Statement of Overseas Assets / Statement of Assets and Liabilities
Yoshio YamaguchiShare
Japan requires high-net-worth individuals to report their assets through two systems:
- The Statement of Foreign Assets, and,
- The Statement of Assets and Liabilities.
Foreign Assets Statement
Overview
Under the Statement of Foreign Assets, individuals with foreign assets exceeding 50 million yen must file a report with the tax office, detailing the type, quantity, value, and location of such assets. This requirement is stipulated in Article 5 of the Act on Submission of Reports on Remittances, etc., Abroad.
- Valuation Date: December 31 of the relevant year.
- Submission Deadline: June 30 of the following year.
Persons Obligated to Submit
This reporting obligation applies to residents of Japan who possess foreign assets exceeding 50 million yen as of December 31.
- Exemption: Non-permanent residents are not required to file. Non-permanent residents are defined as individuals without Japanese nationality who have resided in Japan for less than five years within the preceding ten years.
Reportable Assets
All foreign assets must be declared, including:
- Land, buildings, and jointly owned property.
- Savings accounts, joint accounts, loans, and accounts receivable.
- Securities (including stock options), artworks, and other valuables.
Penalties
1) If a taxpayer fails to report income from foreign property on his/her income tax or inheritance tax return, he/she is subject to additional tax. However, if a statement of foreign assets is submitted by the due date, the additional tax rate for underreporting or non-declaration is reduced by 5%.
On the other hand, if the statement of foreign assets is not submitted by the due date, or if the statement is submitted by the due date but does not include material foreign assets, the additional tax for underreporting of income tax and inheritance tax will be increased by 5%.
2) If the statement of foreign assets is submitted after the due date but before the advance notice of tax audit for income tax or inheritance tax is given, the statement of foreign assets is deemed to have been submitted on time, and the 5% reduction is available (applicable to the laws and regulations after January 1, 2024).
3) If a foreign assets statement is intentionally not submitted, if a false statement is made, or if the statement is not submitted by the due date, the applicant may be imprisoned for up to one year or fined up to 500,000 yen.
Assets and Liabilities Statement
Overview
Individuals meeting certain criteria must submit a Statement of Assets and Liabilities, listing the type, quantity, and value of assets held, along with any liabilities.
- Submission Deadline: June 30 of the following year.
Persons Obligated to Submit
This obligation applies to individuals who meet one of the following conditions:
- Annual income exceeding 20 million yen and assets valued at 300 million yen or more (or securities worth 100 million yen or more) as of December 31.
- Total assets value exceeding 1 billion yen as of December 31 (applicable from 2023 onward).
The statement must include domestic and foreign assets. If a Statement of Foreign Assets is also submitted, only the total value of foreign assets needs to be included in the Statement of Assets and Liabilities.
- Non-Permanent Residents: This requirement also applies to non-permanent residents.
Penalties
1) If a taxpayer fails to report income on his/her income tax or inheritance tax return, he/she is subject to additional tax. However, if a statement of assets and liabilities is submitted by the due date, the additional tax rate for underreporting or non-declaration is reduced by 5%.
On the other hand, if the statement of assets and liabilities is not submitted by the due date, or if the statement is submitted by the due date but does not include material assets, the additional tax for underreporting of income tax and inheritance tax will be increased by 5%.
2) If the statement of assets and liabilities is submitted after the due date but before the advance notice of tax audit for income tax or inheritance tax is given, the statement of assets and liabilities is deemed to have been submitted on time, and the 5% reduction is available (applicable to the laws and regulations after January 1, 2024).
Conclusion
High-net-worth individuals residing in Japan are required to submit comprehensive disclosures of their foreign and domestic assets via the Statement of Foreign Assets and the Statement of Assets and Liabilities. Compliance with these obligations ensures reduced penalties and facilitates proper tax reporting. Conversely, failure to file or intentional omissions lead to increased penalties, additional taxes, and potential legal consequences.
