What is SBIST?
Currently, the two most common ways for foreign investors to invest in Japanese real estate are the GK–TK scheme and direct investment. However, the GK–TK scheme requires investors to establish a corporation, and it incurs a withholding tax of 20.42% on all distributed profit, as well as various professional fees. With direct investment, the tax rate is 40%, which is nearly double that of the GK–TK scheme.
Our SBIST scheme is different. It does not require the establishment of a corporation, therefore it is not subject to Japanese corporate taxes. Also, the procedures for setting investors up to invest through the scheme are simpler than the GK–TK scheme. In addition, if clients meet all applicable conditions — including having a form submitted to claim the benefits of the tax treaty and transferring nearly all profits abroad annually — the tax rate on profit distribution can be reduced to 15% or even 10%, based on the tax treaty between Japan and the investor’s country of residence.
Taxation on different real estate investment schemes:
Direct investment
40
%
GK-TK
20.42
%
SBIST
10
%
–
15
%
In one example, an investment of approximately 110 million yen resulted in a profit of 13 million yen when the land was sold a few months later. If an individual Japanese investor had made a similar investment, they would have been taxed about 5.2 million yen on the profit as income tax. So, a foreign individual investor using the SBIST scheme reduced the withholding tax to about 1.3 million yen, allowing them to retain a larger portion of the profit.
SBIST is an attractive scheme offering significant tax advantages for both individual and corporate foreign investors.
The Seven Phases of the SBIST Scheme
Right now, the majority of our clients investing through the SBIST scheme are overseas investors residing in Mainland China, Hong Kong, Macau, Taiwan, and Singapore. However, we also offer this scheme to investors residing in other countries, as long as those countries have diplomatic relations and a tax treaty with Japan.
The SBIST scheme has seven phases, from an investor’s initial consultation with our company to the point when they can receive profit from their investment. We appreciate the cooperation of all potential investors throughout each phase.
1
Undergo a pre-contract review
A representative from CastGlobal Trust meets with an interested investor to address their concerns and prepare thoroughly before they invest in the SBIST scheme. We also need to conduct an anti-money laundering check. Find out more
2
Sign a basic money trust agreement
Once the identity of interested investors is confirmed and they have a clear understanding of the SBIST scheme, they sign all the necessary contracts and agreements. Find out more
3
Deposit trust funds in a trust account
After CastGlobal Trust opens a trust account in the investor’s name, the investor deposits the amount of money they want to invest. Find out more
4
Instruct us to purchase real estate
We can suggest attractive properties for investors to invest in, then they tell us where they would like to invest their money. Find out more
5
Pay taxes and public dues
When investors are invested in a property, they are required to pay taxes, including on the profits they earn. The tax rates differ depending on the country they are investing from. Find out more
6
Receive and transfer profits
After a Tax Treaty Notification form is submitted, investors are eligible to receive profits from their investment and must transfer at least 97.5% of those profits outside of Japan at the end of the SBIST fiscal year. Find out more
7
Reinvest or exit the SBIST scheme
After profits have been distributed, investors can discuss new SBIST projects with a representative of CastGlobal Trust. Find out more
Important information
Main Risks of Investment
The following is a list of the main risks associated with investing in SBIST. However, these are not an exhaustive list of all risks, and risks other than those listed may exist. If any of these risks materialize, SBIST investors may suffer losses such as a decline in the price of SBIST beneficial interests, a decline in income from SBIST beneficial interests, or profits from SBIST beneficial interests falling below the amount (principal amount) initially placed in the monetary trust.
- Risks Related to Investment Properties
- Since SBIST invests in real estate in Japan, which is subject to price fluctuations, fluctuations in the real estate market may cause the value of SBIST to decline, resulting in a loss of the principal amount invested.
- SBIST’s income depends on the income generated by the real estate it invests in and may fluctuate due to factors such as rent levels and vacancy rates. Similarly, SBIST’s expenses are dependent on the expenses of the real estate it invests in, and may vary due to repair costs or damages from disasters.
- Risks Related to SBIST Beneficial Interests
- SBIST beneficial interests may not be transferred without the prior consent of the trustee. Furthermore, SBIST beneficial interests are not listed on a stock exchange; therefore, even if you attempt to sell your SBIST beneficial interests, you may not be able to sell them at the time and in the manner you desire.
- The existence, amount and payment of trust dividends and principal redemption are not guaranteed with respect to SBIST beneficial interests.
Fees, Compensation, and Other Costs Borne by Customers
When investing in SBIST, customers are required to bear the following fees:
- Trust Contract Execution Fee: 0.2% of the initial monetary trust amount
- Fee for Purchasing Investment Properties: 0.1% of the purchase price of the investment property
- Annual Management Fee: 0.1%/per year of the initial monetary trust amount
- Fee for Selling Investment Properties: 0.1% of the sales price of the investment property
In addition to the above, there may be other costs depending on the specific investment situation.