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FY2026 JCT Reform Update: Extended 8-Year Transitional Deduction Schedule and Reduced JPY 100M Cap for Non-Registered Supplier Purchases
Under Japan’s consumption tax rules, input tax credits for "adjustable fixed assets" are credited upon acquisition. However, if the use of assets changes within three years, an adjustment is required.
Revenue recognition is a key performance metric affecting financial figures. This article explores examples of differences between accounting and tax treatment in Japan.
If you are planning on doing business in Japan, knowledge of the investment environment and information on legal, accounting, taxation and human resource frameworks are essential to keeping you on the right track. This guide has been prepared for the assistance of those interested in doing business in Japan. It does not cover the subject exhaustively but is intended to answer some of the important, broad questions that may arise. When specific problems occur in practice, it will often be necessary to refer to the laws and regulations of Japan and to obtain appropriate accounting and legal advice. This guide contains only brief notes and includes legislation in force as of November 27, 2024.
In December 2024, The Japan National Tax Agency (NTA) has recently issued an update correction to Form of Statement Concerning Foreign Tax Credit for an individual resident taxpayer for 2022 calendar year and thereafter. This correction is concerning foreign income taxes on distribution of collective investment trust income.
Hometown Tax donation (Furusato Nozei) is a system that allows individuals to receive income tax and inhabitant tax deductions for donations made to local governments of their choice. In addition, since the donor can receive return gifts from the recipient local government, the number and amount of such donations have been increasing in recent years attracting more and more attention. This article explains how it works and how the tax amount is reduced.
In accordance with the 2024 Japan Tax Reform, fixed amount of tax credit against National Income Tax and Local Inhabitant Tax will be implemented. This tax credit is a one-time deal and applicable to 2024 National Income Tax and 2024/25 Local Inhabitant Tax payable from June 2024.
The exit tax was introduced in the 2015 tax reform. The exit tax applies to residents in Japan holding relevant financial assets worth JPY100 million or more (hereinafter referred to as“relevant assets”) and is imposed on the unrealized capital gains of those assets at the time of their departure from Japan.
From 2023 tax year onwards, amendments is scheduled to take effect with regard to Assets and Liabilities Report (Zaisan Saimu Chosho) and Overseas Assets Report (Kokugai Zaisan Chosho).
A tax resident is defined as a person who has (1) domicile or (2) a house for continuously 1 year or more in a place where the Income Tax Law is enforced. Domicile is a person’s centre of living as defined by Article 22 of the Civil Code. A person who satisfies one of the following conditions is deemed to have a domicile in Japan.
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.
The 2020 Tax reform closed a loophole for wealthy individual taxpayers who used investments in offshore second-hand buildings to reduce their income tax liability. Losses generated by these investments can be used to offset against other types of income and reduce a taxpayer’s total tax liability. The loophole relied on the accelerated depreciation deductions that could be taken for a second-hand building that was either nearing, or had reached, the end of its statutory useful life.