“Do I need a tax agent if I own property in Japan while living abroad?”

“Who can I appoint as a tax agent?”

If you reside overseas but have income generated in Japan, you are obligated to file and pay taxes in Japan. A tax agent acts on your behalf to handle these tax-related tasks, making their appointment essential for non-residents owning property in Japan.

This article explains the basics of tax agents, when you need one, and how to appoint them.

What Is a Tax Agent?

A tax agent represents overseas residents in filing and paying taxes in Japan, covering income tax, property tax, and more. Their primary responsibilities include:

• Preparing and filing tax returns
• Paying taxes on behalf of the taxpayer
• Receiving tax refunds
• Handling correspondence from the tax office

When taxpayers reside overseas, managing tax-related communication and procedures directly with the Japanese tax authorities can be challenging. A tax agent ensures these processes run smoothly without requiring the taxpayer to be present in Japan.

However, it’s important to note that while a tax agent handles the procedures, the taxpayer retains the ultimate obligation to pay taxes.

Do Overseas Residents and Foreign Nationals Investing in Japanese Real Estate Need to File Taxes in Japan?

Let’s clarify why non-residents are required to file taxes for Japanese income.

Income Tax Obligations for Non-Residents

Under Japan’s Income Tax Act, the following income is subject to taxation:

• Residents: Income from both Japan and overseas
• Non-residents: Income sourced from within Japan

Non-residents are only taxed on income earned in Japan. For instance, if you invest in Japanese real estate and earn rental income or sell the property for a profit, that income must be declared and taxed in Japan.

Resident vs. Non-Resident

A person’s residency status is determined as follows:

Resident: A person with a domicile in Japan or who has lived in Japan for over one year continuously.

Non-resident: Anyone who does not meet the criteria for a resident.

Residents are further categorized into:

Non-permanent residents: Foreign nationals who have lived in Japan for 5 years or less in the past 10 years. They are taxed only on Japan-source income and certain overseas income.

Other residents: Taxed on worldwide income.

Non-residents, however, are taxed only on Japan-source income.

When Is a Tax Agent Required?

Here are common scenarios where appointing a tax agent is necessary:

1. 1.Overseas residents earning income from Japanese real estate:

   Rental income or profits from selling property in Japan require filing taxes, necessitating a tax agent.

2. Overseas residents with property taxes, inheritance taxes, or gift taxes in Japan:

   Even if no income is generated, taxes such as annual property tax require a tax agent to handle payments.

3. Residents leaving Japan with taxable income:

   If you have taxable income before leaving Japan and cannot complete your tax obligations before departure, appointing a tax agent is essential.

Who Can Be a Tax Agent, and How to Appoint One?

Who Can Be a Tax Agent?

Any individual residing in Japan can be appointed as your tax agent. While you can appoint family or friends, it is advisable to choose someone knowledgeable about tax laws, such as a tax accountant, to avoid potential errors or penalties.

How to Appoint a Tax Agent

1. 1.Filing a Declaration:

   Submit the appropriate tax agent appointment form to the relevant tax office:

   For income tax: Submit the Declaration of Tax Agent for Income Tax and Consumption Tax to your local tax office.

   For property tax: Submit the form to the municipal office where the property is located.

2. Timing:

   It is best to appoint a tax agent before leaving Japan. However, you can still complete the process afterward if needed.

3. Ending Tax Agent Appointment:

   If a tax agent is no longer required, file a Notice of Termination of Tax Agent at the same office where the appointment was declared.

Summary

If you are a non-resident earning income or incurring taxes related to property in Japan, you must appoint a tax agent to ensure compliance with Japanese tax regulations. While any Japan-based individual can serve as your tax agent, choosing a tax professional is highly recommended to avoid complications.