Japan tax bulletin

2017/08/14

Deductible expenses under Japan corporation tax law are determined as follows: 1) Cost of goods sold (COGS) 2) Selling, general and administrative expenses (SGA) 3) Losses The amount of allowable expenses is computed according to generally accepted accounting principles (GAAP) and with some adjustments under Japan tax law.

2017/07/14

Size-based business tax is a component of Enterprise tax and is levied on a company’s business scale, not on the size of its profit. The tax applies to corporate taxpayers with share capital of more than JPY100M at the end of a fiscal year. The tax basis consists of three factors,taxable income, value added and paid in capital.

2017/06/15

The major reform of Transfer pricing documentation rules was made in 2016 and the relevant law and legulation were changed. This reform was made as a response to Organisation for Economic Co-operation and Development (OECD) Base erosion and profit shifting (BEPS) Action Plan 13. The National Tax Agency issued four guidelines, as shown below, that provide concrete explanations and practical examples related to this reform for the members of multinational enterprise in Japan.

2017/05/07

Penalty taxes in Japan can be complicated, with the amounts and types imposed depending on a variety of factors. They consist of penalty tax for under-reporting/non-filing etc as an administrative penalty and delinquency tax as interest.

2017/04/08

A valuation loss on an asset is generally disallowed in calculating taxable income (Article 33①of Corporation Tax Law (“CTL”)). However, a loss can be deductible in limited circumstances where the assets are devalued due to legal procedures, such as company rehabilitation procedures, or the assets are physically devalued.

2017/03/08

Persons who transfer taxable assets in Japan or import foreign cargo from bonded areas are required to file a consumption tax return and pay consumption tax to the government (Article 5 of Consumption Tax Law (“CTL”). However, persons are exempt from filing a consumption tax return and paying consumption tax where the amount of taxable sales in the base period is not larger than JPY 10 million (Article 9① of CTL). The base period for a corporate enterprise is the business year two years prior to the current business year (Article 2①(14))1. Taxable enterprises are taxable persons who are not exempt from the requirement to file tax returns and make tax payments.

2017/02/08

The 2017 tax reform proposal was released on December 8, 2016. This article summarizes proposed changes, which are expected to affect businesses.

2017/01/08

On 22 December 2016, a proposal by Japan’s ruling coalition containing several changes to the tax code for fiscal year 2017 was approved by the Cabinet. The coalition has since adopted several of these changes and plans to introduce them at the start of the 2017 fiscal year. In the proposal, it was announced that spin-offs, a type of corporate reorganization, will be treated as tax qualified under certain criteria.

2016/12/10

The 2016 Tax Reform was released on 31 March 2016. Major reforms of Corporate tax and International tax are discussed in this issue.

2016/11/10

Corporate taxpayers in Japan are usually required to file Corporation tax returns, Inhabitant tax returns, Enterprise tax returns, Consumption tax returns and Depreciable asset tax returns annually. Corporation tax is income tax levied by the national government. Inhabitant tax is income tax levied by prefectural governments and municipal governments. Enterprise tax is another income tax levied by prefectural governments. A corporate taxpayer must file national and local corporation tax returns within two months from the end of its business year. However, a one-month extension is allowed if an application is filed with the tax office. These corporate income tax returns may be filed either electronically or by paper.