The exit taxTaxes are levied on stocks that have not yet been sold.Deferring tax payments when you have no cash on hand istax deferralIt is.However, the conditions are strict, and missing even a single notification will cause the grace period to expire.

Conditions for receiving a grace period

Paragraph 1 of Article 137-2 of the Income Tax Act. The article title is "(Tax Payment Deferral in Cases Where Special Provisions for Capital Gains, etc., in the Case of Departure from Japan Apply)".

……amount of income tax subject to tax deferralRegarding the income tax equivalent to ……, the said resident However,by the time of said emigration pursuant to Article 117, Paragraph 2 of the Act on General Rules for National Taxes (Tax Agent submitted the notification of a tax administrator pursuant to the provisions of )andandas provided by Cabinet Orderonly if security equivalent to the income tax amount for the relevant year's tax deferral is provided by the due date for filing the final income tax return for that year、……defer that tax payment。

Two conditions are connected by "and".

The deadline is different.Notification of Tax RepresentativeBefore going abroadIt is.It is too late once you leave the country.The security is valid until the tax return filing deadline (March 15 of the following year).

And paragraph 3 establishes filing requirements.

The provision of item 1... shall apply to... individual's tax return,there is a statement to the effect that they intend to be subject to the provisions of the same paragraphand details of the transfer or settlement of the subject assets, andStatement regarding the calculation of the amount of income tax subject to tax deferralstating other matters specified by Ministry of Finance OrdinanceApply only if documents are attached。

A statement of intent to apply is required.Although paragraph 4 includes a leniency provision for unavoidable circumstances,Only when documents are submittedThat is under the condition.

The grace period is 5 years, which can be extended to 10 years by notification.

Paragraph 1 provides that the end of the suspension period shall be "Expiration reference dateon and after the day followingAprilday on which" passes. The expiration standard date isthe day on which five years have elapsed from the date of moving out of the countryAnd,the date on which the applicable reason for returning to one's home country or similar circumstances occurred's,whichever is earlierIt is.

And item 2.

If an individual subject to the application of the provisions of the preceding paragraph,the day on which five years have elapsed from the date of moving abroadBy ..., pursuant to the provisions of the same paragraphIntention to receive an extension of the deadline related to tax payment postponementstating other matters specified by Ministry of Finance Ordinancenotification, if filed with the district director of the tax office having jurisdiction over the tax payment location, "five years" in the same paragraph shall read "Ten years" is used.

It does not become 10 years automatically.You need to submit the extension notification by the day that marks the expiration of the 5-year period.

And there is a parenthetical note on the deadline.the day on which five years have elapsed from the date of departure from Japan (If it comes to fall under the case of returning to Japan before the same day, the day preceding the day on which it comes to fall under that casebyIf a return to the home country or the like occurs before 5 years, it will be shortened to the day before that date.

I file the continuation application form every year.

This is the easiest place to miss.Section 6.

Individuals subject to the provisions of Paragraph 1 shall……December 31 of each yearwith respect to applicable assets held or under contract into the effect that one wishes to continue to be subject to the provisions of paragraph 1a notification stating other matters specified by Ministry of Finance Ordinance (... "Application for Continued Application"")hereinafter referred to asMarch 15 of the year following the year to which that day belongs（……「Submission deadline), to the district tax office director having jurisdiction over the tax payment location,I have to submit it。

It is by March 15th every year.As long as the grace period continues, I will keep submitting it every year.

What happens if I don't submit it?Item 8.

If the notification for continued application is not submitted by the deadline, notwithstanding the provisions of paragraph (1), the income tax corresponding to the amount of income tax granted tax suspension as of said deadline shall,the day on which four months have elapsed from the said submission deadlinepursuant to the provisions of the same paragraph by means ofset as the due date for the tax payment postponement。

The grace period is about to expire.The payment deadline arrives four months after the submission deadline.

There is also a parenthetical note in case the person themselves has passed away.during the period from the relevant submission deadline to the day on which four months have elapsed from that date, the individual related to the relevant income taxDeathin the event that, the individual'sThe heirDue to the death of the individual in questionthe day on which six months have elapsed since the day when the person became aware of the commencement of the inheritance」。

There is salvation.(Item 7). Regarding the failure to submit by the deadlineWhen the district director of the tax office finds that unavoidable circumstances existis deemed to have been submitted by the deadline only if the notification has been submitted.However, the determination of "unavoidable circumstances" rests with the district director of the tax office.

If you sell it along the way, the grace period for that portion will expire.

Paragraph 5, by the expiration reference date,Transfer of applicable assets through assignment, settlement, or giftProvisions are established for cases where other grounds specified by Cabinet Order arise.

Of the income tax amount for which tax payment is deferred pertaining to applicable assets in respect of which these grounds have arisen, among those applicable assets in respect of which these grounds have arisenThe amount for the corresponding partas for the income tax equivalent to the amount calculated pursuant to the provisions of cabinet orders, notwithstanding the provisions of paragraph 1,the day on which four months have elapsed from the day on which these grounds aroseshall be the due date for the tax grace under the provisions of the same paragraph.

The payment deadline for that portion is the day on which four months have elapsed from the date the grounds arose.not the entire amount of the deferred tax,the portion corresponding to that assetonly is confirmed.

You cannot "sell overseas while deferring the departure tax."

Revocation of grace period (Paragraph 9)

The district director of the tax office shall, in the following cases, apply the provisions of paragraph 1 relating to the income tax corresponding to the amount of income tax for which tax payment is deferred,The time limit for tax payment postponement can be moved up.。

In the case of acceleration, paragraphs 2 and 3 of Article 49 of the Act on General Rules for National Taxes (Revocation of Tax Payment Grace Period) apply mutatis mutandis.

Overview of the procedure

There are 5 scenarios, each with a different deadline.

Points that require care in practice

• By when must a tax representative be appointed?Until the time of moving abroad. It won't be in time if you do it after leaving the country.
• What will be provided as collateral?The Cabinet Order provides. The amount is equivalent to the amount of income tax for which tax payment is deferred.
• Does it automatically become 10 years?That won't do. A notification for extension is required by the date 5 years have passed.
• I forgot to file the annual report.According to Clause 8, it expires in 4 months. The grace period under Clause 7 is at the discretion of the district director.
• I sold the stocks during the grace period.According to paragraph 5, the deadline for that amount will arrive.
• When I return to my home country.The expiration standard date is the earlier of the "5-year elapsed date" and the "date of return to home country, etc."

The exit tax payment deferral is a system that requires both preparation before departure and subsequent management for 10 years.Especially the annual application for continued application is easily forgotten many years after leaving Japan. If you are considering moving abroad and own shares,Before leaving the countryPlease consult with us. The notification of the tax administrator cannot be made in time after leaving the country.

Legal basis

• Article 137-2 (Tax Payment Deferral in Cases where Special Provisions on Capital Gains, etc. upon Overseas Transfer Apply), Paragraph 1 through Paragraph 9 of the Income Tax Act
• Article 60-2 of the Income Tax Act (Special Provisions for Capital Gains, etc., in the Case of Departure from Japan)
• Article 128 of the Income Tax Act (Payment by Tax Return), Article 129 (Payment by Tax Return in Case of Death)
• Article 117, Paragraph 2 (Tax Agent) and Article 49, Paragraphs 2 and 3 (Revocation of Tax Payment Extension) of the Act on General Rules for National Taxes

Cabinet Orders and Ministry of Finance Ordinances specifying the types of security and methods of provision, matters to be stated in notification forms specified by Ministry of Finance Ordinances, details of "grounds specified by Cabinet Orders" under Paragraph 5, and Paragraph 10 and subsequent paragraphs are not covered in this article. Individual procedures require confirmation of asset details and deadlines.