When setting up business abroad, it is crucial to be aware of how tax laws vary for each country. Japanese labor and tax laws are quite cumbersome, and their level of complexity is even greater for foreign companies. Mistakes are costly, and filing an incorrect tax return in Japan can dramatically increase tax return amounts, and lead to fines and penalties.
For foreign businesses in Japan, there are numerous tax returns to file, and figuring which returns are to be filed - and how - can be a great burden. At Tokyo Consulting Group, our experienced staff can provide simple and comprehensive solutions for tax preparation and reports of income tax in Japan. In addition to our Certified Public Tax Accountants, we have social insurance and labor consultant specialists who are dedicated to providing high quality Japanese tax services, including tax return preparation and filing. The services provided by our tax department cover the following fields:
In Japan, there are four main types of tax that result from corporate activity: corporate tax (national), corporate inhabitant tax (local), enterprise tax (local), and special local corporate tax (local). Specific legal provisions determine the scope of the income from which each of these taxes is calculated. Thus, it is crucial for a company in Japan to know precisely what its status and net corporate income is so that their tax may be calculated according to the appropriate bracket. For instance, the following brackets are used to set the tax rate of all corporate income taxes: taxable income below 4 million JPY, taxable income between 4 and 8 million JPY, and taxable income above 8 million JPY.
For companies with a paid-in capital higher than 100 million yen, the corporate inhabitant tax per capita levy varies according to the number of employees of the business (more or less than 50). The combination of employee count and capital amount is then used to assess the amount that must be paid by the corporation.
All businesses operating in Japan are subject to these regulations, and are required to file the appropriate tax returns.
According to Japanese regulations, corporations must file a final tax return in Japan on their income - and pay the appropriate amount - for corporate tax, corporate inhabitant tax, and enterprise tax within two months from the day following the last day of each taxable year (as set by the corporation). Extensions for filing may be granted under certain circumstances, but no extensions are granted for the payment.
The payment must be done through a local Japanese bank, using vouchers provided by the Japanese government. Thus, it is necessary for the payment to be made locally, either by in-house local accountants, or by Japanese accredited tax representatives such as Tokyo Consulting Group.
Regular tax returns are filed on the white form. The other possible type of filing is done on a blue form, which implies a variety of tax benefits. To be allowed to file a blue form, however, corporations must submit applications no later than the day prior to the starting day of the taxable year. Foreign entities may enjoy many tax benefits, provided they are acquainted with the rules and mandatory processes, and file the appropriate tax return in Japan.
For a foreign entity, the situation is quite complex, as the incorporation aspect must be taken into account, and legal statuses and capital amounts must be clearly and transparently established.
Hence, it is crucial for a company or branch in Japan to know exactly which category it falls under, with regards to employee count, capital, and income. Failure to accurately measure and report such figures may result in overpaid tax, or in worse cases, financial penalties for underpaid taxes. On the other hand, foreign corporations with the appropriate knowledge, whether in-house or outsourced, can enjoy the various benefits and potential savings that can result from working with Japanese tax services.
As part of its support strategy, Tokyo Consulting Group has a dedicated overseas clients department, and long-lasting experience in helping foreign companies file tax returns in Japan.
Tokyo Consulting Group can fully consult, advise, and implement permanent solutions to support foreign companies. We can help foreign business avoid financial difficulties, and allow them to enjoy potential benefits and savings. Contact us today to learn about Tokyo Consulting Group's Japanese tax services.