1.Accounting（Incorporating the Effects of the Novel Coronavirus Pandemic when Making Accounting Estimates under Japanese GAAP）
On 9 April 2020, the ASBJ announced some points to be considered regarding accounting estimates under the effects of the Novel Coronavirus.
Various accounting estimates, including the impairment of property, plant and equipment and the collectability of deferred tax assets, are required in preparing financial statements. It seems that it has become extremely difficult to make accounting estimates, in particular to predict future cash flows during this novel coronavirus pandemic. When determining reasonable amounts based on all available information, it is necessary to develop the best estimates after making certain assumptions, even though there may be high uncertainty during events such as the novel coronavirus pandemic. For accounting estimates made in these situations, information should be specially disclosed to enable users of financial statements to understand the assumptions that were made in estimating the accounting. If it is significant information, it should be also disclosed as additional information.
On 20 April 2020, the cabinet approved emergency tax measures due to the novel coronavirus pandemic. As domestic and overseas economies have been hit severely in the novel coronavirus pandemic, the cabinet decided to formulate the following urgent necessary measures for taxpayers in severe situations caused by the efforts to prevent the spread of the novel coronavirus.
i). One year grace period for tax payments
After 1 February 2020, a one year grace period for tax payments will be provided for cases where revenue has decreased by 20 % or more over more than one month, compared to that of the same period of the previous year. A one year grace period will be permitted in cases where it is difficult to pay in a lump sum. Submission of certain property status documents are required, but oral explanation is also permitted in case it is difficult to submit them. A one year grace period will be permitted for national tax and local tax, which allow payments between 1 February 2020 and 31 January 2021, without provision of collateral and payment of delinquent tax.
ii). Expansion of tax refund carryback for loss
Tax refund carryback for loss expanded for companies, which are filing blue returns with a stated capital of JPY 1 billion or less (Currently it is only for companies whose stated capital is JPY100 million or less when filing blue returns). They can receive a tax refund for income of any one of the target fiscal years, which started within one year from the incurrence of the loss. However certain companies whose issued shares are wholly owned by large parent companies with a stated capital of more than JPY 1 billion cannot receive a tax refund carryback for loss as in the past.
iii). Selection of tax-payer status for consumption tax
Concerning cases where revenue has decreased by 50% or more over more than one month between 1 February 2020 and 31 January 2021 due to the effects of novel coronavirus, compared to that of the same period of the previous year, individuals and companies can choose the tax-payer or non-taxpayer status when filing the notification by the end of the filing deadline. They can change this status in the next fiscal year. (Cf. Individuals and companies have to file the notification before the start of the target fiscal year in principle. They cannot change the selected status for 2 years once they choose.)
iv). Besides the above, there are some other tax measures. For example, special depreciation or tax deduction for capital investment in teleworking, reducing measures for depreciable property tax, deduction of housing loans when moving in a house which is newly build, renewed or purchased as a second-hand property has been delayed by the effects of novel coronavirus. In addition, business houses and structures become the subject to the reducing measures for property tax in introducing fixed assets to improve productivity.
Please contact tax accountants if you would like to know more details.
3. Labor Management (The partial amendment of the Labor Standards Act)
With the partial amendment of the Labor Standards Act enforced on April 1, 2020, the statute of limitation for claims for wages and additional payments for unpaid overtime wages was extended from 2 years to 5 years (or 3 years for the time being). At the same time, the retention period for worker rosters and payroll ledgers was also extended to 5 years (or 3 years for the time being).
As a transitional measure, the statute of limitation for claims for wages that became due before the enforcement (up to March 31, 2020) is 2 years as it was previously.
On the other hand, the statute of limitation for claims for disaster compensation and annual paid leave remain unchanged at 2 years. (Resource: “Summary of the bill to partially amend the Labor Standards Act” The Ministry of Health, Labor and Welfare, as of 11:30 am, April 27, 2020)
4. This Month’s Words of Wisdom
In politics if you want anything said, ask a man.
If you want anything done, ask a woman.
(Margaret Thatcher, former PM, Britain)
Each country is a taking different actions against the novel coronavirus pandemic. What these actions are may depend on the nature of each national regime, for example whether they are autocratic or democratic. Unfortunately, the Japanese government has put the economy first, and the health and safety of its citizens second (or lower). Even the German government is currently ignoring the primary balance. However, the Japanese Ministry of Finance is still clinging to the economy and leaving the people’s lives by the wayside.
On the other hand, Jacinda Ardern, the prime minister of New Zealand, stands out conspicuously in this crisis. Her speedy and decisive leadership should be praised.
For more details, please refer to Nagamine & Mishima JC Accounting K.K.