wp\/v2\/tags?post=858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}