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Consumption Tax Consumption taxable sales • Japanese tax law requires that sellers and service providers charge consumption tax (at a rate of 10%) on sales to end users consumption taxable transactions ("taxable sales"). Scope of Japanese Consumption Tax Revenue items (input tax) Taxable transactions Non-taxable transactions KPMG Expense items (output tax) Commercial rents received • PM fees . Parking rents received • AM fees Cleaning/restoration fees • Utilities expenses received from tenants • Sale proceeds from • disposition of Building Utilities recoveries received from tenants (if any) Vending machine sales Residential rents Sale proceeds from disposition of Land Sale of equity Sale of debt Sale of TK instrument Maintenance expenses Insurance premiums paid Interest expense Consumption taxpayer status However, whether or not the receiving entity is required to remit a portion or all of this consumption tax collected to the government will depend on the individual entity's consumption taxpayer status. There are also a number of triggers for becoming a consumption taxpayer which should be considered, but most commonly, whether an entity will become a consumption taxpayer in a given fiscal period is determined based on the amount of revenue from taxable sales in the "base period". Base period is broadly two fiscal years prior to the consumption taxable fiscal year of interest. Consumption taxpayer status Base period annual taxable sales Not more than JPY 10M More than JPY 10M but not more than JPY 50M More than JPY 50M Consumption taxpayer status Non-taxpayer Consumption taxpayer (can elect to be a simplified taxpayer; details on the right side) Consumption taxpayer Consumption tax in the context of residential assets • Where an asset holding entity is able to maintain non-consumption taxpayer status, they should charge consumption tax on the building sale, but are not required to remit such consumption tax to the tax authorities. Accordingly it is common to hold residential assets in separate asset holding GKs below a TMK in order to maintain each asset holding GK as a non-consumption taxpayer. However, this needs to be carefully managed. © 2023 KPMG Tax Corporation, a tax corporation incorporated under the Japanese CPTA Law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. Document Classification: KPMG Confidential | 21

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