A contract forms a binding agreement, and parties are expected to fulfill their respective obligations. However, situations arise where one party unequivocally indicates that they will not perform their duties. This "clear refusal to perform" (明確な履行拒絶 - meikakuna rikō kyozetsu) by a debtor is a serious form of

When the performance of a contractual obligation becomes impossible after the contract has been formed, Japanese law provides specific avenues of recourse for the aggrieved creditor. This situation, known as "impossibility of performance" (履行不能 - rikō funō), fundamentally alters the contractual relationship and triggers distinct legal consequences, primarily

When a contractual obligation is not met, the aggrieved party (creditor) in Japan has several potential remedies. One significant monetary remedy, clarified and structured under the revised Japanese Civil Code (effective April 2020), is "damages in lieu of performance" (履行に代わる損害賠償 - rikō ni kawaru songai baishō). This concept,

The principle of unjust enrichment (不当利得 - futō ritoku), enshrined in Article 703 of the Japanese Civil Code, dictates that a person who has benefited from the property or labor of another without legal ground, thereby causing loss to the other, is obliged to return such benefit to the extent

In Japanese law, the point in time from which default interest (遅延利息 - chien risoku) begins to accrue on a monetary obligation arising from damages can significantly differ depending on whether the underlying claim is based on tort (不法行為 - fuhō kōi) or breach of contract (債務不履行 - saimu furikō)

Understanding when a party is legally considered to be in "delay in performance" (履行遅滞 - rikō chitai) is crucial in Japanese contract law. This determination directly impacts the availability of remedies such as claims for damages due to delay and, in some cases, the right to terminate a

I. Introduction: Equity-Based Compensation in Japan – An Overview In recent years, Japanese companies have increasingly turned to equity-based compensation, such as stock options and restricted stock, as strategic tools to attract, retain, and incentivize talented employees and executives. These instruments aim to align the interests of management and staff with

I. Introduction: Secondment of Employees to Japanese Subsidiaries – Unintended PE Risks for the Foreign Parent Multinational enterprises (MNEs) frequently second key personnel—managers, technicians, sales staff, and other specialists—to their foreign subsidiaries. This practice, while common for operational, training, or strategic reasons, can carry significant, sometimes unintended, Japanese tax

I. Introduction: The Complexities of Intercompany Services and PE Risk in Japan In today's interconnected global economy, multinational enterprise (MNE) groups frequently utilize specialized subsidiaries located in different jurisdictions to provide various services to other group members, including the parent company. When a foreign subsidiary provides services to

I. Introduction: The Rising Scrutiny on Intangible Property under Japanese Transfer Pricing In today's global economy, intangible property (IP) – such as patents, trademarks, know-how, trade secrets, and software – often represents a significant portion of a multinational enterprise's (MNE's) value. Consequently, intercompany transactions involving IP,

I. Introduction: The Tax Dynamics of Licensing Intellectual Property (IP) Involving Japan Intellectual Property (IP) – encompassing patents, trademarks, copyrights (including software), know-how, and trade secrets – is a cornerstone of modern global business. Cross-border licensing of IP rights is a common way for companies to expand their reach, access new markets,

I. Introduction: Understanding the Tokumei Kumiai (TK) – Japan's Unique "Silent Partnership" The Tokumei Kumiai (TK - 匿名組合), often translated as a "silent partnership" or "anonymous partnership," is a distinctive contractual arrangement under Japanese law that has long been utilized for various investment

I. Introduction: Foreign Partnerships Investing in Japanese Assets – A Tax Overview Japan continues to be an attractive market for foreign investment, with assets ranging from real estate and infrastructure to private equity and venture capital. Foreign investors often utilize partnership structures, such as Cayman Islands Exempted Limited Partnerships (ELPs) or

I. Introduction: The Importance of "Net" Receipts in Cross-Border Lending When a foreign entity lends money to a Japanese borrower, the interest income generated is a key component of the lender's return. However, these interest payments can be subject to Japanese withholding tax before they leave

I. Introduction: Navigating the Tax Landscape of Cross-Border Loans with Japanese Entities Cross-border lending and borrowing activities are fundamental to international business and investment. When these transactions involve Japanese entities, either as lenders or borrowers, a complex web of Japanese tax implications arises. These include withholding tax obligations on interest

I. Introduction to Japanese Tax-Qualified Reorganizations Corporate reorganizations such as mergers, demergers (company splits), and share exchanges are vital strategic tools for businesses looking to expand, consolidate, or restructure their operations. In Japan, the tax implications of these transactions can be significant. However, Japanese tax law provides a framework for

I. Introduction: Navigating the Tax Complexities of Cross-Border Business Transfers Involving Japan A "business transfer" (jigyō jōto - 事業譲渡) in the Japanese legal and tax context typically refers to the transfer of a whole or distinct part of a business as a going concern. This often includes a

I. Introduction: Choosing the Right Business Structure for Entering the Japanese Market When a foreign enterprise decides to establish a business presence in Japan, one of the most fundamental decisions is selecting the appropriate legal and tax structure. The choice of entity will have significant long-term implications for liability, governance,

I. Introduction: Unpacking Debt-for-Equity Swaps (DES) in Japan A Debt-for-Equity Swap (DES) is a financial restructuring tool where a creditor converts its debt claim against a debtor company into an equity interest (shares) in that company. This transaction is often employed to improve a distressed company's balance sheet

I. Introduction: The Critical Role of Representations & Warranties (R&Ws) in Mitigating Tax Risks in Japanese M&A In any Mergers and Acquisitions (M&A) transaction, Representations and Warranties (R&Ws) serve as a crucial mechanism for allocating risk between the buyer and the seller.

I. Introduction: The Complex Tax Web of Selling Shares in a Japanese Company with Overseas Operations When shares in a Japanese company are sold, the immediate tax concern is typically the Japanese capital gains tax implications for the seller. However, if the Japanese company itself holds significant subsidiaries or assets

I. Introduction: Understanding Japanese Stamp Duty (Inshi-zei) Japanese Stamp Duty, or Inshi-zei (印紙税), is a national tax levied on the creation of specific types of documents listed in the Stamp Duty Act. Unlike taxes on income or transactions, stamp duty is an excise tax imposed on the paper documents themselves