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New requirement for reporting of overseas assets

Starting from 2013, ‘permanent residents’ in Japan (Japanese nationals or foreign individuals who have been in Japan for more than 5 years out of the preceding 10 years) who hold certain assets have a new annual reporting requirement. This requirement arises when permanent residents hold assets including non financial assets, outside of Japan which exceeds JPY 50 million in gross values (liabilities such as home loans will not be considered) as of December 31. The person must then disclose such assets by submitting an annual report to the tax office by March 15th of the following year.

(i) Individual income tax return not a prerequisite
The ‘Overseas Assets Reporting’ is separate from the individual income tax return and therefore, the new report must be filed regardless of whether an individual income tax return is required to be filed. For example, a nonworking spouse with no Japan tax return filing requirement is required to submit the reporting if he/she has overseas assets of more than JPY 50 million. Also, joint assets located outside of Japan need to be reported by each asset holder separately based on his/her portion.

(ii) International cooperation among governments
In recent years, the environment for tax assessment and collection by Japan and other countries relating to overseas assets has changed quite drastically. The ‘Overseas Assets Reporting’ discussed in this publication is such an example.
Globally, there is international cooperation among government agencies for tax assessment and collection.
More than 50 countries have signed the multilateral Convention on Mutual Administration Assistance in Tax Matters (as of July 2013) for exchanging tax data and helping tax collection. Japan signed the convention in November 2011 and it became effective in June 2013.
Domestically, the National Tax Agency issued the Revised Basic Circular for National Tax Collection Act in June 2013. One of the changes in the revised Circular is that for delinquent taxpayers whose assets are located outside of Japan, the Japanese government can now ask the other country’s government to help collect the unpaid tax.