Under What Circumstances Can Registration and License Tax Be Exempted or Reduced in Japan?

While Japan's Registration and License Tax (登録免許税 - Toroku Menkyo Zei) is a common feature of many official registration procedures, particularly for real estate and commercial entities, there are specific circumstances under which this tax may be either entirely exempted (非課税 - hikazei) or significantly reduced (軽減 - keigen). These provisions are established both within the Registration and License Tax Act itself and, more extensively for reductions, under the Act on Special Measures Concerning Taxation (租税特別措置法 - Sozei Tokubetsu Sochi Ho).

Understanding these exemptions and reductions can lead to substantial cost savings, but their application often depends on meeting strict criteria and following specific procedural requirements, including the submission of requisite certifications.

I. Non-Taxable Registrations (Tax Exemptions)

The Registration and License Tax Act outlines several categories of registrations that are non-taxable, generally due to public policy considerations, the nature of the registrant, or the administrative character of the registration.

A. Key Exemptions under the Registration and License Tax Act

1. Registrations by the State, Local Public Entities, etc., for Their Own Benefit (Article 4, Paragraph 1):
   When the national government, local public entities (prefectures, municipalities), or other entities listed in Appended Table No. 2 of the Act (which includes certain independent administrative agencies and public corporations) receive a registration for their own purposes, the tax is generally waived. This exemption recognizes the public nature of these entities and their activities. The phrase "for its own benefit" (自己のために受ける - jiko no tame ni ukeru) is key, typically meaning the governmental entity is the direct rights holder or beneficiary of the registration (e.g., acquiring property, registering its own ownership, or cancelling a right against it). This also extends to certain registrations made by these entities on behalf of others (代位登記 - dai-i toki) if such registrations are a prerequisite for their own non-taxable registration.
2. Specific Registrations by Certain Public Interest Corporations, etc. (Article 4, Paragraph 2):
   Appended Table No. 3 of the Act lists various corporations established under specific laws (e.g., religious corporations, school corporations, social welfare corporations, certain financial institutions like the Japan Bank for International Cooperation). When these entities undertake specific types of registrations for their own benefit as detailed in the table (often related to acquiring property for their core public interest activities), the tax may be exempted. Frequently, this exemption is conditional upon attaching specific documents prescribed by Ministry of Finance Ordinance to the registration application, proving the eligibility for the exemption.
3. Registrations Arising from Specific Circumstances or Administrative Actions (Article 5):
   This article lists numerous non-taxable registrations, including:
   • Registrations made by a registrar ex officio (e.g., to correct an error made by the registrar, provided no third-party interests are affected).
   • Changes to registered particulars due to the implementation or alteration of a residential addressing system (住居表示の実施又は変更 - jukyo hyoji no jisshi mata wa henko). This requires a certificate from the municipal mayor verifying the change. Even a subsequent correction registration due to an error in the initial municipal certificate for such a change may be treated as non-taxable.
   • Changes to registered particulars due to alterations in administrative zones, names of districts, municipalities, or lot numbers (行政区画等の変更等 - gyosei kukaku to no henko to). This also requires a certificate from the relevant municipal mayor or land improvement project implementer.
   • Registrations necessary for the implementation of Land Improvement Projects or Land Readjustment Projects (土地改良事業等の施行のための登記 - tochi kairyo jigyo to no shiko no tame no toki), such as registrations of land exchange (換地処分 - kanchi shobun). However, there are exceptions: for instance, the initial ownership preservation registration or subsequent transfer registration of certain reserved land (保留地 - horyuchi) or宅地 (residential land) acquired by specific parties (like participating members of a land readjustment association) under these projects are not exempt.
   • Registrations concerning burial grounds (墳墓地 - funbochi).
   • Registrations related to procedures for the collection of delinquent taxes (滞納処分 - taino shobun).
   • Certain registrations mandated by court order in relation to corporate special liquidation proceedings (株式会社の特別清算に関する登記).
4. Registrations Concerning Land or Buildings for Foreign Diplomatic Missions, etc. (Article 6): Subject to reciprocity, registrations received by foreign states for land or buildings used for their diplomatic missions, consulates, or residences of diplomatic staff may be exempt.
5. Specific Trust-Related Registrations (Article 7): Certain trust registrations are non-taxable, such as the transfer of trust property from a trustee back to the original settlor-beneficiary under specific conditions.

B. Exemptions under Other Laws

Beyond the Registration and License Tax Act, other laws provide for non-taxable treatment of certain registrations, often those made by court clerks upon the order of a court in the context of insolvency proceedings:

• Bankruptcy Act (破産法 - Hasan Ho): Registrations related to bankruptcy proceedings, such as the registration of the commencement of bankruptcy, are generally non-taxable when made by court嘱託 (shokutaku - commission/request).
• Corporate Reorganization Act (会社更生法 - Kaisha Kosei Ho) / Civil Rehabilitation Act (民事再生法 - Minji Saisei Ho): Similarly, many registrations related to these formal insolvency and restructuring proceedings are exempt.

II. Tax Reductions (軽減措置 - Keigen Sochi)

Tax reductions, as opposed to full exemptions, are primarily stipulated under the Act on Special Measures Concerning Taxation. This law is designed to achieve specific national policy objectives by temporarily reducing tax rates for certain activities. These objectives often include stimulating economic activity, promoting home ownership, or encouraging industrial development.

A. Role and Purpose of the Act on Special Measures Concerning Taxation

This Act provides exceptions and special rules to general tax laws, including the Registration and License Tax Act. For registration tax, it offers numerous reductions for specific types of registrations if certain conditions are met. These measures are typically time-limited and require careful attention to their effective dates and qualifying criteria.

B. Key Tax Reductions for Real Estate Registrations (Illustrative Examples from Q38)

1. Transfer of Ownership of Land by Sale:
   • The standard rate (20/1000) for transferring land ownership by sale is often reduced to 15/1000 (1.5%) for registrations made by a specified deadline (e.g., March 31, 2027, but always verify current extensions).
2. Ownership Preservation or Transfer of Residential Housing by Individuals:
   • Preservation of Ownership (for newly built or unused homes for personal residence): Rate reduced from 4/1000 to 1.5/1000.
   • Transfer of Ownership (for new or qualifying used homes for personal residence): Rate reduced from 20/1000 to 3/1000.
   • These reductions usually require the registration to be made within one year of construction/acquisition and submission of a "Residential House Certificate" (住宅用家屋証明書 - jutakuyo kaoku shomeisho) from the municipality, verifying compliance with conditions like floor area and personal residential use.
3. Certified Long-Life Quality Housing (特定認定長期優良住宅 - Tokutei Nintei Choki Yuryo Jutaku) and Certified Low-Carbon Buildings (認定低炭素住宅 - Nintei Teitanso Kenchikubutsu):
   • For individuals acquiring such certified residential properties for their own use, the rates for both ownership preservation and ownership transfer can be further reduced, often to 1/1000 (0.1%) or 2/1000 (0.2%) for transfers of detached houses, subject to conditions and deadlines.
4. Mortgage Establishment for Residential Housing Loans:
   • When an individual takes out a loan to finance the acquisition or construction of a qualifying residential property, the tax rate for registering the mortgage to secure that loan can be reduced from 4/1000 to 1/1000 (0.1%) (Article 75, Act on Special Measures Concerning Taxation). This also requires the residential house certificate and timely registration.

C. Key Tax Reductions for Commercial Registrations (Illustrative Examples)

1. Under the Industrial Competitiveness Enhancement Act (産業競争力強化法 - Sangyo Kyosoryoku Kyoka Ho):
   • Registrations related to company incorporation, capital increases, mergers, or demergers undertaken as part of an approved business restructuring plan (認定事業再編計画等 - nintei jigyo saihen keikaku to) can benefit from reduced rates (e.g., 3.5/1000 for certain capital increases, 1/1000 or 1.5/1000 for capital related to mergers, often with caps on the eligible capital amount). Specific certifications from the relevant minister are required.
2. Under the Corporate Reorganization Act:
   • Certain capital increases or company formations occurring under an approved corporate reorganization plan can also receive reduced tax rates (e.g., 1/1000 or 3.5/1000, depending on the specifics).

III. General Considerations for Claiming Exemptions or Reductions

Successfully availing of these tax exemptions or reductions requires careful attention to detail:

• Accurate Identification of Eligibility: The conditions for each measure are precise and must be fully met.
• Timely Submission of Required Documentation: Many exemptions (like those for address changes due to administrative rezoning) and most reductions (especially for residential properties) require specific certificates from governmental authorities or other bodies. These must be attached to the registration application at the time of filing. Submitting them after the registration is completed will generally not allow for a refund of tax already paid if the certificate was a prerequisite for the non-taxable/reduced rate treatment from the outset.
• Awareness of Time Limits: Many reductions under the Act on Special Measures Concerning Taxation are temporary and have expiration dates. It is crucial to check the currently effective legislation.
• Minimum Tax Rules: Even if a reduced ad valorem rate is applied, the final Registration and License Tax payable is subject to a minimum of ¥1,000 (as per Article 19 of the RLT Act).

Conclusion

Japan's Registration and License Tax system incorporates a range of non-taxable provisions and tax reduction measures designed to serve public interest, administrative efficiency, and specific policy goals. While these can offer significant financial relief, their application is conditional and often requires meticulous preparation of supporting documentation. For businesses and individuals undertaking registrations in Japan, a thorough review of potentially applicable exemptions or reductions, often with the guidance of legal professionals like judicial scriveners or tax advisors, is a critical step in managing compliance and optimizing the costs associated with formalizing their legal and commercial standing.