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The NCCJ Tax Seminar on the 19th of April was held in the offices of PwC Tax Japan (PwC). The Japanese system is complicated with lots of sub elements in it. PwC’s Dutch manager Corporate Tax Services Jorg van Leeuwen organized a line-up of professionals giving the audience a 2017 Japan Tax Update. He started the presentation by briefly explaining the Japanese economic program called Abenomics. Some four years ago Prime Minister Shinzo Abe unveiled a comprehensive economic policy package to sustainably revive the Japanese economy while maintaining fiscal discipline. The two hours seminar on the latest tax reforms, many of which aim to further Japan’s goal to realize a600 trillion Yen GDP by the year 2020, had a high information density. Many subjects covered are starting points for other, more technical information sessions.

(source: www.japan.go.jp/abenomics)

Japan Tax Update

Jorg van Leeuwen has identified several main policy goals to understand the underlined agenda of recent tax law changes, for example promote growth strategy, reward companies for raising employee salaries and incentivize R&D efforts. Before he went to the 2017 tax reform measures he mentioned an important announcement of the Japanese government in fall 2016: “There is a delay in the consumption tax hike. The increase of consumption tax rate from 8% to 10% was postponed from 1 April 2017 to 1 October 2019.
There were also recent changes in the components of corporate tax rates. Jorg van Leeuwen continues: “Japanese corporate tax consists of multiple layers. Companies that file consolidated tax returns in Japan should consider potential impacts of recent changes of the components in the various corporate tax rates on deferred taxes for financial statement reporting.”

The themes and topics Jorg van Leeuwen and his colleagues are pointing out are from time to time technical and complicated, for example how you calculate the credit for you.
R&D expenses (can omit: and how large it can be) or how you organize a R&D tax structure. On the other hand it’s easy to understand (omit: that there’s a; add: the) change going on in the compensation of directors. The general policy goal is to facilitate performance based director compensation in order to enable corporations to incentivize management to create value in the mid to long term.

The second part of the program was about individual tax. Marcus Wong and Tyler Tarpenning (Global Mobility Services), gave an overview on very significant changes for individuals such as gift and inheritance tax relief on foreign nationals residing in Japan for ten years or less out of the last fifteen years The amendments passed into law by March 2017 and became effective starting April 1, 2017. It concerns foreigners who hold a “table 1” visa that generally does not allow them to stay indefinitely in Japan. However, no relief is provided to foreign nationals who hold a “table 2” visa such as a spouse of Japanese national or permanent resident visa or foreign nationals who have resided in Japan for more than 10 years out of the last 15 years ; their worldwide assets remain subject to Japanese gift and inheritance tax. In addition, for the first time, the receipt or transfer of worldwide assets by longer-term foreigners will remain subject to Japan inheritance and gift tax after they depart Japan until they have no longer had a jusho in Japan for ten out of the last fifteen years. Therefore, receipt or transfer of worldwide assets by longer-term foreigners could remain subject to Japan inheritance and gift tax for up to five more years after permanent departure from Japan. Finally, the five year lookback rule for Japanese nationals will be increased to ten years after permanently moving out of Japan. (source: PwC, Global Mobility News)

The last part of the seminar was on tax documentation requirements, such as forms and types of documentation. In the handout of the seminar is the following written: Japan passed the 2016 tax reform proposal which included revisions to the transfer pricing legislation based on the recommendations contained in the Action 13 Report. Three-tiered approach: Under the 2016 Tax Reform, preparation and filing of a Master File and Country-by-Country Report, (“CbCR”) will principally be required by the ultimate parent entity of a multinational enterprise (“MNE”), Contemporaneous preparation of a Local File will be required for taxpayers, unless they meet exemption criteria based on transaction volume.
Jorg van Leeuwen concludes the interesting seminar by saying: “The 2017 set of rules is quite extensive, there are a lot of changes that need to be considered by Japanese taxpayers, but overall the Tax Reform provides some interesting opportunities for growth and increased flexibility, especially in the area of R&D, director’s compensation and reorganization”. With a Heineken beer in hand the participants discussed the seminar afterwards and enjoyed some good food.

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Line-up speakers

Jorg van Leeuwen is a tax manager and Dutch tax advisor. He began his career at PwC Netherlands in 2012 and has serviced clients on a wide variety of tax advisory projects since. His particular areas of expertise include the design and implementation of tax efficient group reorganizations, investment structuring, M&A and tax due diligence. Since June 2016, he has been assigned to PwC Tax Japan. Being responsible for the Dutch Tax Desk at the Tokyo office, he supports both Dutch inbound clients and Japanese clients with outbound interests in the Netherlands.
Other speakers and PwC attendants: Mr. Marcus Wong, Partner (Global Mobility Services), Mr. Tyler Tarpenning, Associate (Global Mobility Services), Mr. Daisuke Miyajima, Partner (Transfer Pricing), Mr. Howard Osawa, Director (Transfer Pricing), Mr. Haruhisa Shirato, Director (Corporate Tax Services)