Please to be thoughtful before you (individual) change registered title holder of real estate in Japan
In the case you gift property to other person (“Mr.R”), Mr.R may be need to pay gift tax and you will know this information already.
I would like to inform you that if you gift real estate ( assumed market value of this real estate is 10 million yen ) to R company ( assumed IT business ), such donation may increase amount of corporate tax of R company. If R company has not shown loss in its IT business, the amount of taxable income will be increased by 10 million yen.
As for your income tax
Even if you donate this real estate to R company, tax agency deems you have sold this real estate at 10 million yen. Otherwise you can transfer ownership of real estate without paying income tax. (If you gift the real estate to Mr. R, you do not need to pay income tax, though. So, when you involve corporation in this transaction, you need to be careful ).
If you can not know how much you paid at the time of your purchase, the amount of income based of transfer is 10 million yen – 500,000 yen ( deemed acquisition price ) = 9.50 million yen.
Then, 9.50 million yen × 20%（ including income tax and resident tax ）＝1.90 million yen.
You need to pay income tax and resident tax of 1.9 million yen.
In the case D company gifts a real estate to you.
Tax agency deems D company has sold the real estate at 10 million yen and received 10 million yen. Then, D company has donated 10 million yen to you.
If you are employee or director of D company, such donation of 10 million yen is deemed as bonus to you. So, D can not sum up 10 million yen as deductible expense ( sonkin ). And you are deemed that you have received bonus of 10 million yen and it will increase the amount of income tax and resident tax. If the amount of your income is large, rate of income tax will be high. So, you need to pay a lot of income tax etc..
(Might it not make sense for you to divide that gift over several years?)
In the case D company gifts its real estate to R company
For D company, it is treated as donation. So, most of 10 million yen can not be allocated as deductible expense. For R company, 10 million yen is regarded as profit based on donation. So, the taxable income of D company and R company should be increased.
In the case D company gifts the real estate ( market value is 10 million yen ) to you at 1 million yen.
In this case tax agency still deems that D company has sold the real estate at 10 million yen and gifted 9 million yen to you. So, if you are employee or director of D company, such 9 million yen is treated as bonus. D company can not sum up 9 million yen as deductible expense. If you are not employee nor director of D company, such 9 million yen is treated as donation and it is included in occational income. So, when a company transfers its property to other individual or company, the company needs to confirm market price of property. If D company transfers its property at significantly low price, it is treated as gift.
What is significantly low price
If D company sells the real estate at price of 50% or less of market price, it will be deemed as donation.
However if D company sells the real estate to its president etc., even if it is 10% lower than market price, tax agency may say it is donation.
linkedin2017,October,5th
