JAPAN Law and Practice Contributed by: Taro Omoto, Yusuke Nakajima and Makoto Sakai, Mori Hamada & Matsumoto
2.4 Lessor’s Liabilities 2.4.1 Tax Requirements for a Foreign Lessor A lessee who leases an aircraft from a foreign les - sor will be required to pay withholding tax under the domestic tax law of Japan. If the recipient of the rent is qualified to receive the rent without withholding tax under a double tax treaty, the lessee is not required to withhold tax. 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor A foreign lessor is not generally deemed to have a permanent establishment in Japan just because it is a party to a lease agreement with a Japanese lessee. 2.4.3 Engine Maintenance and Operations Under the default rule of the Japanese Civil Code, the lessor of a lease is responsible for any necessary repairs. However, the parties may agree otherwise in the lease agreement, which is the case for most air - craft or engine leases. 2.4.4 Damage or Loss Caused by an Asset Japanese law adopts the principle of negligence liability in principle. There are no express provisions imposing strict liability on aircraft or engine owners. Furthermore, considering the fact that, under aviation leasing practice, an airline lessee is solely responsible for the maintenance of the aircraft, practitioners gen - erally consider that it is unlikely that a foreign aircraft or engine owner or lessor under a lease, or a financier financing the asset on lease, would be liable under the doctrine of strict liability as a result of damage or a loss caused by the asset. In practice, owners and financers are included as additional insureds under Creditors are not entitled to attach assets that do not belong to the debtor. If the lessee’s creditors attach an aircraft leased to the lessee but owned by another entity (ie, lessor as owner), the owner may bring a third-party action against the creditors to prevent such attachment. 2.4.6 Priority of Third Parties’ Rights Under Japanese law, assuming that the lease is an operating lease, the lessor’s rights under the lease third-party liability insurance. 2.4.5 Attachment by Creditors
A trust beneficial interest of a registered aircraft may be registered, but it has no significant legal effect. 2.3.2 Registration If the Owner Is Different From the Operator An aircraft must always be registered in the name of the owner in Japan (including cases where the own - er is not the operator). It cannot be registered in the name of the operator if the operator is not the owner. 2.3.3 Aircraft/Engine-Specific Registers There is no specific register for leases concerning air - craft or engines. 2.3.4 Registration of Leases With the Domestic Aircraft Registry In Japan, a lease of an aircraft cannot be registered in the aircraft register. In general, the lease of an aircraft is not subject to any consent from any governmental entity. 2.3.5 Requirements for a Lease to Be Valid and Registrable A lease does not need to be in a specific form, trans - lated, served, certified, notarised nor legalised to be valid. A lease cannot be registered (see 2.3.3 Aircraft/ Engine-Specific Registers and 2.3.4 Registration of Leases With the Domestic Aircraft Registry ). 2.3.6 Taxes/Duties Payable for Registering a Lease A lease cannot be registered (see 2.3.3 Aircraft/ Engine-Specific Registers and 2.3.4 Registration of Leases With the Domestic Aircraft Registry ), and therefore will not be subject to registration tax. 2.3.7 Registration of Aircraft in Alternative Countries In principle, aircraft based in Japan must be registered in Japan (except for foreign-registered aircraft oper - ated by foreign airlines). There is no popular alterna - tive country for registration. 2.3.8 Requirements for Documents Concerning Registration See 1.2.4 Registration, Filing and/or Consent From Government Entities .
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