Tax Authority Takes Action Against Defaulted Taxpayers

A Stern Warning to Non-Paying Taxpayers

The National Tax Agency (NTA) has issued a stern warning to taxpayers who have defaulted on their tax payments. The agency is taking swift action to collect the owed taxes and is prepared to take severe measures against those who fail to comply.

Consequences of Non-Payment

According to the NTA’s guidelines, if a taxpayer fails to pay their taxes within 50 days of the original due date:

• A collection letter will be sent
• If payment is not made despite this demand, a disposition for non-payment will be instituted and the taxpayer’s assets may be seized

The tax authority has the power to seize assets, including claims to third parties, such as funds in bank accounts. The proceeds from these seizures will be used to pay off the defaulted tax, with any remaining amount returned to the taxpayer or distributed among other creditors.

Penalties for Non-Compliance

The NTA also imposes penalties on taxpayers who fail to comply with tax laws. These penalties can include:

• Additional taxes
• Fines
• Imprisonment

Penalties are imposed for:

• Underreporting of taxable income
• Failure to file a tax return
• Failure to pay withholding tax

The amount of the penalty is calculated based on the difference between the reported and unreported taxes, ranging from 5% to 40% of the owed tax.

Defences Against Penalties

Taxpayers who have been imposed with penalties may be able to defend themselves by showing that they had:

• Reasonable grounds for their non-compliance

However, mere misunderstanding or reliance on professional advice is not sufficient to constitute reasonable grounds.

Criminal Consequences

The NTA also has the power to prosecute taxpayers who have committed tax evasion or obstructed a tax audit. Criminal penalties can include:

• Imprisonment of up to 10 years
• Fines of up to ¥500,000

Recent years have seen an increase in enforcement action against tax evaders.

Recent Enforcement Record

In 2018, the NTA conducted:

• Approximately 73,579 field examinations at individual taxpayers’ sites
• 99,000 field examinations at corporate taxpayers’ sites

These examinations revealed significant amounts of unreported income, highlighting the importance of compliance with tax laws.

Important Dates

The information above is accurate as of July 8, 2020.