A man who used to rent an apartment in Tokyo found himself in a troublesome situation when a tax inspector revealed that he had failed to pay the taxes he owed, resulting in a substantial debt of approximately $5,170. The landlord of the apartment turned out to be a foreign national without a legal domicile in Japan, leading to complications in tax obligations and raising concerns about the increasing number of similar cases involving foreign property owners in the country.
During his time living in the apartment from 2021 to 2022, the man considered his abode as "company housing" since he had established a corporation under his leadership. He deducted a portion of the monthly rent, around 300,000 yen, as a business expense on his tax return, with the rent being automatically debited from his bank account by the apartment's management company. However, when a tax inspector visited him earlier this year, he was made aware of the tax withholding requirement when renting real estate from a nonresident, which he had failed to fulfill, resulting in the accumulation of back taxes and penalties amounting to 800,000 yen.
The situation shed light on the complexities and potential oversights in rental arrangements involving nonresident property owners in Japan, emphasizing the importance of understanding and fulfilling tax obligations for both renters and landlords. Tax experts, including certified public accountant Shinya Yamada, highlighted the significance of being cautious and informed about tax laws, especially concerning properties owned by foreign nationals, to prevent similar predicaments in the future. Yamada advised renters and the real estate industry to pay close attention to contractual details and seek clarity on tax responsibilities to avoid inadvertent failures to withhold taxes, particularly in scenarios involving corporate contracts or mixed residential-business use of properties.