While this topic isn’t directly about real estate, it’s highly relevant for anyone who already owns property or plans to invest in it as a source of passive income. I’m not speaking as a tax expert, but rather sharing insights based on recent experiences and a detailed discussion with my tax consultant.

What started as a rumor a few years ago has now gained real momentum.
Here are some key points about these tax audits:

1. They appear without warning
On an ordinary day, you may suddenly receive a call from the tax auditors. They might ask you to visit the tax office or, with an appointment, come directly to your home.

2. They already know almost everything
By the time they contact you, they’ve likely accessed all your bank details—not only in Japan, but also in India or any other country where you hold assets. This can include even a small, long-forgotten account in India.

3. They’ve done their math
Any tax payment you missed, even unknowingly, is already on their list. They arrive with calculations in hand, and you are penalized accordingly.

4. The approach is firm but polite
Although the above might raise your blood pressure, remember—this isn’t treated as a criminal offense. Generally, they approach you politely and collect the outstanding tax along with penalties.

5. There’s no escaping it
You don’t get to opt out. According to auditors, we are now liable to pay taxes on assets in India as well, especially if they believe the funds originated from Japan. Whether or not this is fair is debatable, but there’s little room to contest it in practice.

How to Protect Yourself
1. File your ITR in Japan every March (確定申告 / kakuteishinkoku)
For any passive income, filing your annual tax return in March is essential. If you’ve missed filings in the past, go back and correct them. Legalizing your returns as far as possible is key to avoiding penalties later. Remember—when they knock on your door, it’s already too late.

2. File it correctly
Many assume that their year-end adjustment (年末調整 / nenmatsuchosei) by the company is enough, even with passive income. It’s not.
Even the smallest amount of passive income requires filing an ITR, and if you earned passive income in past years, you must keep filing annually—even if you earned nothing this year. When filing, include your salary income as well, so your tax bracket reflects your total income.

3. Go fully legal, especially as your income grows
Some people buy additional properties using personal home loans and rent them out. This can backfire and damage your reputation later. If you’re buying property for passive income, opt for a commercial loan instead. While it might seem large, the income potential often offsets the cost, and it’s safer in the long run.

4. Hire a tax consultant (税理士 / zeirishi)
If your passive income is growing, or you’re unsure about proper filing, hire a tax consultant. They can guide you correctly and handle filings on your behalf.

5. If audited, seek specialized help
If tax auditors have already contacted you, consider working with agencies that specialize in tax audits. They may charge a fee, but they often employ former tax auditors who can help negotiate reductions.

6. Share your story
If you’ve been penalized, remember—it’s not a crime. It simply means you’re among the many who haven’t fully understood Japan’s tax rules. By sharing your experience, you can help others avoid the same pitfalls. Sharing is caring.