※ The above figures are hypothetical. We cannot in any way guarantee that similar results will be achieved by engaging KPMG too provide PAV correction services.
Frequent overpayment of fixed assets taxes
The tax basis for fixed assets taxes is the Property Assessment Value (“PAV”), which is determined by the local government in whose jurisdiction the land and buildings are located, based on fixed assets valuation standards set forth by the Ministry of Internal Affairs and Communications. However, since most of the local government agents conducting the computations are not real estate valuation experts, the PAV may not have been appropriately computed. In addition, taxpayers only receive notice of the PAV and the related tax liability, with no explanation as to how the PAV was computed, hence, taxpayers are not given sufficient opportunities to verify correctness (in terms of calculation methodology and logical basis) of the assessed value of property taxes. Moreover, even where there are errors, it is difficult for taxpayers to identify them due to lack of expert knowledge.
In 2018,there were appropriately 140,000 cases and JPY 7.2 billion in just the 23 wards and the designated cities of Tokyo
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Merits of PAV correction
By correcting the PAV, the following merits may be achieved:
- Reduction of PAV: Refund of overpaid fixed assets taxes (usually looking back up to 5 years) and reduction of fixed assets tax liability going forward.
- Increase of property value: Reduced tax liabilities improve cash flow, which in turn increases the asset's value calculated under the income approach.
Benefits of Correcting Property Assessment Values
Why KPMG? (Expertise of KPMG)
KPMG Tax Corporation has an impressive track record of providing tax advice and tax compliance services to listed real estate investment companies and countless real estate investment schemes and has a wealth of experience and accumulated know-how in dealing with the tax authorities in inquiries, negotiations, and tax audits. The first-class architectural office that we work with is a pioneer in the industry that discovered that the local government made errors in the computation of PAV in buildings and we started providing PAV correction and related services, which resulted in refund of overpaid fixed assets tax and reduction of fixed assets tax liability going forward. In addition, we generally investigate mitigation possibilities and suggest corrective procedures free of charge.
<Covered region>
Nationwide
<Mainly covered real estate properties>
Under construction properties, office buildings, department stores, warehouses etc. with a floor area of over 2000㎡.
※Services provided in cooperation with a first class authorized architectural office
PAV correction procedure and timeline
We fully support a series of procedures, starting from initial required preparations and all the way up to submitting relevant applications to the competent local government. The process usually takes from a few months to a year.
Approach
KPMG's Experience
Free arrangement
※Can be applied for provision of services to KPMG audit clients including KPMG groupcompany KPMG Azsa LLC's audit clients
