A reinvestigation by the tax office concerned or a review by the National Tax Tribunal must be requested within three months after the taxpayer receives a notice of assessment.
If a taxpayer receives a notice of assessment, the taxpayer can either seek reinvestigation by the tax office concerned or directly seek review by the National Tax Tribunal.
Where the taxpayer requests a reinvestigation by the tax office concerned but the issue is not resolved, the taxpayer may request a further review by the National Tax Tribunal. (If the taxpayer seeks a further review by the National Tax Tribunal, the request must be made within one month after the taxpayer receives the tax office's decision.)
A taxpayer who objects to the decision of the National Tax Tribunal may bring the case to a District Court. The tax office concerned cannot, however, bring a suit even if the tax office concerned disagrees with the National Tax Tribunal's decision.
The time it takes to conclude most tax litigation matters in Japan has decreased significantly in recent years, with District Court proceedings generally taking around one-and-a-half to three years. Administrative appeals may be less time-consuming. On average, a reinvestigation by the tax office takes around three months and a review by the National Tax Tribunal takes around one year (in the case of a transfer pricing matter, it may take two to three years).
a. Start: A taxpayer can apply for a mutual agreement procedure (MAP) and a domestic appeal simultaneously. In practice, a taxpayer usually applies for a MAP within three months after receiving a notice of assessment (i.e., similar to a domestic appeal).
b. Conduct of the proceedings: In such cases, however, the taxpayer will usually request a suspension of the domestic appeal until the conclusion of the MAP. This allows the taxpayer to retain the right to a domestic appeal beyond the three-month deadline that begins to run when the taxpayer receives notification of an assessment from the Japanese Tax Authority.The taxpayer may withdraw the domestic appeal application if the MAP is successful or restart the domestic appeal if it is not.
c. Completion of proceedings: The taxpayer may withdraw the domestic appeal application if the MAP is successful or restart the domestic appeal if it is not. Such an approach is taken for two practical reasons:
- MAPs offer a higher probability of resolving disputes than domestic appeals and they can eliminate double taxation; and
- A final judgement in a domestic appeal takes away the flexibility that the competent authority officers would otherwise have in MAP negotiations.
d. Other actions: Since the adoption of the arbitration clause in the OECD Model Tax Convention in 2008, Japan has followed the practice of negotiating for the inclusion of the arbitration clause in its tax treaties (typically, in Japan's tax treaties containing the arbitration clause, a taxpayer may request for the arbitration of tax issues that are not solved within two years after the initiation of a MAP request).