Preventing Consumption Tax Refund Schemes through Tax System Reform


Consumption tax refund schemes involving individuals purchasing residential property for rental as investments are scheduled to be prevented by the tax reform of 2020. Let’s look at the details.

The Mechanism of Consumption Tax Refunds

While consumption tax is not levied on transfers of land, it is levied on transfers of buildings. So buyers must pay large sums of consumption tax on buildings to sellers when purchasing investment property.

The amount of consumption tax owed is calculated by subtracting the consumption tax amount one paid from that which was received. If the person paid more than they received, they will be eligible to get a consumption tax refund.

However, the full amount paid is not deductible; rather, the amount, after the taxable sales ratio is multiplied, is allowable for deduction. Therefore, the higher the ratio, the greater the deduction.

Consumption tax for payment/refund
=(received consumption tax - paid consumption tax) × taxable sales ratio ?

Taxable sales ratio
=taxable sales ÷ (taxable sales amount+exempt sales+nontaxable sales)

If the property purchased as an investment is used as an office rental property, that’s not a problem. Even if it’s for a residential property, because residential rent is not taxable, no taxable sales result. This is because, in accordance with the formula above, since the numerator is zero, the taxable sales ratio is also zero.

Overview of Consumption Tax Refund Schemes

In this situation, the taxable sales ratio must be increased in order to receive a consumption tax refund. However, basically rent for residential property is not recorded as taxable sales.

Therefore, certain individuals thought of schemes involving vending machines and gold bullion. Such schemes aim to maintain high taxable sales ratios by generating “taxable sales” which don’t result from the rental of residential property, by sales of drinks in vending machines, or else through the continuous buying and selling of gold bullion - the value of which doesn’t fall significantly.

While sales by vending machine will not result in large amounts of taxable sales, repeated gold bullion transactions make it possible to record large amounts of such sales. The goal is to receive a refund of a large portion of the consumption tax paid when obtaining property as investments.

Content of the Reform

In order to prevent such schemes, it has been decided that in principle purchase tax credits will no longer be applicable to taxable purchases of residential property. This is a drastic revision that purchase tax credits are not to be applied to residential property, regardless of the taxable sales ratio.

We can read this as a strong message from the government that purchasers of residential property will not receive consumption tax refunds.

This revision is due to be applied to acquisitions of residential properties from October 1, 2020.

Treatment of “香典“Koden and “弔慰金”Choikin


When an officer or employee of one’s company’s dies, in Japan there are many cases where the bereaved are given “香典” (koden) or “弔慰金“ (choikin), both of whichmean “condolence gifts”*. What procedures are required to include those in employee benefits?

  * Both “koden” and “choikin” are often translated as “condolence money/gifts” in English.

What’s the Difference Between “Koden” and “Choikin

“ “香典” (koden) refers to money and/or gifts the relatives and acquaintances of the deceased offer when a person dies, and its original meaning may be understood as money/gifts to the bereaved to reimburse a portion of the expenses for the funeral, etc. On the other hand, “弔慰金“ (choikin) is a word referring to money and/or gifts an employer offers in good faith and consideration, to express his/her condolences when an employee dies.”

The above was verified in a court ruling on December 10, 1997. In other words, even when comparing the two, it is not easy to clearly differentiate them.

The Necessity of Preparing Company-Specific Rules

In order to treat koden and choikin as benefits, it’s required to determine through company-specific regulations regarding congratulatory/condolence monetary payments how both are to be handled.

The Act on Special Measures Concerning Taxation classifies welfare expenses and entertainment/social expenses, providing a prerequisite that they are not subject to being included as/corresponding to social expenses - that is, “expenses paid following a prescribed reference”.

In reality, even if there are no company-specific rules, we don’t think that koden and choikin would be immediately identified as entertainment expenses. However, nothing will be lost by preparing relevant company rules. If after the rules are established, such payments are made in accordance with those rules, there is seemingly little chance of the payments being deemed entertainment expenses.

On the other hand, koden paid on behalf of customers/clients do correspond to entertainment expenses. Also, as both koden and choikin are exempt from consumption tax, attention is required when registering them.

There are many cases where the inclusion of koden intaxable sales gets pointed out in tax audits.

What is the Maximum Amount of Choikin?

When the employee’s death wasn’t a result of an employment-related cause, choikin often are paid for an amount equivalent to six months’ usual salary, excluding bonus, at the time of death in accordance with a company regulation concerning congratulatory/condolence monetary payments.

Such regulations are in line with National Tax Agency Notice 3-20 on Inheritance Tax, which established that choikin needn’t be included in retirement allowances; many companies apply it.

However, this is just a regulation under the Inheritance Tax Act, and no Corporation Tax Act regulations stipulate a limit as to the amount of choikin. Even if such a monetary payment     were found to be excessive, the overpayment amount would be treated as part of the executive retirement allowance. Therefore, it would be judged if the overall allowance was too high by adding the choikin amount to the rest of the retirement allowance.

Additionally, there appear to be no past judgements or court precedents where choikin paid based on National Tax Agency Notice 3-20 on Inheritance Tax were denied under the Corporation Tax Act.

Practical Matters Regarding the Employment of Non-Japanese Workers


A lot of companies are deciding to employ foreign workers recently, due to the labor shortage. However, due to a lack of know-how in this regard, there is sometimes confusion as to how to begin. Below we will describe points to note regarding recruitment methods and employee selection.

Recruitment Methods

There are various recruitment methods for foreign workers. In addition to recruiting methods aimed at Japanese workers, other possibilities include: contacting employment service centers which specialize in employing foreign workers, and/or universities with many foreign students; effective outreach to reliable foreigner communities; and recruitment companies that are good at recruiting foreign workers. Employment service centers for foreigners are public employment offices run under the auspices of the Ministry of Health, Labor and Welfare which provide job counseling and placement services for non-Japanese students, as well as foreign specialists or technical experts who hold corresponding visa status. An important benefit of the offices is that they are managed by the national government, so no cost is incurred by those utilizing their services.

Confirmation Items for Application Document Selection

Regarding document selection, it is important to check the following points in addition to the usual selection criteria for a Japanese national:

1. Confirm residence card
2. Check educational background/career
3. Verify Japanese language ability
4. Check status regarding whether they have dependents, etc.

Confirmation of the applicant’s residence card is an important prerequisite. Legal residence status is essential to work in Japan. Also, please don’t forget to check at the Immigration Services Agency if the residence card is still valid; it is possible to verify there if the card has been forged.

Please confirm if the residence card is valid.

Regarding language ability, there are a lot of cases where foreigners can speak Japanese, but cannot write it. If the main language at work will be Japanese, the person’s Japanese literacy needs to be checked in advance. Additionally, it is required to confirm beforehand if they hope to live in Japan with family members who are currently residing abroad.

Important Points in Interviews

In the interview, it is recommended that you check his/her manner of speaking in both Japanese and the person’s native language. Even though most foreigners have a tendency to speak in a standard way when using Japanese as a foreign language, how they communicate in their mother tongue may better reveal the environment in which a person grew up, or their character.

If possible, it would be desirable that a person fluent in the interviewee’s native language also interviews them. Furthermore, it would be wise to confirm their Japanese literacy via a written examination as well as an interview, if it is expected that there will be aspects of the job involving the writing of Japanese, such as in e-mails. In addition, it is essential that hiring requirements and a job description are defined clearly, as there are some non-Japanese who won’t do work which isn’t included in the job description beforehand.

It may be confusing when considering whether to employ non-Japanese workers for the first time. Please confirm the necessary points in advance, to improve the chances of success.

Employment Service Center for Foreigners
Please scan the QR code below to see Employment Service Center for Foreigners’ website.

  • Russell Bedford

    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's advertising requirements can be summed up by Google's Advertising Principles. They are put in place to provide a positive experience for users.

    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:

    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★ (replace ★ with at-mark) and we will promptly remove you from ALL correspondence.

    Contacting Us

Copyright© SHINSEI INTERNATIONAL TAX CO. All Rights Reserved.