OVID-19: The Tax Measures for Property Owners
As a property owner, we are curious about how the Japanese government reacts to COVID-19 to help us overcome the difficulties. This time, we would like to share with you three tax measures that are applicable to landlords: the grace period for tax payment, the tax reduction/exemption on corporate tax due to the reduction in rent, and the reduction/exemption on property tax & city planning tax.
1. The grace period for tax payment
Due to the effect of COVID-19, those who meet with either ① or ② circumstance below are eligible for 1 year grace period payment in income tax, corporate tax, and consumption tax (stamp tax is not included) which due by February 1, 2020 to January 31, 2021. There’s no need for guarantees and there won’t be any overdue fine.
① Suffering from lost since business income decreased by 20% or more in 2020 compared to the same period (1 month or more) of 2019.
② Having difficulties to pay the tax temporarily
Notice that the “business income” refers to corporations or individual business sales revenue, salary income, real estate rental income, etc. Also notice that in order to receive the grace period, it is necessary to apply to the relevant tax office by 30 June 2020 or by the payment date, whichever is later.
Ministry of Finance
Ministry of Finance / National Tax Agency
National Tax Agency
2. The tax reduction/exemption on corporate tax due to the reduction in rent
Normally, when a landlord gives a tenant (who has a lease agreement with the landlord) rent reduction with no rational reason, in principle the reduction amount will be deemed as a donation under the Corporate Tax Law. However, under the following circumstances, the reduction amount won’t be deemed as a donation.
- It is clear that the tenant is suffering from the loss of income or facing severe difficulties to maintain the business operation due to COVID-19.
- The reduction in rent is intended to support the tenant’s business revivification (business continuity, employment security, etc.), and it can be confirmed by written documents.
- The reduction in rent must have been done within a considerable period of time (a period during the recovery process to resume normal business activities) after the damage to the tenant occurred.
Regarding to the property tax and city planning tax in 2021 for “small & medium enterprise owners whose business income has decreased more than a certain amount” due to the influence of COVID-19, there is a system to reduce or exempt the amount in full or half, details shown in the table below. Furthermore, if the operator of a leasing business (buildings, condominiums, apartments, etc.) are suffering from income decrease because of the reduction in rent due to COVID-19, the system can also be applicable if all requirements are met.
Regarding the definition of “small & medium enterprise”, in Japan it is applicable to those business entities whichever has 1,000 or fewer employees. The application of tax reduction/exemption should be submitted to the local authorities by January 31, 2021 (declaration deadline), with all required documents attached.
The Small and Medium Enterprise Agency
This time, we concluded three applicable tax measures against COVID-19 for landlords: the grace period for tax payment, the tax reduction/exemption on corporate tax due to the reduction in rent, and the reduction/exemption on property tax & city planning tax. Hope this information can be helpful to you.
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