The Japanese government is considering the introduction of a withhold tax on winnings by non-resident foreigners gambling at the country’s yet-to-be-built casinos, sources told local media on Sunday.
It is understood that Japanese lawmakers are considering a tax system of this kind to facilitate any tax probes and investigations that will occur in future. Other countries with thriving casino gaming industries have already implemented a withhold tax on foreigners’ casino winnings, with some of those countries being the United States and South Korea.
Japan legalized casino gambling in December 2016 with the passage of the Integrated Resort Promotion Bill. That measure was the first of a two-phase plan for the authorization of casinos within larger integrated resorts. Lawmakers passed a second bill – the IR Implementation Bill – to lay out the principles under which the nation’s gaming industry would be governed.
However, the Diet, known to be Japan’s central government, is yet to announce the locations that would host up to three casino resorts with dedicated gaming floors and make other important decisions that would pave the way for establishing the nation’s gaming industry. All those decisions are expected to be announced in the next one to two years.
The Withhold Tax on Winnings
Sources said Sunday that under the system currently considered by Japanese lawmakers, casino winnings will be taxed in a manner similar to horse racing, one of the few legal gambling options on the territory of Japan.
Japan will thus levy a tax on the difference between the value of the chips purchased by a non-resident foreigner and the amount of chips converted back into cash.
In addition, country lawmakers mull introducing rules that would make it compulsory for operators of local casinos to keep records on chip purchases and win-loss results. That requirement will aim to prevent casino patrons from pretending that chips they have won are ones they had purchased, or from leaving some of their chips with a friend on the gaming floor to reduce the amount of winnings declared.
The proposed tax regime is expected to be included in the outline of tax reforms for the upcoming fiscal year. The plan is expected to be finalized by lawmakers by the end of the month and to be implemented after April 2021, sources also revealed.
An unnamed government official told local media that deciding on a certain framework in advance was of particular importance as “it will affect the investment decisions of operators” that will be bidding for the three licenses up for grabs.
So far, the city and prefecture of Osaka, Yokohama, Wakayama Prefecture, Nagasaki Prefecture as well as Tokyo, Chiba, and Nagoya have expressed interest in hosting one of Japan’s first three integrated resorts. The large properties, which aside from casinos will also include hotels, MICE facilities, food and beverage outlets as well as recreation, retail and entertainment amenities, are expected to open doors in the mid-2020s.
Up until recently, Hokkaido also considered itself an interested party in the casino race, but its Governor, Naomichi Suzuki, announced on Friday that it is dropping from the heating competition due to concerns over the environmental impact of a potential casino resort.
Hokkaido officials previously pitched a plan for the development of a property of this kind near Lake Utonai, not far from the City of Tomakomai. The lake is a wildlife sanctuary and is on the Ramsar Convention list of internationally important wetlands.
Source: Government considering applying withholding tax to casino winnings of non-resident foreigners, The Japan Times
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