JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
Share Deal In a share deal, corporate sellers are subject to corporation tax but not consumption tax, real estate acquisition 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. 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 these 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
governmental bodies to ascertain the applicable local or specific zoning or planning regulations. 2.9 Condemnation, Expropriation or Compulsory Purchase The Land Expropriation Law provides the require - ments and procedure for the expropriation of privately owned real estate by governmental bodies. Owners of expropriated assets are gen - erally entitled to reasonable compensation. The two major elements of the whole process are confirmation that the project necessitating the expropriation serves the public interest and 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. Depending 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 treatment). Corporation tax is also imposed on net income if the seller is a corporation.
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