Japan’s National Tax Agency updated its FAQs on the common reporting standard (CRS) for automatic exchange of financial account information concerning non-residents on 9 April 2024.
The revised FAQ includes new guidance on reporting requirements and procedures for foreign financial institutions, Japanese financial institutions, Circumventing reporting requirements, Citizenship or residence by investment (CBI/RBI) schemes, and verification of tax residency.
Foreign financial institutions
Transactions by foreign reporting financial institutions generally don’t need to be reported unless there’s uncertainty about their status.
Japanese financial institutions
Specific transactions by reporting financial institutions in Japan are not reportable.
Circumventing reporting requirements
Actions by individuals or related parties that intend to bypass reporting requirements will be disregarded as per the 2020 tax reform.
CBI/RBI schemes
CBI/RBI schemes allow individuals to gain residency or citizenship through investment. These schemes may be used to avoid financial reporting, and the OECD lists countries and regions where they are used.
Verification of tax residency
Financial institutions must verify tax residency claims if they involve jurisdictions with CBI/RBI schemes. Verification involves asking specific follow-up questions about residence rights, stays in other jurisdictions, and income tax filings in the previous year.
