JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
7.6 Liens or Encumbrances in the Event of Non-payment The law grants contractors the right to retain ( ryuchi ken ) or refuse to deliver the completed building in the event of non-payment, as long as the contractor has possession of the building. This right to retain does not require any regis - tration. Construction contracts typically provide for the payment of the last instalment of the construc - tion price in exchange for the delivery of the completed building. 7.7 Requirements Before Use or Inhabitation The Construction Standards Law requires the owner to obtain an inspection certificate ( kensa zumi shou ) before it is allowed to use a newly constructed building. The process is as follows: • the owner must apply for inspection by the relevant local government or government- accredited private building agency within four days of the completion of the construction; • the inspection will be carried out within seven days of the application being accepted; and • if it is confirmed that the construction and the site comply with relevant laws and regula - tions, the inspection certificate will be issued.
tractually obliged to pay an amount equivalent to the consumption tax on top of the purchase price of the building. In general, sellers whose taxable sales did not exceed JPY10 million in the penultimate taxable year are exempt from consumption tax. 8.2 Mitigation of Tax Liability The most common method to mitigate tax liabil - ity is to use a trust structure where the inves - tor purchases the TBI in a Property Trust rather than the outright ownership of the real property itself. Please also see 2.1 Categories of Prop- erty Rights and 5.1 Types of Entities Available to Investors to Hold Real Estate Assets . In doing so, generally: • the registration and licence tax for the estab - lishment of a Property Trust is reduced from 1.5% (for land) or 2% (for buildings) of the Taxable Base of the property (which is appli - cable in an outright purchase of real property) to 0.3% (for land) or 0.4% (for buildings) of the Taxable Base of the property; in addition, JPY1,000 is paid for each TBI transfer; and • the real estate acquisition tax is reduced from 1.5% (for building land), 3% (for non-building land and residential buildings) or 4% (for non- residential buildings) of the Taxable Base of the property (which is applicable in an out - right transfer of real estate) to zero. Alternatively, by using a TMK as an acquisi - tion vehicle, the registration and licence tax is reduced to 1.3% of the Taxable Base of the property, and the real estate acquisition tax is effectively reduced to 0.6% (for building land), 1.2% (for non-building land and residential buildings) or 1.6% (for non-residential buildings) of the Taxable Base of the property because, in
8. Tax 8.1 VAT and Sales Tax
The sale of a building is subject to consumption tax (equivalent to VAT) at the rate of 10% of the purchase price of the building. The sale of land is not subject to consumption tax. Although the seller is liable for the consumption tax under tax law, in practice the buyer is con -
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