Reporting form for assets located outside Japan (国外財産調書） is required to be filed with the Japanese tax authorities by certain residents including non-Japanese taxpayers.
Recently, there has been an increasing number of underreporting cases in connection to income generated from assets located outside Japan.
Many countries have signed a tax convention to exchange such information in order to impose taxes properly in each country.
In line with this trend, Japan tax authorities have established a self-reporting system for assets located outside Japan.
Filing the Form is as important as the individual tax return because the reporting system will be implemented along with a penalty system if a taxpayer fails to report.
If a taxpayer is a permanent resident* and if he/she has assets located outside Japan which are worth more than JPY 50,000,000 in tolal as of December 31, 20××, the taxpayer is required to file the Form.
*A Permanent resident is either:
(1) An individual who has a Japanese passport, or
(2) An individual who has lived in Japan for more than 5 years during the last 10 years.
A taxpayer is required to file the Form by March 15, 20××.
The penalty for false reporting and non-filling of the form is a custodial sentence of up to one year in prison or a fine up to JPY 500,000.
If the tax authorities find underreporting on a tax return or where there is a failure to submit a tax return and the underlying reason relates to income form assets located outside Japan, then the penalty for underreporting (5% or 10% normal) or non-filling of a tax return (15% or 20% normal ) will be decreased or increased by 5% as follows:
(1) In cased where the assets relating to the income underreported / not reported has properly been disclosed on the form, the penalty rate will be decreased by 5% with respect to the said asset located outside Japan.
(2) In the case where the deadline is missed and/or the assets relating to the income underreported / not reported has not properly been disclosed on the Form (including the case insufficient information is provided), the penalty rate will be increased by 5% with respect to the said asset located outside Japan.