Ecovis Malta

Tax exemption for non-resident dependents

The Japanese government has changed the tax laws exempting non-resident dependents from tax. The law came into force on 1 January 2023. The Ecovis experts explain the details.

Background

Taxpayers in Japan are allowed to make a deduction for non-resident dependents from their income. A non-resident dependent is a relative, other than the spouse, who is 16 years of age or older, supported by the taxpayer as part of the taxpayer’s household and whose annual income does not exceed JPY 480,000 (or gross income of JPY 1,030,000 in the case of salary only). The Japanese tax office can verify the above conditions for resident dependents in Japan but is hardly able to check non- resident dependents.

In the 2016 tax reform, a revision was made for a taxpayer to submit or present documents confirming that a non-resident dependent is the taxpayer’s relative, and documents to confirm that the taxpayer has paid the relative’s living or educational expenses. The documentation should be made for each dependent and verified individually. As the income limit for the exemption was based on Japanese domestic source income only, there were still problems with non-resident dependents who received a large amount of income abroad, but no income in Japan. To overcome this, the 2020 tax reform (effective 1 January 2023) more narrowly revised the category of applicable non-resident dependents.

We can support you in getting the tax exemption for non-resident dependents.

Kazuhiko Chiba, President, ECOVIS APO, Tokyo, Japan

The tax exemption for non-resident dependents from 2023

1. Category of the applicable dependents
   Generally, there is no tax exemption for non-resident dependents who are over 30 years of age.
2. Exceptions
   There are exceptions to the general rule above for the following, as these would be less likely to earn any income without support:
   • Persons studying abroad who no longer have a domicile or residence in Japan.
   • Disabled persons
   • Persons who received more than JPY 380,000 from the taxpayer to cover living or educational expense during the year
3. Documents required
   From 1 January 2023, taxpayers applying for the exemption for their non-resident dependents must submit or present the following documents:

   Category of age etc. of non-resident relative		When submitting dependent declaration form	When submitting year-end tax adjustment documents
   16 or older / under 30, or 70 and above		Documents confirming relative status	Documents confirming expenses
   30 or older / under 70	1) studying abroad	Documents confirming relative status and visa documents for studying abroad	Documents confirming expenses
   	2) disabled person	Documents confirming relative status	Documents confirming expenses
   	3) persons receiving more than JPY 380,000 in support	Documents confirming relative status	Documents confirming payment of JPY 380,000 or more
   	Person other than ①　②　③	Not qualified for exemption

For further information please contact:

Kazuhiko Chiba, President, ECOVIS APO, Tokyo, Japan
Email: kazuhiko.chiba@ecovis.jp

Supporting Hydroline Oy in establishing a company and expanding in Poland

Hydroline Oy is a leading manufacturer of world-class heavy-duty hydraulic cylinders. The company started as family business in 1962 in Vuorela, Finland.  Hydroline Oy’s customers include the most renowned machine and device manufacturers in mining, construction, agriculture, maintenance, load handling, forestry, hoisting, recycling, defense, energy and other industries.

In 2012, company decided to expand its operations abroad and to enter the Polish market. The same year, Hydroline Poland was established in Stargard. The first production facility had an area of around 4,000 sqm and production was launched in 2014. Thanks to dynamic growth, a new production facility was built in Stargard in 2019, three times as large as the original one. Last year, Hydroline Poland enjoyed 60% growth.

Hydroline became a client of Ecovis Legal Poland in 2012, needing a partner to support them in their expansion to Poland. Hydroline received a lead to contact Ecovis Legal Poland from one of Ecovis Legal Poland’s other Finnish clients.

During the cooperation, which has lasted for more than 10 years now, Ecovis Legal Poland has supported Hydroline in many interesting and challenging projects.

• Establishing the company, providing support and assistance with negotiations aimed at obtaining for the new company a decision on support under a new investment tax incentive scheme (CIT exemption based on the value of new investment);
• Supporting the acquisition of a land plot for the production facility;
• Drafting the general contractor agreement, project management contract and other legal documents in course of developing the facility;
• Supporting the company with the implementation of local employment law;
• Advising the company and leading negotiations in a sale and leaseback transaction involving the company’s real estate;
• Advising the company and leading negotiations in a BTS (Build-to-Suit) lease agreement for the new production facility;
• Providing the company with ongoing legal and tax advice during day-to-day operations, including restructuring of the company’s capitals and the tax aspects of such operations;
• Acting as a trusted advisor on a range of strategic and operational matters.

Our successful cooperation continues and new challenging projects are expected soon.

Company formation in Germany: Establishing a limited liability company online

In August 2022 it became possible to obtain an online appointment with a notary to establish a limited liability company (in German: GmbH). For foreign companies, for example from China, this brings numerous advantages. The Ecovis experts know how online formation works in Germany.

EU directive 2019/1151 obliges Member States to make online company formation possible. Germany has now complied with this directive.

Why online?

The most obvious advantage is that there is no need to be present. There are therefore no travel costs and the process can be altogether more convenient. It saves time and money. In particular, foreign investors no longer need to enter the country. This is of great benefit to Chinese entrepreneurs, for example, due to the current political and pandemic restrictions. However, a German bank account is still required.

The disadvantages of online company formation

There are restrictions during the establishment process if it is handled online. With online foundation, it is not possible to deposit share capital by providing material assets. However, in practice, this does not play a major role. Only registered merchants (eingetragene Kaufleute) and limited liability companies can be established online. Furthermore, there is no major time saving with online foundations for foreign shareholders, as opening a bank account can still take some time. There is a charge of EUR 25 for online appointments.

We have many years of experience and would be happy to support you in founding a company in Germany.

Richard Hoffmann, Lawyer, Ecovis Heidelberg, Germany

How does the process work?

The notarisation process is carried out by video conference. Only the notary association’s video communication system (for transmitting legal documents) is allowed here. The identity of the parties is verified using the identity card eID-function. The notary still carries out his/her essential duties, such as checking the capacity of the contract, reading out the wording of the contract, as well as his duty of checking the contract and instructing the parties. Sample transcripts can be used, but these do not reduce the costs of foundation. Representation by power of attorney is still possible. However, the notary can refuse the notarisation if he/she cannot verify the identity of the parties.

Online limitations

Currently, only limited liability companies can be established online. Increasing capital and other corporate actions outside the foundation process are not possible. The same applies to shareholder meetings and resolutions. However, in future more will be possible. Establishing a limited liability company with material assets, changing the articles of association as well as the foundation of non-commercial associations are planned to become available by 1 August 2023. Other contracts requiring notarisation, e.g. in the areas of family law and the law of succession will most likely still require attendance in person.

For further information please contact:

Richard Hoffmann, Lawyer, Ecovis Heidelberg, Germany
Email: richard.hoffmann@ecovis.com