If you are a permanent resident of Japan, regardless of your nationality, you might have an obligation to file a Foreign Asset Report (hereafter FAR) to the National Tax Agency (hereafter NTA).
A person who has assets of market value exceeding 50 million yen as of December 31 must file a FAR by March 15 the following year. The FAR is a list of your properties located outside Japan describing their types, quantities, market value and other required information.
While preferential tax treatment of 5% penalty tax abatement on an underdeclared*1 income tax and estate tax is offered for a proper FAR filing, the following penalties are enforced for violators since January 1, 2015. (*1) Underdeclared tax penalties only, undeclared tax penalty is not applicable for the abatement.
- If you do not file your FAR on time, fail to list all reportable assets, or do not file your FAR at all, an additional 5% underdeclared tax penalty is levied on your income tax*2 for the unlisted or underdeclared assets. (*2) Except an income tax return for deceased taxpayer
- If you do not file your FAR on time and do not have good cause, or declared inaccurate information, you may be subject to up to 1-year imprisonment or up to 500,000 yen fine; however, consideration may be given for extenuating circumstances. This is enforced on FARs required to file since January 1, 2016.
The NTA obtained 400,000 pieces of offshore financial information of Japanese residents this October. NTA will very likely use the information to audit residents as soon as possible.
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