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The Act on Special Measures for Preservation of National Tax-Related Books and Documents Prepared Using Computers (hereinafter referred to as the "Act on Electronic Preservation System for Books/Documents") has been revised and it will take effect on January 1, 2022.
From October 1, 2023, the qualified invoice preservation method will be introduced as a way of the purchase tax credit of the consumption tax to correspond to the multiple consumption tax rates. Under the method, the preservation of "qualified invoices" issued by "qualified invoice issuers" will be a requirement for the purchase tax credit.
On 11 February 2020, as part of tax base erosion and profit shifting project, the OECD released final Transfer Pricing Guidance on financial transactions. The Guidance mainly addressed regarding the intra-group loans, cash pooling arrangements, financial guarantees, and captive insurance. This article aims to summarize the key chapters of the Guidance and the possible impact the Guidance may have on transfer pricing arrangements for financial transactions within a multinational enterprise group.
An individual taxpayer liable for income tax is classified as a resident or a non-resident. A resident is an individual who has a domicile or has had a residence continuously for one year or more in Japan. A non-resident is an individual who is not a resident.A non-permanent resident is a resident who does not have Japanese nationality and who has had a domicile or a residence in Japan for not more than five years in total within the past ten years. With respect to income generated from overseas assets (foreign sourced income), such as interests on overseas deposits or dividends of overseas shares, non-permanent residents are taxed when those are either paid in, or deemed to be remitted to Japan. Residents other than non-permanent residents are taxed on worldwide income.
Under Japan’s traditional employment practice represented by lifetime employment and seniority-based wage systems, employees’ wages increased at an accelerated speed during the later years of career.
Under the Corporation Tax Acts, where monetary claims such as account receivables, loan receivables etc. become uncollectible, losses on such monetary claims are tax deductible subject to certain conditions. Further, SME1 and certain other corporate taxpayers are allowed to make a tax-deductible provision for bad debt allowance subject to the deductible limitation.
On December 18, 2020, the OECD released a “Guidance on the transfer pricing implications of the COVID-19 pandemic”. The Guidance represents the consensus view of the 137 members of the Inclusive Framework on BEPS regarding the application of the arm’s length principle and the OECD Transfer Pricing Guidelines to issues that may arise or be exacerbated in the context of the COVID-19 pandemic. The Guidance is helpful both for taxpayers in reporting the financial periods affected by the pandemic and for tax administrations in evaluating the implementation of taxpayers’ transfer pricing policies.
The group tax relief system will be introduced for business years beginning after March 31, 2022, replacing the current consolidated tax return system. Corporate taxpayers that elect to file consolidated tax returns are deemed to elect for the group tax relief system automatically unless they notify the tax office otherwise.
1. Special tax measures for deferral of national tax payments 2. Additional tax measure for extension of the national tax filing deadlines 3. Special tax measures for carried-back losses 4. Special tax credit /special depreciation applicable to capital investment for remote work 5. Other tax measures
The tax deductibility of officer1 remuneration is limited under Japan tax law (Corporation Tax Law (“CTL”) 34①). Officer remuneration consists of amounts other than retirement payments and are only deductible for corporate income tax purposes if they fall under the following categories: (1) Salary paid in the same amount on a regular basis2 (CTL 34①(1)); (2) Salary for which the fixed payment amount has been notified in advance (CTL 34①(2)); or (3) Performance-linked salary3 (CTL 34①(3)).
Transactions such as export sales are consumption tax exempt as tax rate 0%. 1. Export tax exemption 2. Tax exemption at export shops
Amendments to the basic corporate tax circular s have been announced due to the spread of the new coronavirus infection infection.
In order to improve the consumption tax credit system for purchases of residential rental buildings, the two adjustments below have been in force since April 2020. 1. Restriction of the purchase tax credit for residential rental buildings 2. Adjustment of consumption tax credit for purchases of residential rental buildings
The filing deadline of consumption tax return is within two months after the end of taxation period (a taxation period is basically a financial year of a company) in principle. The tax reform of an extension for consumption tax filing deadline for the companies comes into force after the financial year ended March 31, 2021.
A partnership is a vehicle not used frequently for business activities but rather used for investment activities in aircraft leasing, ship leasing etc. A partnership is formed under the Civil Code and called a Kumiai or Nini Kumiai.
New anti-avoidance rule to prevent the pre-sale dividend stripping of foreign subsidiary investments.