National Tax Collection Act

Where a provisional registration or provisional recording based on a contract for establishment of security interest by use of provisional registration prescribed in Article 1 (Purpose) of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (Act No. 78 of 1978) (hereinafter referred to as a "provisional registration for security") has been made, on or before the statutory due date for tax payment, etc. of national tax, on a taxpayer's property with the taxpayer as the person obliged to register (including a person obliged to record), that national tax is collected from the proceeds of realization next after the claim secured by that provisional registration for security.

Where, on a taxpayer's property for which a provisional registration for security has been made, there is a statutory lien listed in the items of Article 19, paragraph (1) (Priority of Statutory Liens for Preservation of Real Property, etc.), or there has been, since on or before the statutory due date for tax payment, etc. of national tax, a statutory lien listed in the items of Article 20, paragraph (1) (Priority of Statutory Liens for Lease of Real Property, etc. Existing on or before the Statutory Due Date for Tax Payment, etc.), or a pledge or mortgage has been established or a provisional registration for security has been made on or before the statutory due date for tax payment, etc. of the national tax, that national tax is collected, from the proceeds of realization relating to the settlement money prescribed in Article 3, paragraph (1) (Settlement Money) of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (including where applied mutatis mutandis pursuant to Article 20 (Application Mutatis Mutandis to Contracts Whose Object Is a Right Other Than Ownership of Land, etc.) of that Act), next after the claims secured by those statutory liens, pledges and mortgages whose rights have been exercised under the provisions of Article 4, paragraph (1) (Subrogation) of that Act (including where applied mutatis mutandis pursuant to Article 20 of that Act), and by the subsequent provisional registrations for security prescribed in Article 4, paragraph (2) of that Act whose rights have been exercised under the provisions of Article 4, paragraph (1) of that Act as applied mutatis mutandis pursuant to Article 4, paragraph (2) of that Act (including where applied mutatis mutandis pursuant to Article 20 of that Act).

The provisions of Article 17, paragraph (1) (Priority of Pledges or Mortgages Created before Acquisition) apply mutatis mutandis where a taxpayer has acquired property on which a provisional registration for security has been made, and the provisions of the preceding Article (excluding paragraph (3)) apply mutatis mutandis where a taxpayer who does not have other sufficient property to appropriate to national tax has transferred property on which the taxpayer made a provisional registration for security after the statutory due date for tax payment, etc. of that national tax, respectively.

A provisional registration and a provisional recording based on a contract for establishment of security interest by use of provisional registration prescribed in Article 1 of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration, under which the monetary obligation to be extinguished is not specified at the time of the contract, have no effect in the delinquent tax collection procedure for national tax.

Where a taxpayer is delinquent in paying national tax, if there is property that the taxpayer has transferred and that has become the object of security by that transfer (hereinafter referred to as "property transferred as security"), the taxpayer's national tax may be collected from the property transferred as security only where it is found that the national tax to be collected would still be insufficient even if the delinquent tax collection procedure were executed against the taxpayer's property.

When the district director intends to collect under the provisions of the preceding paragraph, the district director must give notice, by a document stating the amount to be collected and other necessary matters, to the right holder of the property transferred as security (hereinafter referred to as "holder of property transferred as security"). In this case, the district director must notify that fact to the district director competent over the location of the holder's domicile or residence (including offices and places of business; the same applies hereinafter) and to the taxpayer.

If the amount to be collected has not been paid in full by the day on which 10 days have elapsed from the day on which the written notice under the preceding paragraph was issued, a collection official may execute the delinquent tax collection procedure against the property transferred as security, deeming the holder of property transferred as security to be a secondary taxpayer. In this case, the provisions of Article 32, paragraphs (3) through (5) (General Rules on Secondary Tax Liability) and Article 90, paragraph (3) (Restrictions on Realization) apply mutatis mutandis.

Where property transferred as security has been seized as the taxpayer's property referred to in paragraph (1), the delinquent tax collection procedure may be continued by treating the seizure as seizure under the provisions of the preceding paragraph, only where the requirements of paragraph (1) are met. In this case, the district director must without delay give the notice and make the notification under paragraph (2).

When continuing the delinquent tax collection procedure under the provisions of the preceding paragraph, if the property transferred as security is property listed in the following items, the district director must notify the person specified in each such item that the delinquent tax collection procedure will be continued by treating the seizure made as seizure of the taxpayer's property as seizure under the provisions of paragraph (3).

Movables in the possession of a third party (excluding property subject to the provisions of Article 70 (Seizure of Ships or Aircraft) or Article 71 (Seizure of Motor Vehicles, Construction Machinery or Small Vessels); the same applies hereinafter) or securities: the third party in possession of the movables or securities;

Property subject to the provisions of Article 62 (Procedures for Seizure and Time of Taking Effect) or Article 73 (Procedures for Seizure of Telephone Subscription Rights, etc. and Time of Taking Effect) (excluding property for which registration is required for the transfer of rights in it): a third-party debtor or a person equivalent thereto (hereinafter referred to as "third-party debtor, etc.").

When continuing the delinquent tax collection procedure under the provisions of paragraph (4), if there is a known person among those listed in Article 55, item (i) or item (iii) (Notice of Seizure to Pledgees, etc.), the district director must notify them that the delinquent tax collection procedure will be continued by treating the seizure made as seizure of the taxpayer's property as seizure under the provisions of paragraph (3).

Where, after notice under the provisions of paragraph (2) has been given or seizure subject to the provisions of paragraph (4) has been made, the claim secured by the transfer of the taxpayer's property is extinguished by default or for any other reason except performance (including where a contract of repurchase, reservation of resale or any similar contract has been concluded with respect to the property transferred as security and that contract loses effect for a reason other than performance of the contract, such as lapse of a time limit), the provisions of paragraph (3) apply even in that case, deeming the property to continue to exist as property transferred as security.

The provisions of paragraph (1) do not apply where, on or before the statutory due date for tax payment, etc. of national tax, there is registration of transfer of rights relating to a transfer made for the purpose of security, or where the holder of property transferred as security proves, by the day before the decision to sell the property, that the property had become property transferred as security on or before the statutory due date for tax payment, etc. of the national tax. In this case, the provisions of Article 15, paragraph (2), second sentence and paragraph (3) (Proof of Pledges Having Priority) apply mutatis mutandis.

A holder of property transferred as security who is subject to the provisions of paragraph (1) is deemed to be a taxpayer for the purpose of applying the provisions of Chapter X (Penal Provisions).

Where there is property transferred as security for which registration of a sale with a special agreement of repurchase, provisional registration (including provisional recording; the same applies hereinafter) for the preservation of a claim under a reservation of resale, or other similar registration (hereinafter in this Article referred to as "registration of repurchase right, etc.") has been made, and the right holder of the registration of repurchase right, etc. is a delinquent taxpayer, the seized right pertaining to the registration of repurchase right, etc. and the property transferred as security with that registration of repurchase right, etc. that has been seized under the provisions of paragraph (3) of the preceding Article may be realized together.

Beyond what is prescribed in the preceding Article and the preceding paragraph, matters necessary for the collection of a taxpayer's national tax from property transferred as security are specified by Cabinet Order.

Where, in a compulsory liquidation procedure, national tax competes with other national tax, local tax, or public charges (hereinafter in this Article referred to as "local tax, etc.") and other claims (hereinafter in this Article referred to as "private claims"), and under the provisions of this Chapter, the Local Tax Act, or other Acts, the national tax takes priority over the local tax, etc., and the private claims are subordinate to the local tax, etc. and take priority over that national tax, or the national tax is subordinate to the local tax, etc., and the private claims take priority over the local tax, etc. and are subordinate to that national tax, the distribution of the proceeds of realization is as provided in the following items.

Where there are the expenses or expenses for the delinquent tax collection procedure prescribed in Article 9 (Priority of Expenses of Compulsory Liquidation Procedure) or Article 10 (Priority of Direct Expenses for the Delinquent Tax Collection Procedure), the national tax prescribed in Article 11 (Priority of Consumption Tax, etc. in the Case of Compulsory Liquidation) (including local tax that has a priority right equivalent thereto under the provisions of the Local Tax Act), claims subject to the application of the provisions of Article 21 (Priority of Rights of Retention), claims subject to the application of the provisions of Article 59, paragraph (3) or (4) (Priority of Prepaid Rent) (including the case where applied mutatis mutandis pursuant to Article 71, paragraph (4) (Provisions Applied Mutatis Mutandis to Motor Vehicles, etc.)), or claims subject to the application of the provisions of Article 19 (Priority of Statutory Liens for Preservation of Real Property, etc.), the proceeds are to be applied to each of these in that order;

With respect to the national tax, local tax, etc., and private claims (excluding those subject to the application of the provisions of the preceding item), the total amounts to be applied to the national tax, local tax, etc., and private claims are each determined by applying the provisions of this Chapter, the Local Tax Act, or other Acts in sequence, starting with the one whose statutory due date for tax payment, etc. (including the corresponding due date for payment, etc. of local tax or public charges) or whose time of creation, registration, transfer, or establishment is the earliest;

The total amount to be applied to the national tax and local tax, etc. determined under the provisions of the preceding item is applied in sequence to the national tax and local tax, etc. in accordance with the provisions of Article 8 (Principle of Priority of National Tax) or Articles 12 through 14 (Priority of National Tax by Prior Seizure, etc.), or the provisions of the Local Tax Act or other Acts corresponding to these; and

The total amount to be applied to the private claims determined under the provisions of item (ii) is applied in sequence to the private claims in accordance with the provisions of the Civil Code (Act No. 89 of 1896) and other Acts.