Japan

Requirement for banks to collect and remit information regarding bank accounts owned by non-residents

A tax reporting system is applicable under which individuals are required to report information to the relevant branch of the financial institution, which will, in turn, submit such information to the tax authorities in Japan.

The person who contracts with the financial institution for a deposit to a bank account in Japan on or after 1 January 2017 will be required to report the relevant information to the bank, including (i) name, (ii) address, (iii) date of birth, and (iv) resident country. If the resident country is outside Japan, the individual will be required to report the taxpayer identification number in the taxpayer’s resident country. The financial institution will be required to report the individual information collected as well as details regarding the account (balances, transactions, etc.) as of 31 December by the following 30 April.

Corporate spin-offs

Corporate demerger

Before the 2017 Tax Reform, a corporate demerger by a corporation with many shareholders where the shares in the new company are given to the shareholders does not qualify as a tax qualified demerger. These rules are relaxed under the 2017 Tax Reform Act, whereby a spin-off of a specific business by a corporation without a controlling shareholder becomes tax qualified under certain conditions.

Distribution in kind

Before the 2017 Tax Reform, a distribution in kind by a corporation with many shareholders is not tax qualified. Under the 2017 Tax Reform, a spin-off conducted as a distribution in kind of shares in a 100% subsidiary becomes tax qualified under certain conditions.

Minority shareholder squeeze-outs

Under the 2017 Tax Reform, creating a 100% subsidiary through a squeeze-out process using shares with compulsory acquisition rights, share consolidation, and a request to sell back shares, is considered a type of corporate reorganisation. As part of bringing such squeeze-outs within the corporate reorganisation framework, special measures will be introduced, including mark-to-market rules and the special rules on consolidated taxation.

In a merger or share-for-share transfer, if the merging corporation or the 100% parent corporation owns 2/3 or more of the merged corporation or the 100% subsidiary, consideration other than shares can be provided to minority shareholders without disqualifying the corporate reorganisation.

Consideration in triangular mergers, corporate split-offs, and share-for-share exchanges

Before the 2019 Tax Reform Act, in a triangular merger, corporate split-off, or share-for-share exchange, shares of a 100% direct parent of an acquiring company are treated as tax qualified consideration. Under the 2019 Tax Reform, tax qualified consideration was expanded to include shares of an indirect 100% parent of the acquiring company.