JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
tax. Moreover, the share purchase agreement is basically not subject to stamp duty. Allocation of Responsibilities for Taxes Typically, the real estate acquisition tax, the reg - istration and licence tax and the consumption tax are borne by the buyer, and the corporation tax is borne by the seller. The responsibility for the stamp duty is allocated based on agreement between the buyer and the seller. Special Methods to Mitigate Tax Liability For tax treatments that can be accomplished by using a trust structure or a tokutei mokuteki kaisha (TMK), please see 8.2 Mitigation of Tax Liability . 2.11 Legal Restrictions on Foreign Investors There are no legal restrictions on the acquisi - tion of real property in Japan by non-residents, except that such buyers are required to make a post-transaction filing pursuant to the Foreign Exchange and Foreign Trade Law. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Please see 5.1 Types of Entities Available to Investors to Hold Real Estate Assets . 3.2 Typical Security Created by Commercial Investors A mortgage is the most typical security interest created by a borrower who holds outright owner - ship of real estate. If the borrower and the lender intend to enter into financing transactions on a continual basis, a revolving mortgage may be created instead. If the borrower holds an inter - est in real estate in the form of a TBI, a pledge
over the TBI is the principal security interest in place of a mortgage. Some lenders may require pledges over insurance claims. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no special restrictions on granting security over real estate to foreign lenders. How - ever, a licensing requirement applies if a foreign financial institution lends money in Japan as part of its money lending business, unless the institu - tion is a licensed bank in its home country and has a Japanese branch. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Formal (ie, non-provisional) registration of a mortgage is subject to a registration and licence tax, at a rate of 0.4% of the secured amount. Because this tax can be substantial depending on the secured obligation, some lenders permit the borrower to make a provisional registration only, which costs JPY1,000 for each real prop - erty. Once the mortgage is formally registered based on the provisional registration, the mort - gagee enjoys priority over other mortgagees who register their mortgages after the provi - sional registration. Judicial foreclosure of a mortgage involves vari - ous costs. The applicant has to prepay up to JPY2 million (in the case of the Tokyo District Court) to a competent court, which will be cred - ited to the court’s expenses. 3.5 Legal Requirements Before an Entity Can Give Valid Security If there are minority shareholders in a company that is providing security to secure a debt owed by its parent company, the directors of the secu - rity provider usually obtain the consent of said minority shareholders to ensure that the direc -
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