Outline of “Designated Tax Representative”
Tax Reform in FY2021
National Tax Agency
In addition to the conventional “tax representative” system, a new “designated tax representative” system has
been established by the tax reform in 2021. Under the designated tax representative system, when a taxpayer who
has not spontaneously filed a notification of a tax representative meets certain requirements such as failure to
submit a notification of tax representative even after receiving requests from the jurisdictional tax authority to
appoint a tax representative and submit a notification, the tax authority is entitled to designate a certain person
who has a domicile or residence in Japan (“domestic facilitator”) as a tax representative of that taxpayer.
The provision concerning the designated tax representative becomes effective from January 1, 2022.
This brochure introduces the outline of the “designated tax representative” system based on the laws andregulations as of January 2022.

１. Background of tax reform of “designated tax representative” system
In recent years, cross-boarder economic activities by non-residents or foreign corporations have become
increasingly active, such as sales of real estate in Japan, a transaction carried out through a domestic local
corporation of a foreign corporation, and sales of digital contents (such as an online game and music) through theInternet. As a result, there is an increase in the number of situations where taxation issues arise for non-residents
and foreign taxpayers that do not have any physical bases in Japan.
The tax examination for these taxpayers has been implemented indirectly by contacting them through tax
representatives residing in Japan. However, if these taxpayers do not fullfill their obligation to appoint such tax
representatives despite the need for tax authorities to contact them for sending a notice of tax examination , inquiry ,or service of other documents, it is difficult to conduct examinations of these taxpayers because there are no futherlegally available measures that can be taken by tax authorities regarding the appointment of a tax representative.

- 1 -In order to tackle such a problem and carry out a proper and fair taxation, the “designated tax representative”
system has been established by the tax reform in 2021 by which the tax authority is allowed, under certain
conditions, to designate a tax representative as follows.

〔Examples of “designated tax representative”〕

In the examples above, the real estate company and the digital platform operator located in Japan respectively
fall under the category of “designated tax representative”.

- 2 -２．Outline of “designated tax representative” system
Further details of the “designated tax representative” system are elaborated below.

⑴

Requirement for a taxpayer to submit a notification of a tax representative

Where a taxpayer who is required to appoint a tax representative fails to submit a notification of a tax
representative, the jurisdictional District Director or the Regional Commissioner is entitled to request the
taxpayer in writing to submit a notification of a tax representative while specifying matters that are related to thenational tax and necessary to be processed by a tax representative (hereinafter referred to as the “specified
matters”) by the date designated considering the days usually required to prepare for the matters within the time
period not exceeding 60 days (hereinafter referred to as the “designated date”) (Act on General Rules for
National Taxes 117, [3]).

〔Terminology〕⑵

Request for a domestic facilitator to become a tax representative

Where a taxpayer who is required to appoint a tax representative fails to submit a notification of a tax
representative, the jurisdictional District Director or the Regional Commissioner is entitled to request a person
in writing who has a domicile or residence (including an office and a business premise) in Japan and isappropriate and convenient person for the processing of the specified matters (hereinafter referred to as the“domestic facilitator”) to become a tax representative of the taxpayer (Act on General Rules for National Taxes
117 [4]).
In such cases, when the taxpayer appoints the domestic facilitator as a tax representative by responding to therequest, the taxpayer is supposed to notify the District Director or the Regional Commissioner having jurisdiction
over the place of payment of the national tax pertaining to the tax representative of the tax representative throughan ordinary procedure provided for in 117, [1]/[2] of the Act on General Rules for National Taxes.

⑶

Designation of a designated tax representative by the tax authority

When a taxpayer in (1) above (hereinafter referred to as “specified taxpayer”) fails to submit a notification ofa tax representative by the designated date, the jurisdictional District Director of the Tax Office or the Regional
Commissioner is entitled to designate a domestic facilitator as a tax representative from among those requested
to become a tax representative pursuant to (2) above and enumerated below to process the specified matters(hereinafter referred to as the “designated tax representative”) (Act on General Rules for National Taxes 117,[5]). In such cases, the jurisdictional District Director of the Tax Office or the Regional Commissioner shallnotify in writing both the designated tax representative and the specified taxpayer of the designation of the tax
representative (Act on General Rules for National Taxes 117, [7]).
- 3 -[1] In cases where the specified taxpayer is an individual
a. A spouse or other relative who reaches the age of majority living in the same household as the specified
taxpayer;b. A person having close relations with the specified taxpayer due to a contract executed with him/her
concerning the fact to be included in the basis of calculation of national tax base or tax amount pertaining
to the specified taxpayer;c. A business person providing a place of transactions (e.g. digital platforms) where the specified taxpayer
conducts electronic transactions or other transactions continuously and repeatedly.
[2] In cases where the specified taxpayer is a corporation
a. A corporation having special relations with the specified taxpayer;
b. The officer of the specified taxpayer, or a spouse or another relative who reaches the age of majority
living in the same household as the officer;
c. A person of b. or c. in [1] above.
〔Examples of “designated tax representative”〕⑷

Dismissal of a designated tax representative by the tax authority

Where the desiganted tax representative has been appointed pursuant to (3) above by the jurisdictional District
Director or the Regional Commissioner, and if it is no longer necessary to have the designated tax representative
process the specified matters, the jurisdictional District Director or the Regional Commissioner shall dismiss thedesignated tax representative (Act on General Rules for National Taxes 117, [6]). In such cases, the jurisdictional
District Director or the Regional Commissioner shall notify in writing both the designated tax representative andthe specified taxpayer of the dismissal of the designated tax representative (Act on General Rules for National
Taxes 117, [7]).

〔Example of cases to dismiss “designated tax representative”〕- 4 -3. Important caveats⑴

Obligations of designated tax representatives

The matters to be processed by designated tax representatives are limited to “specified matters”, which are toreceive documents sent from the tax authority, and send them to the specified taxpayer, to receive documents fromthe specified taxpayer which he/she intends to submit to the tax authority, and then send the received documents tothe tax authority, and to do other things simillar to these matters. Therefore, the designated tax representative is
NOT liable to undertake obligations to submit a tax return or to pay tax on behalf of a specified taxpayer as adesignated tax representative’s own obligation.

⑵

Filing a complaint concerning the designation of a designated tax representative

The designation of a designated tax representative by the tax authority falls under the “disposition carried out
pursuant to the national tax laws,” and if the specified taxpayer or designated tax representative has a complaint
for the designation, he/she is entitled to file a complaint such as [1] the request of re-examination to thecompetent District Director of the Tax Office or the Regional Commissioner, or [2] the request of administrative
review to the Director-General of the National Tax Tribunal (Act on General Rules for National Taxes 75, [1]).
In addition, after filing such complaints, he/she is entitled to file a lawsuit pursuant to the Administrative
Litigation Law, etc. (Act on General Rules for National Taxes 114, 115 [1])4. Effective date of the designated tax representative system
The “designated tax representative” system was established by the tax reform in FY2021. The provision
becomes effective from January 1, 2022, and applies to the request of a taxpayer’s submitting a notification of atax representative, the request that a domestic facilitator becomes a tax representative of a taxpayer, or the tax
authority’s designation of a designated tax representative after these requests to be made on that day and later.

5. Terminology◎ “tax representative”・・・A person who is appointed by a taxpayer from those who has a domicile or address
or office in Japan and is suitable tax related affaires of a taxpayer, where the taxpayer needs to submit tax
returns or handle tax affairs related to the national tax. (Act on General Rules for National Taxes
117[1]/[2])◎ “designated tax representative”・・・A tax representative who is designated by the jurisdictional District
Director of the Tax Office or Regional Commissioner from among domestic facilitators after requesting toappoint a tax representative by himself/herself in order to process the specified matters when a taxpayer fails
to fulfill the obligation to appoint a tax representative by the designated date. (Act on General Rules for
National Taxes 117[5])◎ “specified matters”・・・ The following matters and other matters similar to them (Regulation for
Enforcement of the Act on General Rules for National Taxes 12-2).
［1］To receive documents to be sent to a taxpayer from the Regional Commissioner or the District Directorof the Tax Office, or relevant employees of the Regional Taxation Bureau or Tax Office (hereinafterreferred to as the “Regional Commissioner or other personnel”) and sent them to the taxpayer during
the examination pertaining to national tax; and- 5 -［2］To receive documents to be submitted to the Regional Commissioner or other personnel from a taxpayer
and submit them to the Regional Commissioner or other personnel in the examination pertaining tonational tax.
* ”other matters similar to them” includes receiving, sending and submitting documents related toprocedure for collecting delinquent taxes such as an asset seizure pursuant to National Tax Collection
Act.

◎”special relationship”・・・The “special relation” has the same meaning as the one defined in the transfer
pricing legislation (Act on Special Measures Concerning Taxation 66-4 ) and specifically referred to as thefollowing relationship (Order for Enforcement of the Act on General Rules for National Taxes39-2[1]) ;(i)

The relationship whereby either one of two corporations holds, directly or indirectly, shares or capital
contributions that account for 50 percent or more of the total number or total amount of issued shares ofor capital contributions to the other corporation (excluding the shares of or capital contributions to theother corporation held by itself) (Refer to the category of “Shareholding relations” in Reference chart [1].)(ii) In the case where shares or capital contributions that account for 50 percent or more of the Issued Shares,
etc. of two corporations are held respectively directly or indirectly by the same person (in the case where
the person is an individual, the individual and an individual who has a special relationship specified by
Cabinet Order as prescribed in Article 2, item (x) of the Corporation Tax Act with the individual; thesame applies in the following item), the relationship between those two corporations; (Refer to the categoryof “Shareholding relations” in Reference chart [1].)(iii) The relationship whereby the existence of any of the facts listed in the following or any other fact
equivalent thereto (referred to as a "specified fact" in the following items) enables either one of two
corporations to determine substantially the whole or part of the other corporation's business policy (Referto the category of “Substantial control relations” in Reference chart [1].
a.

The fact that 50 percent or more of the officers of the relevant other corporation or any officers who
have authority to represent the relevant other corporation are persons who concurrently serve as
officers or employees of the relevant one of the two corporations or who used to serve as officers or
employees of the relevant one of the two corporations;b. The fact that the relevant other corporation depends on transactions with the relevant one of the two
corporations for a considerable part of its business activities;c. The fact that the relevant other corporation procures a considerable part of funds necessary for its
business activities by receiving loans from the relevant one of the two corporations or by obtaining
guarantees from the relevant one of the two corporations;(iv) The relationship between one corporation and any of the following corporations: (Refer to the category of“Shareholding and substantial control relations” in Reference chart [1].
a.

A corporation in a relationship whereby shares or capital contributions that account for 50 percent
or more of its Issued Shares, etc. are held directly or indirectly by the relevant one corporation or thewhole or part of its business policy can be substantially determined by the relevant one
corporationdue to the existence of a specified fact;b.

A corporation in a relationship whereby shares or capital contributions that account for 50 percentor
more of its Issued Shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or
thewhole or part of its business policy can be determined substantially by a corporation listed in (a)or (c) due to the existence of a specified fact;c.

A corporation in a relationship whereby shares or capital contributions that account for 50 percent
or more of its Issued Shares, etc. are held directly or indirectly by a corporation listed in (b) or the- 6 -whole or part of its business policy can be substantially determined by a corporation listed in (b) due
to the existence of a specified fact;(v) The relationship between two corporations whereby they fall respectively under any of the categories ofcorporations listed as follows (limited to the case where the person prescribed in (a) is the same person:(Refer to the category of “Shareholding and substantial control relations” in Reference chart [1]).
a.

A corporation in a relationship whereby shares or capital contributions that account for 50 percent
or more of its Issued Shares, etc. are held directly or indirectly by one person listed in (a) or (c) or
the whole or part of its business policy can be substantially determined by one person listed in (a) or(c) due to the existence of a specified fact;b.

A corporation in a relationship whereby shares or capital contributions that account for 50 percent
or more of its Issued Shares, etc. are held directly or indirectly by a corporation listed in (a) or (c) or
the whole or part of its business policy can be substantially determined by a corporation listed in (a)or(c) due to the existence of a specified fact;c.

A corporation in a relationship whereby shares or capital contributions that account for 50 percent
or more of its Issued Shares, etc. are held directly or indirectly by a corporation listed in (b) or thewhole or part of its business policy can be substantially determined by a corporation listed in (b) due
to the existence of a specified fact.

【Reference Chart [1]】- 7 -(ⅵ) In the case referred to in item (i) of the preceding paragraph, the determination as to whether one of two
corporations holds directly or indirectly shares or capital contributions that account for 50 percent ormore of the Issued Shares, etc. of the other corporation is to be made according to the ratio obtained byadding the ownership ratio for the shares, etc. of the relevant other corporation held directly by therelevant one of the two corporations and the ownership ratio for the shares, etc. of the relevant othercorporation held indirectly by the relevant one of the two corporations. (Order for Enforcement of the
Act on General Rules for National Taxes 39-2 [2]). (Refer to Reference chart [2].)【Reference Chart [2]】(ⅶ)

The ownership ratio for the shares, etc. of the held directly as prescribed in the (ⅵ) paragraph means
the ratio of the number of the amount of the relevant other corporation's shares or capital contributions
held by the relevant one of the two corporations out of the total Issued Shares, etc. of the relevant othercorporation (Order for Enforcement of the Act on General Rules for National Taxes 39-2 [2]). (Referto the category of “Ratio of direct ownership” in Reference chart [3].)(ⅷ)

The ownership ratio for the shares, etc. held indirectly as prescribed in the in the (ⅵ) paragraph means
the ratio of issued shares, etc. of the other corporation owned by its shareholder, etc. (juridical person)
to all issued shares, etc. or the amount of contribution in relations linking a corporation and such ashareholder due to the ownership of all issued shares, etc. or 50% or more of all the shares or theamount of contribution. It specifically refers to the rates provided for in each category in the following
cases (in the case where the ratio falls under both of the following items, the sum of the ratios specified
as follows): (Order for Enforcement of the Act on General Rules for National Taxes 39-2 [3]). (Referto the category of “Ratio of indirect ownership” in Reference chart [3].)a.

Where shares or capital contributions that account for 50 percent or more of the issued shares, etc.
of a corporation which is a shareholder, etc. of the other corporation are held by one of the two
corporations（parent/sub-shareholder relations）:
The ratio of the number or amount of shares of or capital contributions to the relevant othercorporation held by the relevant corporation which is a shareholder, etc. out of the issued shares, etc.
of the relevant other corporation (in the case where there are two or more of those corporations which- 8 -are shareholders, etc., the sum of the ratios calculated for each of them);b. Where one corporation or two or more corporations intervene between a corporation which is ashareholder, etc. of the other corporation and the relevant one of the two corporations, and have alinkage with them through holding the issued shares, etc.（multi-layered control relations）:
The ratio of the number of shares or amount of capital contributions to the relevant other corporation
held by the corporation which is a shareholder, etc. out of the issued shares, etc. of the relevant othercorporation (in the case where there are two or more of those corporations which are shareholders,etc. the sum of the ratios calculated for each of them).

【Reference Chart [3]】- 9 -