Tax measures for the real estate leasing sector in response to COVID-19

Japan tax newsletter 21 May 2020

Due to the disruptive impact of COVID-19 on businesses, sales are decreasing drastically for companies managing commercial complexes, restaurants and hotels, resulting in severe cash flow constraints and creating fears that tenants of such buildings will find difficulty in paying rent.

The Ministry of Land, Infrastructure, Transport and Tourism relayed through real estate trade organizations a request that real estate companies respond flexibly during this crisis by accepting requests for rent payment deferrals from tenants facing difficulties paying rent, or by implementing other similar measures.

In response, the National Tax Agency (NTA) announced a special measure for the corporate tax imposed on owners of rental properties in the event they reduce or exempt rent to counter the impact of COVID-19.

On 7 April 2020, the Japanese government made a cabinet decision to approve the emergency economic package in response to COVID-19. In light of this decision, the Diet passed two bills on 30 April 2020, which were promulgated on the same day, to mitigate the negative impact on taxpayers from the measures to prevent and end the pervasive spread of COVID-19: (1) A bill on special measures to temporarily revise national tax-related laws in response to the impact of COVID-19 and (2) a bill to partially revise the Local Tax Act.

In this newsletter, we provide explanations of tax measures that are likely to be utilized by companies engaged in the real estate leasing business.

Please refer to the Japan Tax newsletter, “Japan government COVID-19 tax measures,” that was released on 20 April 2020 for an outline of tax measures included in the emergency economic package in response to COVID-19.