National Tax Collection Act

If any of the following items applies, a collection official must seize the property of the delinquent taxpayer for the delinquent taxpayer's national tax:

When a delinquent taxpayer has received a demand and has not paid in full the national tax pertaining to that demand by the day on which 10 days have elapsed counting from the day on which the demand letter was issued;

When a taxpayer has not paid in full a national tax listed in the items of Article 37, paragraph (1) (Demand) of the Act on General Rules for National Taxes by its due date for payment (for a national tax for which an advance demand has been made, the due date pertaining to that demand).

If, after the due date for payment of a national tax and by the day on which the 10 days prescribed in item (i) of the preceding paragraph have elapsed, a fact falling under any of the items of Article 38, paragraph (1) (Advance Demand) of the Act on General Rules for National Taxes arises with respect to a delinquent taxpayer who has received a demand, a collection official may seize the property immediately.

In the case where paragraph (1) is applied to a secondary taxpayer or a guarantor, the term "demand letter" in that paragraph is deemed to be replaced with "written payment reminder".

Property other than that necessary for collecting national tax may not be seized.

If there is no prospect that the value of the property that may be seized will exceed the total amount of the expenses for the delinquent tax collection procedure pertaining to the seizure and the amounts of other national taxes, local taxes, and other claims that take priority over the national tax to be collected, that property may not be seized.

In seizing the property of a delinquent taxpayer (including a holder of property transferred as security; the same applies hereinafter except in Articles 75, 76 and 78 (Property Exempt from Seizure)), a collection official must endeavor not to harm the rights that a third party holds in that property, so long as doing so does not impede the execution of the delinquent tax collection procedure.

Where property that is the subject of a pledge, mortgage, statutory lien (limited to a statutory lien listed in the items of Article 19, paragraph (1) (Statutory Liens for Preservation of Real Property, etc.) or the items of Article 20, paragraph (1) (Statutory Liens for Lease of Real Property, etc.); the same applies hereinafter except in this paragraph), right of retention, right of lease, or other right of a third party (excluding statutory liens other than those statutory liens; the same applies hereinafter) has been seized, that third party may, by the date of the public auction notice for that property (or, where it is to be sold by private contract, the date of that sale), request the district director to substitute the seizure, on the ground that the delinquent taxpayer has other property that is easy to realize and is not the subject of rights of other third parties, and that the entire amount of the delinquent taxpayer's national tax can be collected from that property.

When a request under the preceding paragraph is made, the district director is to substitute the seizure if the district director finds the request appropriate, and must notify that third party to that effect if the district director does not find the request appropriate.

Where notice under the preceding paragraph has been given, and the third party who received the notice has, by the day on which seven days have elapsed counting from the day of receiving the notice, applied for the realization of the property that the third party requested be seized under the provisions of paragraph (1), the property subject to the third party's right prescribed in that paragraph may not be realized unless that property has been seized and put up for realization, except where that property is extremely difficult to realize or is subject to the right of another third party.

In the case under the preceding paragraph, if the district director does not seize the property relating to the application and put it up for realization within two months from the day of the application under that paragraph, the district director must release the seizure of the property subject to the third party's right prescribed in paragraph (1); provided, however, that this does not apply where a provision of an Act relating to national tax under which realization may not be carried out is applicable.

The seizure under paragraph (2) or the preceding paragraph may be carried out notwithstanding any provision of an Act relating to national tax under which the execution of the delinquent tax collection procedure may not be newly carried out.

When seizing the property of an heir for the national tax of the decedent, a collection official must endeavor to seize the inherited property first, to the extent that doing so does not hinder the execution of the delinquent tax collection procedure.

Where the heir's own property has been seized for the national tax of the decedent, the heir may request the district director to substitute the seizure, on the ground that the heir holds other inherited property that is easy to realize and is not subject to the rights of third parties, and that the entire amount of that national tax can be collected from that property.

When a request under the preceding paragraph is made, the district director is to substitute the seizure if the district director finds the request appropriate, and must notify that heir to that effect if the district director does not find the request appropriate. In this case, the provisions of paragraph (5) of the preceding Article apply mutatis mutandis.

The effect of seizure extends to natural fruits arising from the property that has been seized (hereinafter referred to as "seized property"); provided, however, that where the delinquent taxpayer or a third party is able to use or derive profit from the seized property, this does not apply to natural fruits arising from that property (excluding natural fruits not collected by the time of the transfer of rights through the realization of the property).

The effect of seizure does not extend to legal fruits arising from seized property; provided, however, that this does not apply to interest after the seizure in the case where a claim has been seized.

The provisions of Article 15 (Security Provisional Registration in Cases of Compulsory Auction, etc.) of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (including as applied mutatis mutandis pursuant to Article 20 (Application Mutatis Mutandis to Contracts Concerning Rights Other Than Ownership of Land, etc.) of that Act) apply mutatis mutandis to the case where property with a provisional registration for security has been seized. In this case, the phrase "that decision" in Article 15 of that Act is deemed to be replaced with "that seizure", and the phrase "is based on a petition" is deemed to be replaced with "is one".

Where seized property is covered by non-life insurance, or is the subject of mutual aid under Article 9-7-2, paragraph (1) (Fire Mutual Aid Business) of the Small and Medium-Sized Enterprise Cooperatives Act (Act No. 181 of 1949) or other similar mutual aid under the provisions of an Act, the effect of the seizure extends to the right to receive payment of insurance proceeds or mutual aid proceeds; provided, however, that the seizure cannot be asserted against the insurer or the mutual aid business operator unless notice that the property has been seized is given to them.

Where a collection official has received payment of the insurance proceeds or mutual aid proceeds under the preceding paragraph relating to the seizure, and the property was the subject of a statutory lien, pledge, or mortgage at the time the accident relating to that insurance or mutual aid occurred, the holder of the statutory lien, the pledgee, or the mortgagee is deemed to have made the seizure before the payment, for the purpose of applying the proviso to Article 304, paragraph (1) (Subrogation of Statutory Lien) of the Civil Code and other provisions that require the seizure of the right to receive payment of the insurance proceeds or mutual aid proceeds before the payment in order to exercise those rights.

When a collection official has seized the property of a delinquent taxpayer, the official must prepare a seizure record and, where the property is any of the following, deliver a certified copy of it to the delinquent taxpayer.

Movables or securities;

Claims (excluding telephone subscription rights, rights of lease, property subject to the provisions of Article 73-2 (Procedures for Seizure of Book-Entry Corporate Bonds, etc. and Time of Taking Effect), and other claims that cannot be collected; the same applies hereinafter in this Chapter); or

Property subject to the provisions of Articles 72-2 through 73-2 (Procedures for Seizure of Specified Electronically Transferred Property Rights, etc. and Time of Taking Effect).

When property listed in the following items has been seized, the district director must notify those who are known among the persons listed in the relevant item to that effect and of other necessary particulars.

Property that is the subject of a pledge, mortgage, statutory lien, right of retention, right of lease, or other right of a third party (excluding rights relating to a provisional registration for security): the persons who hold these rights

Property with a provisional registration: the right holder of the provisional registration

Property that has been provisionally seized or subject to a provisional disposition: the court of preservative execution or the court enforcement officer that carried out the provisional seizure or provisional disposition

Seizure of movables or securities is carried out by a collection official taking possession of the property.

The effect of the seizure under the preceding paragraph arises at the time the collection official takes possession of the property.

When a collection official has seized money, the national tax relating to the seizure is deemed to have been collected from the delinquent taxpayer to that extent.

When securities have been seized, the collection official may collect the monetary claim relating to those securities.

When a collection official has collected money under the provisions of the preceding paragraph, the national tax relating to the seizure is deemed to have been collected from the delinquent taxpayer to that extent.

Movables or securities of a delinquent taxpayer that are in the possession of a third party other than a relative or other person with a special relationship cannot be seized if that third party refuses to deliver them.

Where there are movables or securities under the preceding paragraph and the third party under that paragraph refuses to deliver them, the district director may, only where it is found that the delinquent taxpayer has no other property that is easy to realize and from which the entire amount of the national tax relating to the delinquency can be collected, order the third party under that paragraph in writing, designating a time limit, to deliver the movables or securities to a collection official. In this case, the district director who gave the order must notify the delinquent taxpayer to that effect.

When the movables or securities relating to the order under the preceding paragraph have been delivered to a collection official, or when the third party who received the order under that paragraph does not deliver them to a collection official by the designated time limit, the collection official may, notwithstanding the provisions of paragraph (1), seize those movables or securities.