JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada
2.9 Condemnation, Expropriation or Compulsory Purchase
and warranty insurance in real estate transactions in Japan. 2.6 Important Areas of Law for Investors The primary laws relating to real estate transactions include the following: • laws governing private parties’ rights and obliga - tions (the Civil Code, the Law on Unit Ownership of Buildings, the Land Lease and Building Lease Law and the Real Estate Registration Law); • laws regarding regulations and public policy (the City Planning Law, the Construction Standards Law, the Soil Contamination Countermeasures Law, the Real Estate Transaction Business Law and local government ordinances); • laws related to trusts and TBI transactions (the Trust Law, the Trust Business Law and the Finan - cial Instruments and Exchange Law); and • laws related to foreign investment (the Foreign Exchange and Foreign Trade Law). 2.7 Soil Pollution or Environmental Contamination The buyer may be responsible for soil pollution or the environmental contamination of a property. If the soil contamination is likely to harm human health, the land will be designated as an area requiring action ( yo sochi kuiki ) under the Soil Contamination Counter - measures Law and the landowner is required to take the necessary measures to remedy the contamination. These measures depend on the class of hazardous substances found on the land and on the state and degree of contamination. In practice, the removal of contaminated soil is the prevailing remedial method. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law The City Planning Law is the main source of zoning regulations. An “explanation sheet of important mat - ters” prepared by a broker or the seller will address the zoning restrictions applicable to the subject property under the City Planning Law. A buyer may also consult with relevant governmental bodies to ascertain the applicable local or specific zoning or planning regula - tions.
The Land Expropriation Law provides the require - ments and procedures for the expropriation of private - ly owned real estate by governmental bodies. Owners of expropriated assets are generally entitled to rea - sonable compensation. The two major elements of the process are confirmation that the project necessitat - ing expropriation serves the public interest and that the amount of compensation has been determined. 2.10 Taxes Applicable to a Transaction The outright transfer of real property (asset deal) is subject to real estate acquisition tax ( fudosan shutoku zei ), registration and licence tax ( toroku menkyo zei ), consumption tax ( shohi-zei ) and stamp duty. Depend - ing on the type of real property and the timing of the transactions and subject to some exceptions, the tax rates are as follows: • registration and licence tax: 1.5% to 2% of the taxable base of the property, which is the property value recorded in the tax rolls for purposes of fixed assets tax; • real estate acquisition tax: 3% to 4% of the taxable base; • consumption tax: 10% of the purchase price of the building; and • stamp duty: up to JPY600,000 (or up to JPY480,000 under the current special tax treat - ment). Corporation tax is also imposed on net income if the seller is a corporation. Share Deal In a share deal, corporate sellers are subject to corpo - ration tax but not consumption tax, real estate acqui - sition tax or registration and licence tax. Moreover, the share purchase agreement is basically not subject to stamp duty. Allocation of Responsibilities for Taxes The real estate acquisition tax, the registration and licence tax and the consumption tax are typically borne by the buyer and the corporation tax is borne by the seller. Responsibility for stamp duty is deter - mined by agreement between the buyer and the seller.
366 CHAMBERS.COM
Powered by FlippingBook