A man who had rented an apartment in Tokyo found himself in hot water when a tax inspector informed him of a significant tax liability. The issue stemmed from the fact that the apartment's owner was a foreign national without a legal domicile in Japan, leading to confusion and financial repercussions for the tenant.
The man had established a corporation and considered his rented apartment as "company housing," allowing him to deduct a portion of the rent on his tax returns. However, he was unaware of the obligation to withhold 20.42 percent of the rent for nonresident income taxes, resulting in him owing approximately 800,000 yen in back taxes. The complexity of the situation was exacerbated by the lack of awareness on the part of both the tenant and the management company regarding the necessary tax withholding procedures when renting from a nonresident landlord.