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Reduce Taxes in Japan by Investing in Art

multicolored abstract painting 1266808 scaled - Reduce Taxes in Japan by Investing in Art

In Japan artwork valued lower than one million yen per item can be deducted from corporate taxable income via depreciation. The cost of the artwork has to include auction fees and any other expenses incurred, such as delivery fees, with the purchase.

The artwork can be depreciated over eight years or 15 years depending on what material it is constructed from. If it’s made mostly of metal, it can be depreciated over 15 years and if is made from wood or other materials it can be depreciated over eight years.

The depreciation has to be calculated based on the number of months you possess the art for a given year. For example, if you purchased an art piece in September for 800,000 yen with an auction fee of 15%, you will only be allowed to expense 38,333 yen (if you adopt the straight-line method. There are other methods but this one is the easiest to use in an example). The calculation is as follows: (800,000 + 800,000 * 15% (fee)) / 8 years * 4/12 months

Tax Impact

This probably won’t make a big impact on you income statement or on your taxes. But in the long run, after eight years you will have an “invisible” asset which is sellable on your balance sheet. If you continue to buy one piece of artwork valued at one million yen every year, and your business continues for 20 years, you will have invisible cashable assets of 20 million yen in your vault. Isn’t that something to consider.

If you are in the 50 percent tax bracket (including the resident tax and social insurance), you are reducing your tax and able to purchase art for effectively half the price.