Japan: Updated CRS FAQs
Revised overview of reporting system for automatic exchange of financial account information regarding non-residents
Overview of reporting system for automatic exchange of financial account information
The National Tax Agency on April 9, 2024, updated its common reporting standard (CRS) “frequently asked questions” (FAQs) to revise Q.5, “Please provide an overview of the reporting system for automatic exchange of financial account information regarding non-residents.”
The revised overview includes the following additional guidance:
- Specified transactions conducted by foreign reporting financial institutions as defined under the Act 10-6(1) and the Ordinance 6-14(1) are generally not required to be reported. However, if it is uncertain whether the financial institution qualifies as a foreign reporting financial institution, the transaction must be reported.
- In addition, contracts related to specific transactions conducted by a reporting financial institution resident in Japan are not reportable.
- Per the fiscal year 2020 tax reform, any person (including related party of the person) conducting a specified transaction with a reporting financial institution or if the reporting financial institution engages in actions intended to circumvent reporting requirements, those actions will be disregarded.
- Under the citizenship or residence by investment (CBI/RBI) schemes, individuals obtain residency rights, including citizenship, temporary residency, and permanent residency, by investing or paying fees in a specific jurisdiction. These schemes may be used to avoid reporting of financial account information to the tax authorities. The OECD portal lists the CBI/RBI schemes, along with the countries and regions in which the schemes are used.
- The OECD guidance reminds that if a reporting financial institution cannot trust a claimed tax residency on a new notification form, particularly if the claim involves a country or jurisdiction where the CBI/RBI schemes are used, the reporting financial institution must verify the information on the notification form by asking follow-up questions, as provided under the OECD guidance:
- Did you obtain residence rights under an CBI/RBI scheme?
- Do you hold residence rights in any other jurisdiction(s)?
- Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
- In which jurisdiction(s) have you filed individual (personal) income tax returns during the previous year?
Read a May 2024 report prepared by the KPMG member firm in Japan
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.