According to a draft proposal, the Japanese government is contemplating withholding taxes on the casino winnings of non-resident foreigners.
A withholding tax system is preferred by the authorities because it is a lot harder to keep a track of the foreign visitors once they leave the Japanese borders. Other nations like South Korea and the United States have similar withholding tax systems in place for casino winners.
Under this proposal, which is similar to the process in place for horse racing, the Ministry of Finance plans to make it compulsory for all casino operators to keep a detailed record of all chip purchases. Casinos will also be required to keep an overall win-loss record for each player.
the Ministry of Finance plans to make it compulsory for all casino operators to keep a detailed record of all chip purchases
The withholding tax could then be applied based on the figure remaining when the value of purchased chips is compared to the number of chips subsequently converted to cash.
By keeping detailed records, it prevent people from pretending that the chips they are cashing out are just those that they originally cashed in for. It also stops them from giving chips to loss-making friends that are inside the facility and therefore bypassing the withholding tax.
Could be introduced in 2021
Details of this proposal will be outlined in tax reforms for the fiscal year 2020. The ruling parties will be finalizing these tax reforms by the close of December 2020. These new tax rules would then be introduced until at least April 2021.
One government official spoke about the need for clarity in the early stages of the casino industry in Japan, stating:
If we do not decide on a certain framework in advance, it will affect the investment decisions of operators.”
No indication has been given as to what the tax rate on casino winnings will be for residents and non-residents.
Burgeoning casino sector
For many years, casino gambling was not legal in Japan. However, in recent times, both regular commercial casinos and integrated resort casinos have been legalized.
Hokkaido was previously on this list of candidates, but it pulled out of the race at the end of November. The main reason for this withdrawal was the potential environmental impact the multibillion dollar project will have. There are also extensive concerns about problem gambling as a result of these new facilities.
As part of these resort complexes, there will be massive hotels, convention centers, conference areas, and many other leisure and entertainment facilities. The plan is for the license application process to be completed by mid-2021.
Several global casino companies are interested in becoming the operator for one of the three resort casino licenses.