{"id":114842,"date":"2025-10-06T11:57:32","date_gmt":"2025-10-06T11:57:32","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=114842"},"modified":"2025-10-07T09:39:08","modified_gmt":"2025-10-07T09:39:08","slug":"japan-tax-disputes","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/japan-tax-disputes\/","title":{"rendered":"Japan: Tax Disputes"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-114842","comparative_guide","type-comparative_guide","status-publish","hentry","guides-tax-disputes","jurisdictions-japan"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">PwC Legal Japan<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/09\/PwC_logo_rgb_colour_pos.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">PwC Legal Japan<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/09\/PwC_logo_rgb_colour_pos.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Tax Disputes laws and regulations applicable in Japan<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it necessary for a taxpayer to register with the tax authority? Are separate registrations required for corporate income tax and value added tax\/sales tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, when an individual or a company becomes a taxpayer obligated to pay taxes, they may be required to submit statutory notifications to the tax authorities, depending on the type of tax involved. For companies that become liable for both corporate income tax and consumption tax, which is similar to value added tax (VAT) or sales tax in other jurisdictions, they are generally required to submit separate notifications for each tax using the prescribed forms. This requirement applies regardless of whether the company is a domestic or foreign corporation. In addition, in cases where the taxpayer is a foreign corporation, it is usually necessary to appoint a tax agent in Japan (known as a <em>nouzei kanrinin<\/em>) to manage the filing of tax returns and other tax-related matters, and to submit a notification of such appointment to the tax authorities using the designated form.<\/p>\n<p>Please note that in Japan, national taxes are administered by the National Tax Agency (NTA), while local taxes are administered by local tax authorities. This guide focuses exclusively on national taxes and does not address the treatment of local taxes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">In general terms, when a taxpayer files a tax return, does the tax authority check it and issue a tax assessment \u2013 or is there a system of self-assessment where the taxpayer makes their own assessment which stands unless checked?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, a self-assessment tax system is in place whereby taxpayers calculate and declare their own tax liabilities by filing tax returns. The amount of tax due is, in principle, determined based on the taxpayer\u2019s filed return. The tax authorities may conduct tax audits to verify the accuracy of the declared amounts of tax due after the tax return has been filed. If inconsistencies or errors are found, the tax authorities have the authority to issue tax assessments based on the audit results, in accordance with applicable tax laws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a taxpayer amend the taxpayer\u2019s return after it has been filed? Are there any time limits to do this?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A taxpayer may submit an amended tax return to the tax authorities if the initial tax return filed by the taxpayer contains an understatement of the tax liability under the self-assessment system.<\/p>\n<p>On the other hand, if the taxpayer\u2019s initial return contains an overstatement, the taxpayer is not permitted to unilaterally amend the return; instead, the taxpayer is entitled to file a request for reassessment with the tax authorities. Upon approval of such a request, the tax authorities will issue a formal tax reassessment, and the taxpayer may be granted relief accordingly.<\/p>\n<p>As a general rule, a request for reassessment must be filed within five years from the statutory deadline for filing the original tax return. However, there are certain exceptions to this period. For instance, in cases involving understated net operating losses for corporate tax purposes, the filing period is extended to ten years, while in corporate tax matters related to transfer pricing, it is seven years. Furthermore, even after these periods have elapsed, the taxpayer may file such a request within two months from the day following the occurrence of certain specified subsequent circumstances prescribed by law. Such circumstances include: (i) a final court decision regarding factual findings underlying the taxpayer\u2019s self-assessment, confirming that the facts differ from those initially declared; (ii) a reassessment or decision by the tax authorities that taxable objects, initially treated as being attributed to the taxpayer in the original tax return, should be attributed to another person; and (iii) an agreement resulting from mutual agreement procedures between competent authorities under relevant tax treaties, where the agreed terms differ from those declared by the taxpayer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Please summarise the main methods for a tax authority to challenge the amount of tax a taxpayer has paid by way of an initial assessment\/self-assessment.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The main method by which tax authorities challenge the amount of tax payable determined by the taxpayer\u2019s initial self-assessment is through reassessment as an administrative disposition. Reassessment must be conducted following a tax audit and is implemented by delivering a notice to the taxpayer.<\/p>\n<p>In practice, even when the tax authorities become aware through a tax audit that a taxpayer\u2019s initial tax return was understated, they generally first encourage the taxpayer to submit an amended return. Therefore, reassessment by the tax authorities typically occurs only when the taxpayer does not agree to submit an amended return in response to the authorities\u2019 encouragement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the time limits that apply to such challenges (disregarding any override of these limits to comply with obligations to relief from double taxation under a tax treaty)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As a general rule, the tax authorities may conduct reassessments only within five years from the statutory tax return filing deadline. However, if the taxpayer has engaged in \u2018deception or other wrongful acts\u2019, the period during which reassessments can be made is extended to seven years. For the interpretation of the phrase \u2018deception or other wrongful acts\u2019, please refer to Section 6 below.<\/p>\n<p>There are exceptions to these periods. For instance, where the taxpayer has overstated net operating losses for corporate tax purposes, a reassessment may be conducted within ten years, and in cases involving corporate tax under the transfer pricing rules, the reassessment period is seven years.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is tax fraud defined in your law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Japanese tax law does not provide an explicit statutory definition of tax fraud; however, it establishes that acts by a taxpayer involving tax evasion or receiving refunds through \u2018deception or other wrongful acts\u2019 are subject to criminal sanctions. The Supreme Court has interpreted the phrase \u2018deception or other wrongful acts\u2019 as encompassing acts committed with the intent to evade taxes by using fraudulent schemes or other deceptive artifices that make tax assessment or collection impossible or substantially difficult. Typical examples of such acts include making false entries in accounting books and maintaining double sets of accounts.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is tax fraud treated? Does the tax authority conduct a criminal investigation with a view to seeking a prosecution and custodial sentence?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Japanese law stipulates several taxpayer actions that are subject to criminal penalties. When a taxpayer commits any act corresponding to those described in Section 6 above, the individual perpetrator may be punished by imprisonment, a fine or both. Moreover, if the act pertains to taxes payable by a corporation, the corporation itself may be fined.<\/p>\n<p>Japan has established a criminal investigation system under which tax authorities may exercise coercive powers. Based on the findings of such investigations, the authorities may file charges with prosecutors and request the initiation of criminal proceedings. These investigations are carried out by investigators belonging to a department separate from that responsible for ordinary tax audits.<\/p>\n<p>Under this system, the tax authorities have the power to question taxpayers suspected of tax fraud, as well as related parties, including business associates. They may inspect books, documents and objects held by these persons and may retain any voluntarily submitted items. Furthermore, upon issuance of a warrant by a judge, the tax authorities are empowered to conduct on-site inspections and searches of residences, factories and offices, and to seize books, documents and objects.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">In practice, how often is a taxpayer audited after a return is filed? Does a tax authority need to have any justification to commence an audit?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The tax authorities may commence tax audits of taxpayers without any specific justification. Although the authorities do not publicly disclose the frequency of audits, it is understood that large companies are typically audited approximately once every several years.<\/p>\n<p>In recent years, the tax authorities have adopted a risk-based approach for auditing large companies. They assess tax risks by analysing various factors, including corporate governance related to taxation, business activities, tax returns and financial statements, as well as identified non-compliance and their subsequent remediation. Based on these risk assessments, the authorities select audits on a targeted basis and allocate resources accordingly. Under this approach, the frequency of tax audits is determined by the level of tax risk associated with each company.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the tax authority have to abide by any standards or a code of conduct when carrying out audits? Does the tax authority publish any details of how it in practice conducts audits?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Act on General Rules for National Taxes establishes several procedural obligations that tax authorities are required to observe with respect to tax audits. Pursuant to these obligations, tax authorities must (i) generally provide prior notice to the taxpayer when conducting on-site audits; and (ii) explain the audit findings to the taxpayer when intending to impose a tax assessment based on such findings. If tax authorities fail to comply with these procedural requirements in imposing a tax assessment, such assessment may be annulled on appeal.<\/p>\n<p>In addition, the Commissioner of the NTA issues internal directives to ensure the uniform administration of tax audits by tax authorities. These directives include administrative guidelines setting forth the fundamental principles for conducting audit procedures, as well as notifications clarifying the interpretation of the tax audit provisions under the Act on General Rules for National Taxes. The NTA publishes these documents on its website.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the tax authority have the power to compulsorily request information? Does this extend to emails? Is there a right of appeal against the use of such a power?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The tax authorities are empowered to question taxpayers and to inspect the books, documents and objects held by them. They may temporarily retain any items voluntarily submitted by taxpayers. Because tax audits must be conducted with the voluntary cooperation of taxpayers, the tax authorities cannot forcibly exercise these information-gathering powers. However, if a taxpayer obstructs the exercise of these powers, the taxpayer may be subject to imprisonment or fines.<\/p>\n<p>The scope and manner in which the tax authorities may exercise the foregoing powers are subject to their reasonable discretion, so long as such exercise is necessary and proportionate, balancing the private interests of the subject and prevailing social norms. Therefore, these powers may extend to electronic communications such as emails. In cases where the tax authorities request a substantial volume of emails or those containing trade secrets or confidential information, taxpayers may argue and negotiate with the tax authorities to limit the scope of emails to be submitted.<\/p>\n<p>If the tax authorities unlawfully exercise their information-gathering powers, taxpayers may seek annulment of the resulting tax assessment through administrative appeal procedures or judicial litigation on the grounds that the tax audit was conducted unlawfully. Taxpayers do not have the right to seek an injunction to restrain the exercise of the tax authorities\u2019 information-gathering powers. However, if taxpayers encounter an unlawful exercise of such powers, they should promptly demand that the tax authorities cease such conduct.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can the tax authority have the power to compulsorily request information from third parties? Is there a right of appeal against the use of such a power?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The information-gathering powers referred to in Section 10 above may also be exercised against third parties, such as business associates. Taxpayers are not entitled to seek an injunction to restrain the exercise of these powers by the tax authorities, regardless of whether the subjects of the exercise are third parties or the taxpayers themselves.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to settle an audit by way of a binding agreement, i.e. without litigation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, disputes arising during a tax audit cannot be conclusively resolved through a binding agreement between the taxpayer and the tax authorities. Such disputes are ultimately resolved through administrative appeal procedures or judicial litigation.<\/p>\n<p>However, in practice, when there are multiple issues in dispute, the tax authorities may propose that the taxpayer file an amended tax return reflecting a partial acceptance of the taxpayer\u2019s position as a result of negotiations. If the taxpayer accepts this proposal, the dispute is effectively resolved through the filing of the amended return, although this resolution does not constitute a formal settlement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If a taxpayer is concerned about how they are being treated, or the speed at which an audit is being conducted, do they have any remedies?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A taxpayer does not have a legal right to compel the tax authorities to discontinue an ongoing tax audit. When concerns arise during a tax audit, it is common practice for the taxpayer to communicate such concerns to the auditor in charge or, if appropriate, to that auditor\u2019s supervisor, with a view to resolving the issues.<\/p>\n<p>Moreover, the tax authorities have appointed Taxpayer Support Officers at Regional Taxation Bureaus and local tax offices. These officers serve as designated contacts to receive and address taxpayers\u2019 complaints, grievances and difficulties related to general tax administration, including tax audits. Accordingly, taxpayers with concerns regarding a tax audit may also direct such concerns to the relevant Taxpayer Support Officer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If a taxpayer disagrees with a tax assessment, does the taxpayer have a right of appeal?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, when a taxpayer disagrees with a tax assessment by the tax authorities, the taxpayer may file an administrative appeal (a request for reconsideration) with the National Tax Tribunal within three months from the day following receipt of notice of the assessment.<\/p>\n<p>If the taxpayer is dissatisfied with the decision on the request for reconsideration, the taxpayer may file a lawsuit with the courts within six months from the day after receiving a copy of that decision. As such, in principle, taxpayers must first go through the administrative appeal procedure at the National Tax Tribunal before seeking judicial review to overturn a tax assessment. However, if no decision is rendered within three months from the day after the request for reconsideration was filed, the taxpayer may initiate litigation before the court.<\/p>\n<p>Additionally, prior to filing a request for reconsideration with the National Tax Tribunal, the taxpayer may submit a request for re-examination to the administrative agency that issued the original assessment, also within three months from the day after the notice of the assessment was received. When a request for re-examination is filed, the re-examination shall be conducted by a tax official different from the one who handled the original audit. If the taxpayer is dissatisfied with the decision on the re-examination request, the taxpayer must file a request for reconsideration with the National Tax Tribunal within one month from the day after receiving a copy of that decision.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the right of appeal to an administrative body (independent or otherwise) or judicial in nature (i.e. to a tribunal or court)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Taxpayers may pursue remedies by filing administrative appeals with the National Tax Tribunal and, if dissatisfied, initiating litigation before the courts. However, as noted in Section 14 above, before commencing litigation in court, a taxpayer must first file a request for reconsideration with the National Tax Tribunal.<\/p>\n<p>The decision rendered by the National Tax Tribunal constitutes the final and binding administrative ruling. Therefore, even if the tax authorities are dissatisfied with that decision, they are barred from initiating litigation to challenge it.<\/p>\n<p>Although the National Tax Tribunal is a special body within the NTA and is not fully independent, it is nevertheless empowered to issue decisions without being bound by the statutory interpretations set forth in directives issued by the Commissioner of the NTA, provided certain procedural requirements are observed.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the hearing in public? Is the decision published? What other information about the appeal can be accessed by a third party\/the public?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Court hearings are generally open to the public, and judgements are formally published. Third parties may usually inspect documents and evidence submitted by the litigating parties; however, if one or more parties seek to restrict access, the court may impose limitations on such inspection.<\/p>\n<p>In contrast, proceedings before the National Tax Tribunal are generally conducted in private, and its decisions are not ordinarily made public. Nevertheless, the National Tax Tribunal publishes selected decisions on its website, with the parties\u2019 names anonymised to protect privacy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the procedure mainly written or a combination of written and oral?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Court hearings are, as a general rule, conducted orally. However, in practice, the parties submit their arguments in writing, and written submissions play a critical role in the proceedings.<\/p>\n<p>Proceedings before the National Tax Tribunal are primarily conducted based on written submissions. Nevertheless, taxpayers are guaranteed the right to make oral statements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a document discovery process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Japan does not have a document discovery process.<\/p>\n<p>Instead, Japanese law provides a procedure allowing a party to petition the court to order the opposing party to produce documents in its possession, subject to specified conditions. Nonetheless, in practice, courts seldom order tax authorities to produce documents in tax litigation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are witnesses called to give evidence?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In court proceedings, witnesses may be called to testify, and their testimony may be admitted as evidence. Witness examination typically proceeds in the order of direct examination, cross-examination and redirect examination. Prior to the examination, it is common practice for the party calling the witness to submit to the court in advance a written statement setting forth the witness\u2019s proposed testimony, which serves as documentary evidence.<\/p>\n<p>In contrast, no formal witness or cross-examination is conducted in proceedings before the National Tax Tribunal. Instead, the Appeals Judge at the National Tax Tribunal may obtain oral testimony from relevant persons, record such testimony in writing and admit these written records as evidence.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the burden on the taxpayer to disprove the assessment the subject of the appeal?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>When the tax authorities issue a reassessment on the grounds that the taxpayer\u2019s original tax return understated taxable income, they generally bear the burden of proving the correctness and legality of their reassessment. However, since Japanese tax law permits the tax authorities to make assessments based on estimated taxable income in certain cases, the evidentiary burden on the authorities may be mitigated under such circumstances.<\/p>\n<p>By contrast, when a taxpayer files a request for reassessment on the grounds that their original return overstated taxable income, the burden of proving the correctness and the legality of the request generally rests with the taxpayer.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How long does an appeal usually take to conclude?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As described in Section 14 above, when a taxpayer objects to a tax assessment by the tax authority, the taxpayer may file an objection with both the National Tax Tribunal and the court, seeking annulment of the assessment. However, as a general rule, a lawsuit cannot be brought before the courts unless the taxpayer has first submitted a reconsideration request to the National Tax Tribunal.<\/p>\n<p>The National Tax Tribunal has established a standard processing period of one year for the reconsideration request procedure. Accordingly, except in certain cases involving complexity or difficulty, many cases are resolved within one year from the date the reconsideration request is filed. In addition, prior to filing a reconsideration request with the National Tax Tribunal, the taxpayer may choose to request a re-examination by the administrative agency that issued the original assessment. The standard processing period for the re-examination request procedure is three months.<\/p>\n<p>Regarding litigation procedures, although the courts do not publish statistics specifically for tax litigation, according to the 2024 statistics on administrative litigation in general\u2014which includes tax litigation\u2014the average trial duration is 14.8 months at the District Courts, 7.1 months at the High Courts (measured from when the High Courts receive the case records) and 3.9 months for final appeal cases and 4.0 months for cases in which a petition for the acceptance of a final appeal has been filed at the Supreme Court (measured from when the Supreme Court receives the case records). The average total duration from filing suit at the District Courts to final resolution at the Supreme Court is 40.8 months for final appeal cases and 42.9 months for cases in which a petition for the acceptance of a final appeal has been filed. However, it should be noted that these data are based solely on statistical averages. In complex cases or those involving controversial issues, the trial duration tends to be longer. For an overview of the Japanese judicial system, please also refer to Section 26 below.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the taxpayer have to pay the assessment pending the outcome of the appeal?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Filing an appeal against a tax assessment does not suspend the legal effect of the assessment, its enforcement or the continuation of related procedures. Even if a taxpayer files a request for re-examination with the tax authorities or a request for reconsideration with the National Tax Tribunal, failure to pay the assessed additional tax may result in the imposition of delinquent tax. Furthermore, the taxpayer faces enforcement actions, including asset seizure by the tax authorities. Consequently, where the taxpayer has the financial ability to satisfy the tax liability, it is common practice to complete payment without awaiting the outcome of the appeal procedure in order to avoid or mitigate these risks.<\/p>\n<p>If, following payment, the taxpayer\u2019s appeal results in cancellation of the tax authorities\u2019 assessment, the taxpayer is entitled to receive interest on the refunded amount.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on who can conduct or appear in the appeal on behalf of the taxpayer?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In litigation proceedings, only attorneys-at-law are permitted to represent taxpayers. However, an attorney-at-law may appoint a certified tax accountant as an assisting professional and receive support from the certified tax accountant throughout the litigation.<\/p>\n<p>In reconsideration request proceedings before the National Tax Tribunal, there are generally no restrictions on who may act as a representative. Nevertheless, pursuant to the Certified Tax Accountants Act, only attorneys-at-law who have submitted the required notification to the Regional Taxation Bureaus and certified tax accountants are permitted to engage in representation as a business. Accordingly, if a taxpayer intends to appoint a tax professional as their representative for the proceedings before the National Tax Tribunal, the taxpayer must appoint either an attorney-at-law or a certified tax accountant.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a system where the \u201closer pays\u201d the winner\u2019s legal\/professional costs of an appeal?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In litigation proceedings, the losing party is generally required to bear the litigation costs, which include court filing fees, postal fees for document transmission, and travel expenses and daily allowances for witnesses. However, these litigation costs generally do not encompass all expenses necessary for conducting the lawsuit; for example, attorneys\u2019 fees are excluded. Consequently, even if taxpayers prevail, they remain responsible for their own attorneys\u2019 fees.<\/p>\n<p>In administrative appeal procedures before the National Tax Tribunal, taxpayers are not required to pay any filing or procedural fees. Nonetheless, even if taxpayers prevail, they must still bear their own attorneys\u2019 fees.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to use alternative forms of dispute resolution \u2013 such as voluntary mediation or binding arbitration? Are there any restrictions on when this alternative form of dispute resolution can be pursued?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Japan, there is no statutory mechanism for resolving disputes between taxpayers and tax authorities concerning the revocation of tax assessment through alternative dispute resolution methods such as mediation or arbitration. Such disputes are resolved exclusively through administrative appeal procedures or judicial proceedings.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a right of onward appeal? If so, what are all the levels of onward appeal before the case reaches the highest appellate court.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As described in Section 14 above, a taxpayer who is dissatisfied with the decision of the National Tax Tribunal may thereafter file an action before the court seeking annulment of the tax assessment.<\/p>\n<p>Japan\u2019s judicial system is structured in three tiers. Cases involving administrative litigation, including tax litigation, are heard sequentially by the District Courts, the High Courts and the Supreme Court.<\/p>\n<p>A party dissatisfied with a decision of the District Court may appeal to the High Court. The High Court conducts fact-finding and reviews the application of law within the scope of the party\u2019s objections against the District Court\u2019s decision. The High Court\u2019s proceedings constitute a continuation of those at the District Court, and its judgement is based both on evidence previously submitted and any new evidence introduced at the High Court level. At the District Court level, oral hearings are often held multiple times; however, at the High Court level, they typically conclude in a single session.<\/p>\n<p>A party dissatisfied with the High Court\u2019s decision may appeal to the Supreme Court only if there is an alleged error in constitutional interpretation or a violation of significant procedural requirements prescribed by law. However, the Supreme Court may also accept the appeal upon a party\u2019s petition for acceptance of a final appeal if the High Court\u2019s decision conflicts with precedent or involves important issues regarding the interpretation of laws and regulations. The Supreme Court\u2019s hearing focuses on legal issues, and in principle, it is bound by the High Court\u2019s factual determinations. The Supreme Court proceedings are primarily conducted on the basis of written submissions, and oral hearings before the Supreme Court are rare.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the main penalties that can be applied when additional tax is charged? What are the minimum and maximum penalties?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>When a taxpayer fails to file a tax return or make payment by the statutory deadline, the main penalties imposed are penalty taxes and delinquent tax.<\/p>\n<p>Penalty taxes are administrative sanctions imposed in addition to the principal tax and include the penalty tax for understatement, the penalty tax for failure to file, the penalty tax for non-payment and the heavy penalty tax. The heavy penalty tax is imposed in lieu of the penalty tax for understatement, failure to file or non-payment when the taxpayer has engaged in concealment or falsification.<\/p>\n<p>The standard rates applied to the additional principal tax to be paid are 10% for the penalty tax for understatement, 15% for the penalty tax for failure to file and 10% for the penalty tax for non-payment. However, these rates may be adjusted upward or downward depending on specific circumstances, making it difficult to specify exact minimum or maximum rates. Additionally, the standard rates for the heavy penalty tax imposed in lieu of the penalty taxes for understatement, failure to file or non-payment are 35%, 40% and 35%, respectively, with certain additional increments applied in prescribed cases.<\/p>\n<p>Delinquent tax, which constitutes a supplementary tax with the nature of damages for late payment, is generally calculated by applying an annual rate of 14.6% to the unpaid tax amount, although this rate may be reduced in some cases.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If penalties can be mitigated, what factors are taken into account?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Japanese tax law contains detailed provisions regarding the adjustment and exemption of penalty taxes. The following example focuses on the penalty tax for understatement imposed under these provisions:<\/p>\n<p>First, if a taxpayer voluntarily submits an amended return before receiving notification of a tax audit, the taxpayer will not be subject to penalty tax for understatement.<\/p>\n<p>Second, if the taxpayer submits an amended return after receiving notification of a tax audit but without anticipation of a reassessment by the tax authorities, the penalty tax rate applied to the additional tax amount will be reduced to 5%.<\/p>\n<p>Furthermore, even if the taxpayer submits an amended return with prior anticipation of a reassessment, or if the tax authorities issue a reassessment, the penalty tax for understatement may be waived if a \u2018justifiable reason\u2019 exists for the understatement in the original return. Although such reasons are rarely accepted in practice, exemptions may be granted, for example, where the understatement results from a subsequent change or reversal in the tax authorities\u2019 position, or where the understatement was caused by erroneous or misleading guidance provided by tax officials.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Within your jurisdiction, are you finding that tax authorities are more inclined to bring challenges in particular areas? If so, what are these?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In recent years, the tax authority has intensified its audits of companies engaged in cross-border transactions to address international tax avoidance by taxpayers. These audits often focus on areas at high risk of significant income understatement, such as the application of Controlled Foreign Corporation (CFC) rules and transfer pricing rules. Furthermore, the tax authority has actively conducted audits of taxpayers who fraudulently claim consumption tax refunds by abusing export transactions exempt from consumption tax.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">In your opinion, are there any areas which taxpayers are currently finding particularly difficult to deal with when faced with a challenge by the tax authorities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Taxpayers often face difficulties responding to challenges from tax authorities, especially regarding tax issues arising from corporate reorganisations. Under Japanese law, with respect to corporate income tax on reorganisations, when actual corporate actions or calculations unjustly reduce the corporate tax burden, the tax authorities may disregard those actions or calculations and substitute those that would normally be expected, imposing tax accordingly.<\/p>\n<p>It is often unclear under what circumstances corporate actions or calculations will be deemed unjust. Combined with the complexity of corporate reorganisation transactions, this often leads to differences of opinion between taxpayers and tax authorities. Nevertheless, over the past decade, the tax authorities have demonstrated an assertive stance on taxation in this area. Therefore, when the tax authorities suspect that a corporate reorganisation transaction constitutes tax avoidance, taxpayers are likely to find it difficult to avoid such tax assessments.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">\u202fWhich areas do you think will be most likely to be the subject of challenges and disputes in the next twelve months?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Based on recent trends in tax audits conducted by tax authorities, as described in Section 29 above, it is highly likely that disputes between tax authorities and taxpayers concerning international taxation issues arising from cross-border transactions and overseas business operations will increase significantly over the next 12 months. Such disputes are expected to relate particularly to areas including Controlled Foreign Corporation (CFC) rules, transfer pricing rules, gifts\/donations to foreign related parties, earnings stripping rules and withholding tax regimes applicable to cross-border payments.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5065<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/114842","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=114842"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}