Accounting & Taxes After Setting Up Your Company
Here is an outline of procedures related to taxes and accounting in Japan. Under Japanese law, taxes must be submitted within 2 months from the last day of the accounting period established in the company’s articles of incorporation. Also, the accounting period cannot exceed one year.
Process After Company is Established
After the company or branch is established, documents related to taxes, social insurance, and employment insurance are submitted to the company’s local government offices. Although not mandatory, generally a company will be in a better tax position if they submit documents to the tax office.
|Local Tax Office||Prefecture Office||Local Municipal Office|
Corporate Establishment Notification Form
Notification Form for Opening a Wage-paying Office
Notification Form for Depreciation Method of Assets
|Corporate Establishment Notification Form||Corporate Establishment Notification Form|
Labor Insurance and Social Insurance
|Labor Standards Supervision Office||‘Hello Work’||Pension Office|
Report forms for the applicable business
Establishment of a Labor Insurance Report Form
Approximate Labor Insurance Premium Report Form
Applicable reporting form for establishing employment insurance
Notification for Receiving Qualification to be Covered Under Employment Insurance
New applicable forms
Notification for Receiving Qualification to be Covered Under Insurance
Daily sales and expense transactions are recorded by the company. Monthly financial statements are produced based on that data, and the company analyzes its performance.
Also, the government will check the company’s actual performance with the business plan submitted to them at the time the visa was obtained. If the company uses subsidy money or takes part in government incentive programs, the company must produce separate performance reports and income-expense management reports regarding those funds.
The financial and tax reporting documents produced are to be based on Japanese accounting standards and submitted to the company’s local tax office, the prefecture tax office, and the city hall. The company’s accounting period can be decided freely based on the company’s articles of incorporation. Financial statements based on Japanese accounting standards may also need to be sent to the company’s parent company.
There are four taxes that apply to companies: corporate tax, corporate residence tax, corporate enterprise tax, and sales tax. Corporate tax and corporate enterprise tax amounts depend on the company’s income. Corporate residence tax is a fixed amount of tax unrelated to the amount in corporate tax.
|Taxes on Profits||Corporate profits are taxed||LLC profits are taxed||Generally, only profits generated within Japan are taxed|
|Accounting Treatment||Accounting based on Japanese standards||Accounting based on Japanese standards||Profits gained in Japan are consolidated with parent company’s (filing also required in Japan)|
|Corporate Effective Tax Rate||36%|
|Small-medium Business Effective Tax Rate||25.1% *applies to companies with equity of 100 million yen or under, and net income of 8 million yen or under.|
|Sales Tax Rate||5％|
Note: The above tax rates are shown after the proposed revision that is still under consideration by the Diet. We will watch the situation carefully and update this information as necessary.
Revision of the Tax System
With the goal of strengthening its position in Asia, the Japanese government is offering a preferential tax treatment system in order to entice foreign businesses to expand to Japan.
|Corporate Tax Reduction||Corporate profit will increase thanks to a 5% corporate tax reduction with the goal of promoting development by foreign companies and strengthening international competition with Japanese companies.|
|International Strategy Comprehensive Zones||Companies that operate in certain zones and clear certain requirements will only be taxed on an amount that excludes 20% of their reported income related to applicable activities for a period of 5 years. (Determination of these special zones is scheduled to occur in April 2011)|
|Promotion to Strengthen Base in Asia||Companies engaged in R&D work or international business and who clear certain requirements are only taxed on an amount that excludes 20% of their reported income related to applicable activities for a period of 5 years.|
Reference: “2011 Tax System Revision Outline”, Ministry of Economy, Trade and Industry
We support all of the above tax and accounting services. We prepare as much as possible of the documents that need to be submitted to government offices, but we ask that if you can, please have the items below ready. If you don’t have them we may be able to assist you in obtaining them.
|Items the Client Provides|
|Articles of Incorporation & Corporate Registration|
|Fee (inc. tax)|
|Creation/submission of documents of establish a company||21,000 yen|
|Management through monthly figures||31,500 yen|
|Tax filing related work||157,500 yen|
- What if I don’t turn in a company formation notification to the Tax Office?
- What is the labor insurance system like in Japan?
- What is the social insurance system like in Japan?
- Is it necessary to compile a trial balance every month?
- How are Japan’s accounting standards different from other countries’?