NEWS

NEWS

NEWS

2019.10.25

Taxpayer Loses Court Case Concerning a Tax-saving Measure Which Involved Borrowing Large Sums Shortly Before an Inheritance Commenced

Introduction

We will discuss herein a tax-saving scheme utilizing differences between the appraised values of real estate for lease based on evaluation instructions and transaction prices. Asset valuations utilized for inheritance tax are generally based upon the National Tax Agency’s “Basic Instructions on Evaluation of Assets”. The following will concern a case where the National Tax Agency refuted a declaration of zero inheritance tax after a taxpayer bought real estate for lease for 1.4 billion yen, using bank loans received shortly before the taxpayer’s death.

Published Real Assets

The Tokyo District Court adopted an evaluation by the National Tax Agency Commissioner based on Clause 6 of the Basic Instructions on Evaluation of Assets, dismissing an heir taxpayer’s appeal pertaining to the appraisal value for inheritance tax on the real estate for lease that the decedent (the benefactor) had bought using loans before the inheritance commenced. As concrete assets, the decedent had acquired the real estate using loans obtained three years and five months (41 months) & two years and six months (30 months) before the commencement of the inheritance.
Real estate acquisition Real estate acquisition 3 years & 5 months before commencement of inheritance Real estate acquisition 2 years & 6 months before commencement of inheritance
①Acquisition price approx. 830 million yen approx. 550 million yen
②Appraisal value based upon Basic Instructions on Evaluation of Assets approx. 200 million yen approx. 130 million yen
①÷② approx. quadruple approx. quadruple
Transfer price after commencing inheritance in possession approx. 510 million yen
Appraisal value approx. 750 million yen approx. 520 million yen
After the heir taxpayer’s declaration of zero inheritance tax, a tax office, based on Clause 6 (the rule to evaluate according to the direction of the National Tax Agency Commissioner, when evaluation by the Basic Instructions on Evaluation of Assets is deemed inappropriate), decided that evaluations based on appraisal values were appropriate, and in April 2016 the taxpayer was ordered to pay back taxes and penalties for the incorrect zero tax declaration. Then, after a ruling by a national tax tribunal in May 2017, the taxpayer filed a lawsuit against the government.

Specific Circumstances besides the Differences between Acquisition Price and Appraisal Value

The Tokyo District Court recognized the appraisal values based on Clause 6 of the Basic Instructions on Evaluation of Assets, in line with the National Tax Agency’s claims. The Court compared the different values based on the Basic Instructions, the acquisition prices and the appraisal values for both properties, finding differences of approximately 4X (cf. the above table ①÷②). As a result, it decided that there were “special circumstances”, as mentioned in Clause 6 of the Basic Instructions on Evaluation of Assets. Looking also at the sequence of events as to how the properties ended up being declared as inheritances, the deceased individual had purchased them by borrowing heavily when he was 90-91 years old. Likely an important point in this case is that were it not for the loans payable and the real estate acquisitions, the assessed value of the inheritance would have exceeded 600 million yen. In addition, though the real estate acquisitions and loans were set up as part of the inheritance and business succession processes, the court likely took seriously that (according to the bank’s loan approval documents, etc.) the decedent probably was aware of the inheritance tax burden-reducing effects, and carried out the transactions in expectation of that. It would be extremely risky to attempt to easily avoid inheritance taxes by going along with such a suggestion by a real estate company or some other such entity.

Changes in How Consumption Taxes Are Handled by Google Advertising

Introduction

Since April 1st 2019, the way consumption tax on online advertising is handled has changed. Before that date, advertisement charges paid to Google were not an object of purchase tax deductions for consumption tax, but now they can be deducted.

Advertisements produced by Google

There are various kinds of Net advertising provided by Google. A representative type is “search advertising”, which displays ads with Google search results. Furthermore, there is “display advertising”, which indicates text advertising and banner ads on Google service screens, etc., as well as “video advertising” which displays videos to users watching YouTube, and more. Today there are numerous companies which utilize advertisements provided by Google. However, likely many people have not been concerned about whom they have been paying advertisement fees to, even as they have been using Google’s services. Actually, through March 31, 2019 those advertisement charges were paid to Google Asia Pacific Pte. Ltd., a foreign corporation, not to Google Limited Liability, Google’s Japanese subsidiary. The Google Asia Pacific Pte. Ltd. company is seemingly a subsidiary company managing accounts and payments for the Asian-Pacific region. Therefore, the ad charges paid to it were not an object of purchase tax deductions for consumption tax (reverse charge method).

Contract Transferred to Google Limited Liability Company from April 1st 2019

The contract was transferred to Google Limited Liability Company on April 1, 2019. As the advertisement service provider has changed from a foreign company to a domestic one, fees paid have become regular domestic transactions subject to consumption tax. In other words, the advertisement charges an advertiser pay will now be objects of purchase tax deductions.

No Changes regarding Google AdSense

Google AdSense, in contrast to Google advertisements, has not undergone such changes. Google AdSense is an ad-serving application run by Google where website owners can enroll to enable advertisements on their website, thus generating revenue. Google AdSense doesn’t constitute domestic transactions, so its consumption tax handling is complicated; however, it seemingly will be unaffected by the contract transfer.
Google Advertisements Due to the change of business partner to Google’s Japanese branch (a domestic company), advertisement charges paid are now an object of purchase tax deductions for consumption tax.
Google AdSense Due to fees continuing to be transactions with a foreign entity, advertisement charges on the website will still not include consumption tax(transactions not subject to consumption tax)

The Reduced Consumption Tax Rate is Beginning

Introduction

The reduced consumption tax rate system has begun, so let’s verify the points we should pay attention to concerning how to indicate prices at a store.

Points to Note if Standardizing Tax-Included Prices

Major restaurant chains that provide take-out services have agreed on new price- setting principles to follow from October 1 – utilizing one of these two methods: ① Standardizing prices at the new tax-included level (i.e., adjusting base prices) or ② Keeping base prices the same (i.e., changing the tax-included prices). Judging from price displays, it seems method #1 (standardizing prices at the new tax-included level) is easy to adapt. A simple display which includes the consumption tax amount allows a customer to see with one glance the total sum they’d have to spend. However, even with price displays standardized to include the tax, there are some restaurants which also display base (pre-tax) prices as a customer service, though not required under tax law to do so. If such establishments continue to display base prices after October 1st, they will have to display three prices – that is, the pre-tax price as well as two tax-included prices which differ according to whether the food/beverage is a take-out or eat-in order. Please be aware that if a shop displays pre-tax prices in such a way that customers are liable to be misled concerning the price to pay, that will result in a high risk of corresponding to “misleading representation displays”, so care must be taken. “Misleading representation displays” are a prohibited display method, as they can interfere with customers’ voluntary, rational choices, due to items being mistakenly seen as less expensive than they really are. It is desirable that of the above three prices, the tax-included amounts are displayed so that consumers notice that they are the final payment amounts. For instance, when a tax-included price is set uniformly at 1,100 yen, a shop can draw attention to that price by displaying it with larger numbers, etc.

Points to be Aware of if Maintaining Base (Pre-tax) Prices

The prices displayed when the base prices are maintained (different tax-included prices displayed) need to be written clearly distinguishing between take-out and eat-in. For instance, you might display them in the following ways: “1,100 yen for dining (1,080 yen for take-out)”, or “1,100 yen (1,080 yen) *Price in brackets is for take-outs.”, etc. However, shops where most customers buy for take-out (such as bakery shops with small eating spaces) could display only the take-out prices subject to the reduced tax rate because there is little necessity to display prices for dining. Nevertheless, even in such cases, shop owners need to remain aware of the “misleading representation displays” issue. If a shop displays only tax-included prices for the take-out category, it might cause misunderstanding that the prices for dining there are lower than they actually are, because the tax-included prices for dining in are higher. Therefore, shops need to display prices clearly so customers are not misled. Specifically, in addition to making clear that the displayed prices are for take-out, it may be recommended that shops indicate clearly that the tax-included prices for dining are different by stating, “In cases of dining in, prices will differ due to the different tax rates”, or some such statement.
pagetop
  • Russell Bedford
  • PRIVACY POLICY
  • PRIVACY POLICY

    locate a single person, or to identify an individual in context. Please read our privacy policy carefully to get a clear understanding of how we collect, use, protect or otherwise handle your Personally Identifiable Information in accordance with our website.

    What personal information do we collect from the people that visit our blog, website or app?

    When ordering or registering on our site, as appropriate, you may be asked to enter your name, email address, Address or other details to help you with your experience.

    When do we collect information?

    We collect information from you when you fill out a form or enter information on our site.

    How do we use your information?

    We may use the information we collect from you when you register, make a purchase, sign up for our newsletter, respond to a survey or marketing communication, surf the website, or use certain other site features in the following ways:

    • To follow up with them after correspondence (live chat, email or phone inquiries)

    How do we protect your information?

    We do not use vulnerability scanning and/or scanning to PCI standards.
    We only provide articles and information. We never ask for credit card numbers.
    We do not use Malware Scanning.

    We do not use an SSL certificate
    • We only provide articles and information. We never ask for personal or private information like names, email addresses, or credit card numbers.

    Do we use 'cookies'?

    Yes. Cookies are small files that a site or its service provider transfers to your computer's hard drive through your Web browser (if you allow) that enables the site's or service provider's systems to recognize your browser and capture and remember certain information. For instance, we use cookies to help us remember and process the items in your shopping cart. They are also used to help us understand your preferences based on previous or current site activity, which enables us to provide you with improved services. We also use cookies to help us compile aggregate data about site traffic and site interaction so that we can offer better site experiences and tools in the future.

    We use cookies to:
    • Keep track of advertisements.
    • Compile aggregate data about site traffic and site interactions in order to offer better site experiences and tools in the future. We may also use trusted third-party services that track this information on our behalf.

    You can choose to have your computer warn you each time a cookie is being sent, or you can choose to turn off all cookies. You do this through your browser settings. Since browser is a little different, look at your browser's Help Menu to learn the correct way to modify your cookies.

    If you turn cookies off, some features will be disabled. It won't affect the user's experience that make your site experience more efficient and may not function properly.
    However, you will still be able to place orders.

    Third-party disclosure

    We do not sell, trade, or otherwise transfer to outside parties your Personally Identifiable Information unless we provide users with advance notice. This does not include website hosting partners and other parties who assist us in operating our website, conducting our business, or serving our users, so long as those parties agree to keep this information confidential. We may also release information when it's release is appropriate to comply with the law, enforce our site policies, or protect ours or others' rights, property or safety.

    However, non-personally identifiable visitor information may be provided to other parties for marketing, advertising, or other uses.

    Third-party links

    Occasionally, at our discretion, we may include or offer third-party products or services on our website. These third-party sites have separate and independent privacy policies. We therefore have no responsibility or liability for the content and activities of these linked sites. Nonetheless, we seek to protect the integrity of our site and welcome any feedback about these sites.

    Google

    Google's advertising requirements can be summed up by Google's Advertising Principles. They are put in place to provide a positive experience for users. https://support.google.com/adwordspolicy/answer/1316548?hl=en

    We use Google AdSense Advertising on our website.

    Google, as a third-party vendor, uses cookies to serve ads on our site. Google's use of the DART cookie enables it to serve ads to our users based on previous visits to our site and other sites on the Internet. Users may opt-out of the use of the DART cookie by visiting the Google Ad and Content Network privacy policy.

    We have implemented the following:
    • Remarketing with Google AdSense

    We, along with third-party vendors such as Google use first-party cookies (such as the Google Analytics cookies) and third-party cookies (such as the DoubleClick cookie) or other third-party identifiers together to compile data regarding user interactions with ad impressions and other ad service functions as they relate to our website.

    Opting out:

    Users can set preferences for how Google advertises to you using the Google Ad Settings page. Alternatively, you can opt out by visiting the Network Advertising Initiative Opt Out page or by using the Google Analytics Opt Out Browser add on.

    California Online Privacy Protection Act

    CalOPPA is the first state law in the nation to require commercial websites and online services to post a privacy policy. The law's reach stretches well beyond California to require any person or company in the United States (and conceivably the world) that operates websites collecting Personally Identifiable Information from California consumers to post a conspicuous privacy policy on its website stating exactly the information being collected and those individuals or companies with whom it is being shared. - See more at: http://consumercal.org/california-online-privacy-protection-act-caloppa/#sthash.0FdRbT51.dpuf

    According to CalOPPA, we agree to the following:
    Users can visit our site anonymously.
    Once this privacy policy is created, we will add a link to it on our home page or as a minimum, on the first significant page after entering our website.
    Our Privacy Policy link includes the word 'Privacy' and can be easily be found on the page specified above.

    You will be notified of any Privacy Policy changes:
    • On our Privacy Policy Page
    Can change your personal information:
    • By emailing us

    How does our site handle Do Not Track signals?

    We honor Do Not Track signals and Do Not Track, plant cookies, or use advertising when a Do Not Track (DNT) browser mechanism is in place.

    Does our site allow third-party behavioral tracking?

    It's also important to note that we allow third-party behavioral tracking

    COPPA (Children Online Privacy Protection Act)

    When it comes to the collection of personal information from children under the age of 13 years old, the Children's Online Privacy Protection Act (COPPA) puts parents in control. The Federal Trade Commission, United States' consumer protection agency, enforces the COPPA Rule, which spells out what operators of websites and online services must do to protect children's privacy and safety online.

    We do not specifically market to children under the age of 13 years old.

    Fair Information Practices

    The Fair Information Practices Principles form the backbone of privacy law in the United States and the concepts they include have played a significant role in the development of data protection laws around the globe. Understanding the Fair Information Practice Principles and how they should be implemented is critical to comply with the various privacy laws that protect personal information.

    In order to be in line with Fair Information Practices we will take the following responsive action, should a data breach occur:
    We will notify the users via in-site notification
    • Within 7 business days

    We also agree to the Individual Redress Principle which requires that individuals have the right to legally pursue enforceable rights against data collectors and processors who fail to adhere to the law. This principle requires not only that individuals have enforceable rights against data users, but also that individuals have recourse to courts or government agencies to investigate and/or prosecute non-compliance by data processors.

    CAN SPAM Act

    The CAN-SPAM Act is a law that sets the rules for commercial email, establishes requirements for commercial messages, gives recipients the right to have emails stopped from being sent to them, and spells out tough penalties for violations.

    We collect your email address in order to:
    • Send information, respond to inquiries, and/or other requests or questions

    To be in accordance with CANSPAM, we agree to the following:
    • Not use false or misleading subjects or email addresses.
    • Identify the message as an advertisement in some reasonable way.
    • Include the physical address of our business or site headquarters.
    • Monitor third-party email marketing services for compliance, if one is used.
    • Honor opt-out/unsubscribe requests quickly.
    • Allow users to unsubscribe by using the link at the bottom of each email.

    If at any time you would like to unsubscribe from receiving future emails, you can email us at
    info★shin-sei.jp (replace ★ with at-mark) and we will promptly remove you from ALL correspondence.

    Contacting Us

Copyright© SHINSEI INTERNATIONAL TAX CO. All Rights Reserved.