Hello all,
Question 1:
I am hoping to purchase a house sometime next year in Tokyo and was wondering if there is a large difference in the tax write-off and tax expense you can claim as opposed to a rental. I know that with a rental you can often claim 50 to 70% as a home office (if you are operating as a sole proprietorship), which is what I currently do.
Does that change significantly if you operate the same business in a purchased home (with a mortgage on it)? I am also planning to build a home office / studio in one whole floor and expecting the occasional client to come by as well.
Question 2:
Eventually, I am hoping to register a company here and I know that this will also change how the taxes operate. I have been speaking to some accountants about this and in many instances the owner of the property (who is often the owner or managing director of the company) will lease the house to the company that the company can ten write off as rent. Is that the best way to go about it once incorporate?
TLDR: I am upgrading from a rental to a purchased home and soon after that hoping to scale up my business from a sole proprietorship and incorporate.
If anyone has any some general advice on to how to best navigate this new tax situation and how to get the best tax exemption for my home office in these two new situations that would be very much appreciated.
Thank you very much.
by rasdouchin
3 comments
> Question 2: I have been speaking to some accountants about this and in many instances the owner of the property (who is often the owner or managing director of the company) will lease the house to the company that the company can ten write off as rent. Is that the best way to go about it once incorporate?
Far from being a tax expert but this is also what our current tax accountant recommended.
We rent part of our house/land to our own company for use. He advised us to do the same with our car too.
> I am also planning to build a home office / studio in one whole floor and expecting the occasional client to come by as well.
We got a separate prefab office kind of thing on our land that our company paid for in full, and as recommended by the accountant, the company is renting the landing the building is on + electricity + Internet (+ water, I guess) from us as a rent “package”.
I remember he also told us if we had to build a new house with an office in it, it’s also best to build it under our private name and rent it out to the company.
I don’t know if it’s possible to use a part of your home officially as an office with the typical mortgages. Some contracts may have provisions about that.
For instance Flat35 type mortgages generally require paying back the loan corresponding to the portion of the property used for business:
https://www.flat35.com/user/attension/jyutaku_henkou.html
Now, even where the contract allows it, I know you can only deduct the interest portion of your mortgage payments as expenses, not the prinicpal:
https://souzoku.asahi.com/article/14506133
If you’re planning to open a company in the future, it might be worthwhile thinking about who you would like the owner to be, and the answer will depend a lot on how much the property is and your yearly sales and taxable income.
If you purchase a property under the company’s name, it must be depreciated over a large number of years depending on the construction type. [See here](https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/pdf/2100_01.pdf). If it’s a dedicated office which is an RC construction it’ll be depreciated over 50 years, for example. If, however, you rent an office, then the whole amount can be counted as a monthly expense. Of course, if it’s a home office then the appropriate percentage which is used for business should be taken into account.
You’ll have to consider if you want the owner to be you as an individual or your future company. You’ll also have to take into consideration which would be the most beneficial to you long term, which might depend on how you see the future of your company.