Provisional Registrations (Karitoki) for Real Estate in Japan: What Are the Tax Consequences?

In Japanese real estate transactions, a "provisional registration" (仮登記 - karitoki) serves as a crucial legal mechanism to safeguard a future claim to a property right or to secure the priority of a registration that cannot yet be completed due to certain pending conditions. While not a full registration of the right itself, a karitoki has significant legal implications, particularly in reserving a place in the order of priority against subsequent claims. Engaging in provisional registrations also has specific consequences for the Registration and License Tax (登録免許税 - Toroku Menkyo Zei).

Understanding the purpose of provisional registrations and their associated tax treatment, including how the tax paid for a karitoki interacts with the tax for the subsequent main registration (本登記 - hontoki), is important for anyone involved in property dealings in Japan.

What is a Provisional Registration (Karitoki)?

A provisional registration is a temporary entry in the real property register designed to protect a right that is intended to be fully registered later. Its primary effect, as stipulated in Article 106 of the Real Property Registration Act (不動産登記法 - Fudosan Toki Ho), is to preserve the order of priority (順位保全効 - jun'i hozenko). This means that if a main registration is later made based on the provisional registration, the main registration will be deemed to have taken effect, in terms of its priority against other competing rights, from the date the provisional registration was made.

Article 105 of the Real Property Registration Act outlines two main circumstances under which a provisional registration can be made:

1. Type 1 Karitoki (1号仮登記 - ichi-go karitoki): This is made when an applicant is unable to provide all the information procedurally required for a full registration application. For example, if a necessary document from the other party (like a certificate of registered seal or the registration identification information - 登記識別情報 toki shikibetsu joho) is temporarily unavailable.
2. Type 2 Karitoki (2号仮登記 - ni-go karitoki): This is made to preserve a claim (請求権 - seikyuken) for the establishment, transfer, alteration, or extinguishment of a real property right. This is common in situations like:
   • A contract for a future property transfer (e.g., a purchase agreement with a future closing date, or a purchase option).
   • A right that is subject to a future condition precedent (停止条件 - teishi joken) or a future commencement date (始期 - shiki).

Registration and License Tax for Various Types of Provisional Registrations

The Registration and License Tax for a provisional registration varies depending on the type of right being provisionally registered and, in some cases, the underlying cause. The Appended Table No. 1 of the Registration and License Tax Act, particularly Item 1 (十二), details these rates.

1. Provisional Registration Concerning Ownership (所有権に関する仮登記)

• Provisional Registration of Ownership Preservation (所有権保存の仮登記 - shoyuken hozon no karitoki):
  • This is for the initial provisional recording of ownership, typically applicable in limited cases, such as when a person who acquired ownership of a newly constructed condominium unit from the original developer (who only had a display section registration) seeks to preserve their claim before full registration, often requiring a provisional disposition order from a court. It's not possible to make a provisional registration to preserve a claim for ownership preservation.
  • Tax Base: Assessed value of the real estate (不動産の価額).
  • Tax Rate: 2/1000 (0.2%) of the property value.
• Provisional Registration of Ownership Transfer (所有権移転の仮登記 - shoyuken iten no karitoki) or Provisional Registration to Preserve a Claim for Ownership Transfer (所有権移転請求権保全の仮登記 - shoyuken iten seikyuken hozen no karitoki):
  • The tax rate depends on the underlying cause of the intended transfer:
    • Due to Inheritance, Corporate Merger, or Division of Co-owned Property:
      • Tax Base: Assessed value of the real estate.
      • Tax Rate: 2/1000 (0.2%) of the property value.
      • Note: In practice, provisional registrations for ownership transfer due to inheritance or corporate merger are generally not accepted because these transfers occur automatically by law, and the registration is typically a unilateral application by the acquirer, not requiring the cooperation of a "registration obligor" in the traditional sense that might necessitate a provisional registration to secure their future cooperation.
    • Due to Other Causes (e.g., sale, gift, exercise of a purchase option/sales reservation):
      • Tax Base: Assessed value of the real estate.
      • Tax Rate: 10/1000 (1.0%) of the property value. This is significantly higher, reflecting half of the standard 20/1000 rate for a full transfer by sale.

2. Provisional Registration Concerning Usufructuary Rights (用益権に関する仮登記) (e.g., Superficies, Leaseholds)

• Provisional Registration for the Establishment of Superficies (地上権 - chijoken), Emphyteusis (永小作権 - eikosakuken), Leasehold (賃借権 - chinshakuken), or Quarrying Rights (採石権 - saisekiken):
  • Tax Base: Assessed value of the real estate.
  • Tax Rate: 5/1000 (0.5%) of the property value. (This is half of the standard 10/1000 rate for the full establishment of these rights).
• Provisional Registration for the Transfer of the above Usufructuary Rights:
  • The rate depends on the cause of transfer, mirroring the logic for ownership transfer:
    • Due to Inheritance, Corporate Merger, or Division of Co-owned Rights (for the portion corresponding to original share): Tax base (value of the right, often based on property value) × 1/1000 (0.1%).
    • Due to Other Causes (e.g., sale of leasehold): Tax base × 5/1000 (0.5%).

3. Provisional Registration Concerning Security Interests (担保権に関する仮登記)

• Provisional Registration for the Establishment of a Mortgage (抵当権設定の仮登記 - teitoken settei no karitoki):
  • Unlike the main registration for mortgage establishment which is based on the claim amount (an ad valorem tax), the provisional registration for mortgage establishment falls under the category of "other provisional registrations."
  • Tax: Fixed amount of ¥1,000 per property. This is a notable exception where the provisional registration tax is a flat fee while the main registration is percentage-based.

4. Provisional Registration Concerning Trusts (信託に関する仮登記)

• Provisional Registration of Trust of Ownership:
  • Tax Base: Assessed value of the real estate.
  • Tax Rate: 2/1000 (0.2%) of the property value.
• Provisional Registration of Trust of Security Interests (e.g., mortgage in trust):
  • Tax Base: Amount of the secured claim or maximum claim amount.
  • Tax Rate: 1/1000 (0.1%).
• Provisional Registration of Trust of Other Rights (e.g., leasehold in trust):
  • Tax Base: Assessed value of the real estate.
  • Tax Rate: 1/1000 (0.1%).

5. Other Provisional Registrations (その他の仮登記)

This category, as per Q170 of the referenced material, includes provisional registrations for matters such as:

• Alteration of a registered right (権利の変更の仮登記 - kenri no henko no karitoki)
• Correction of a registered right (権利の更正の仮登記 - kenri no kosei no karitoki)
• Cancellation of a registration (登記の抹消の仮登記 - toki no massho no karitoki)
• (As mentioned above) Establishment of a mortgage.

For these "other provisional registrations":

• Tax: Fixed amount of ¥1,000 per property involved.

Transition from Provisional to Main Registration: Tax Credit (Registration and License Tax Act Article 17)

A key feature of the Registration and License Tax system concerning provisional registrations is Article 17 of the Act. This article provides a form of "tax credit" when a main registration (本登記 - hontoki) is made based on a prior provisional registration.

• Principle: When calculating the Registration and License Tax for the main registration, the tax rate that was effectively paid (or a deemed equivalent rate specified in Article 17's table) for the provisional registration is deducted from the standard tax rate applicable to the main registration.
• Purpose: This mechanism is designed to prevent double taxation or an excessively high cumulative tax burden, as the provisional registration is merely a precursor to the intended full registration. The total tax paid for both the provisional and main registration should ideally approximate the tax that would have been paid if the main registration could have been done directly.
• Example:
  • A provisional registration for ownership transfer by sale is made (tax rate: 10/1000 of property value).
  • Later, the main registration for ownership transfer by sale is made. The standard rate for this main registration is 20/1000.
  • Under Article 17, the rate for the main registration would be calculated as: (20/1000 - 10/1000) = 10/1000 of the property value at the time of the main registration.
  • Effectively, the 10/1000 paid for the karitoki is credited.
• Varying "Credit" Rates: The table in Article 17 specifies the deemed "provisional registration tax rate" to be deducted for different types of main registrations (e.g., for ownership transfer due to inheritance, the main registration rate is 4/1000, and the deductible provisional rate is 2/1000, resulting in a 2/1000 rate for the main registration if a provisional was made).

It's crucial to consult the detailed table in Article 17 and any relevant amendments or special measures (especially those from the Act on Special Measures Concerning Taxation which can modify these deductible amounts, as seen in Q88 of the source material regarding past changes) to accurately calculate the tax for the main registration following a provisional one.

Cancellation of a Provisional Registration

If a provisional registration is no longer needed (e.g., the underlying agreement is cancelled), it can be cancelled (抹消 - massho). The Registration and License Tax for cancelling a provisional registration is generally treated like the cancellation of any other registration: a fixed amount of ¥1,000 per property.

Conclusion

Provisional registrations play a vital role in securing claims and priority in Japanese real estate dealings. The Registration and License Tax applicable to a karitoki varies significantly based on the nature of the right and the cause. While these taxes are generally lower than for a full registration, they are an important cost factor. The system allows for a credit of the provisional tax paid (or a deemed equivalent) when proceeding to the main registration, aiming to ensure a fair overall tax burden. Given the complexities, particularly with the interaction between standard rates, provisional rates, and the crediting mechanism under Article 17, professional legal advice from a judicial scrivener is highly recommended to navigate these tax implications accurately.