The Japanese government is considering implementing a tax on money won by foreign visitors to the nation’s casinos. In a decision that could have major implications for Japan’s IR industry, the ruling party has flagged applying the withholding tax in order to prevent tax evasion.
It is believed that operators will have a duty to record wins and losses of each game and the purchase price of chips used by players in their casino. This will be included in the 2020 tax reforms to be drafted in December, with the aim of realizing tax reform by 2021.
Further, tax inquiries will be difficult once a foreign visitor has left Japan, why is why introduction of a withholding tax is being considered.
Profits earned at a casino will be taxed in a similar way to horseracing in Japan and apply to the difference between the purchase price of chips and the amount redeemed when leaving the venue.
In Japan, taxation of gambling profits, such as those from horse racing, is treated as temporary income. Temporary income is income generated in a fashion other than continuing activities for the purpose of profit, not in exchange for labor, services or transfer of assets.
In the government’s plan, tax would not be imposed on the results of each game but on the difference of chips purchased at the venue and money exchanged on exit. However, if this is conventional temporary income, the losses of a day will not be recorded, and only profits on winning days will be taxed. As a result, there is a possibility tax may be imposed even if annual winnings are negative.