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Property division and Japanese tax

What is property division in Japan

Nancy and Ken are getting a divorce (りこん). When they get divorced, they need to decide many things.

They need to decide who will have custody of their children. It might be deciding on alimony payments.

They also need to settle the assets that Nancy and Ken acquired during their marriage.

Nancy and Ken got married and built a castle. Ken borrowed money from the bank and built a castle like the British royal family.

However, Ken was able to maintain the family finances by working as a company employee, and Nancy may have supported Ken as a housewife.

Therefore, even if the castle is in Ken’s name, they need to discuss who owns the castle after the divorce.

This process of deciding who owns the property built during the marriage after the divorce is called property division(財産分与=Zaisan Bun yo).

On the other hand, assets that Nancy and Ken had prior to their marriage are not subject to property division(Zaisan Bun yo).

Also, during the marriage, Nancy received property from Nancy’s parents (airplanes). However, that airplane is not subject to property division.

Also, debts incurred by Nancy and Ken during the marriage are subject to property division.

So the debt that Ken borrowed from the bank to build the castle is also subject to property division.

Even if the debtor is in Ken’s name, Ken is not naturally obligated to repay the debt.

However, to the bank, the debtor is only Ken. Even if the property division results in Nancy paying the debt, it does not necessarily mean that the bank will allow the debtor to change from Ken to Nancy.

Also, when Ken borrowed money from Bank A, the contract would state that he would need the bank’s permission to change the title to the property.

If Ken tried to change the title of the castle from Ken to Nancy, the bank might not allow it.

If they wanted to make Nancy the debtor, Nancy would have to borrow money ($100) from another bank (Bank B) and use that $100 to repay Bank A.

But as a housewife, Nancy might not be able to borrow money from Bank B.
To divide the property, they will discuss it among themselves, but if Nancy and Ken are unable to discuss it, they will use the court process (調停=ちょうてい).

Nancy and Ken are getting a divorce, and after discussing the division of property, they agree to transfer ownership of the castle from Ken to Nancy on April 1, 2023.

They then filed divorce papers with the ward office on May 1, 2023. The date of transfer of ownership in this case would be May 1, 2023.

If Nancy and Ken’s agreement on the division of property was dated after they divorced (e.g., June 1, 2023), then the date of transfer of ownership of the property would also be June 1, 2023.

Assume that Nancy and Ken did not discuss property division at the time of their divorce. Suppose, however, that Nancy files a claim for property division against Ken some time later.

In this case, Nancy would have two years from the date of divorce to make such a claim.

In order to change the title of the castle from Ken to Nancy, a title deed to the castle and Ken’s seal registration certificate, etc. would be required.

If Ken does not cooperate in changing the title to the castle, Nancy will use mediation or other court procedures. If mediation allows her to change the title to the property, she can complete the process without Ken’s title deeds or seal certificate.

My job is to change the name of the real estate in this way, etc.

property division in Japan

Property division and Japanese tax 

You (non-Japanese) and your wife (Japanese) bought a house in Japan (for 10 yen. The numbers are small for clarity of explanation).

Since you could not borrow money from the bank in your name, you borrowed money in your spouse’s name, purchased the property in your spouse’s name, and it was registered with the legal affairs bureau.

When you bought the property, your spouse paid 1 yen as a down payment.

After purchasing the property, you have gave your salary to your spouse to repay the loan.

Unfortunately, however, you and your spouse have decided to divorce.

The loan from the bank is still outstanding. So, you basically cannot transfer ownership right from your spouse to you (as stipulated in the loan agreement your spouse entered into with the bank).

Since she has no income, you will continue to pay the loan.

After the loan is repaid (9 yen), you wish to transfer title to the property from your spouse to you. The cause for registration in this case is the division of property (財産分与-Zaisan Bun yo).

The property is registered in your spouse’s name, but you have paid the loan and maintained the property. So, after the loan is paid off by you, it will be registered in your name, the true owner.

A judicial scrivener (Shiho Shoshi Lawyer,)applies to register the transfer of ownership right from your ex-wife to you due to the division of property.

He can also file registration of removal of mortage at the same time.

In the case of this property division, there is no gift tax.

This is because you are the true owner of the property and the property division is the process of changing the name on the registration to match the truth.

When you acquire ownership right to the real estate through property division, you are subject to real estate acquisition tax(不動産取得税), fixed property tax (annually、固定資産税), and registration tax(登録免許税).