Holding Japanese property personally or through a company

Not purely a tax question

Whether to hold Japanese property personally or through a company is often framed as a comparison of tax burdens. In practice the decision touches four things at once: the annual charge to tax, the treatment of costs and depreciation, how a family shares and eventually passes on the asset, and how the holding is ultimately unwound. Their relative weight follows from purpose. A house used by the family from time to time and an income property held for the long term do not call for the same answer. Establishing the purpose before comparing rates is usually the shorter path, since tax rules are revised periodically while a purpose tends to stay still.

The character of each route

• Personal ownership is structurally simple, with no formation or maintenance cost and lighter filing
• Rental income is generally brought into the individual’s own income, on a different rate structure from a company
• A company allows management, repair and interest costs, and depreciation, to be gathered at entity level
• A company carries fixed annual obligations: bookkeeping, accounts, returns and local taxes
• A company lets family members participate proportionately through shares or interests, and transfer them in stages
• Non-resident owners may need to address withholding on rent or on a sale, and appoint a tax agent

Succession and exit

Seen from succession, a building is hard to divide and shares are not. Where several children are expected to inherit together, a company can reduce friction at the point of division. But holding through a company also means that what changes hands later is shares rather than real estate; the valuation method, the tax treatment and the pool of possible buyers all differ from a direct sale, and winding the company up takes time and cost of its own. Personally held property, conversely, sells through a simpler procedure, yet on death the family must face the division of the estate and the practical question of cash for the tax. Which friction is easier to bear differs from family to family.

How the decision is usually reached

A workable method is to set down three things first: how long the asset is likely to be held, who will use it and who will inherit it, and which exit is most probable. A certified tax accountant can then model both routes under the law as it stands, covering the holding period and a disposal, and a lawyer or judicial scrivener can confirm the legal constraints. The Taiwanese and Japanese positions should be examined together, because what looks optimal on one side is not necessarily optimal on the other. Every projection rests on assumptions, outcomes vary with the facts and with changes in the law, and no structure is advantageous in all circumstances.

This note is general information and is not tax, legal, investment or immigration advice. Tax rules and practice may be revised and results depend on individual circumstances, so any decision should be confirmed with qualified professionals in both Japan and Taiwan.