- Japan tax bulletin
- The blue tax return system and its benefits
- Research and development tax credits under Japan tax law
- Tax Procedures at the time of Dissolution and Liquidation
- Treatment of estimated expenses under Japan tax law
- Size-based business taxation in Japan
- Revised Transfer Pricing Documentation requirements
- Penalty taxes
- Valuation loss on assets
- Taxable enterprises under Consumption Tax Law
- 2017 tax reform proposal in Japan
- Tax Qualified Corporate Reorganizations under Japan tax law
- 2016 Tax reform
- Corporate tax filing in Japan
- Entertainment expenses
- Effect of the reverse-charge mechanism on foreign enterprises
- Restricted Stock
- Family Corporations under Japan tax law
- The treatment of donations (kifukin) under Japan tax law
- Filing requirements for the Country-by-Country report and Master File for a Specified Multinational Enterprise Group
- Procedures for claiming tax treaty benefits
- Restrictions on interest expense deduction
- Proposed change to the transfer pricing documentation rules
- Group taxation
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.
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.
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.
The 2017 tax reform proposal was released on December 8, 2016. This article summarizes proposed changes, which are expected to affect businesses.
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.
The 2016 Tax Reform was released on 31 March 2016. Major reforms of Corporate tax and International tax are discussed in this issue.
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.
In order to revitalize the economy through increased consumer spending, from accounting periods beginning on or after April 1, 2014, 50% of entertainment expenses spent on food and drink has been treated as tax deductible expenses. However, corporations whose capital is JPY100 million or less are able to choose to deduct 100% of all entertainment expenses up to JPY8 million instead of the 50% food and drink deduction described above (This is not applicable to a corporation held 100% by a parent company with capital of JPY500 million or more).
The Consumption Tax Act and other relevant laws and regulations were partially amended in 2015 introducing a new taxation mechanism for consumption tax, called the “Reverse Charge Mechanism”
In recent times, companies in Japan have introduced several plans to incentivize their directors, including Restricted Stock ("RS"). Prior to this year’s tax reform, the tax treatment related to RS was not clear, for example the amount and timing of deductions in a company’s income tax calculation were not clearly defined. Due the uncertainty, the 2016 reform clarified the tax treatment of this increasingly popular form of remuneration.