Accession in Civil Law and Property Taxes

Focusing on a case in which a tenant attaches a fixed asset to a building owned by a landlord, this article examines who is liable for tax on that fixed asset under local tax law, and whether the fixed asset is a building or a depreciable asset. The article will examine the issue first by clarifying the concept of accession as stipulated by Article 242 of the Civil Code. It will then delve into the implications of Article 343, Paragraph 10 of the Local Tax Law, which was newly established by the 2004 revision of the Local Tax Law. Finally, the article will analyze the decision by the Tokyo District Court of February 24, 2012, in which the issue was who is liable for tax payment for an elevator installed in a building. From these considerations, the paper draws the following three conclusions: 1 If the property meets the requirements of Article 343 (10) of the Local Tax Law, the property is a depreciable asset under the Local Tax Law and property tax shall be imposed on the tenant. 2 If the requirements of Article 343 (10) of the Local Tax Law are not met, and if the fixed assets installed in the building are determined to be accessorized under the Civil Code, the fixed assets shall be considered as a building under the Local Tax Law and the property tax shall be imposed on the owner of the building. 3 If the requirements of Article 343 (10) of the Local Tax Law are not met, and if the fixed assets installed in the building are determined not to be attached under the Civil Code, the fixed assets shall be considered depreciable assets under the Local Tax Law and property tax shall be imposed on the tenant.