1. Accounting (Source: “Keiei Zaimu Magazine”)
IFRS, in principle, require group companies to reconcile fiscal year-ends. In Japan, we have the flexibility to determine the fiscal year-end, but in China it cannot legally be changed from the end of December. In response to this dilemma, “The Yokohama Rubber Company, Limited” and “Kao Corporation” etc. changed their fiscal year-ends from March to December.
Under the fiscal year ending in December, the busy period from late January through early February coincides with Chinese New Year, during which most Chinese take a week’s paid holiday. That’s why schedule coordination has become considerably important. On the other hand, an accounting person of the controlling company is able to enjoy Golden Week holidays, even during the busy period, under the fiscal year ending in March.
2. Taxation (Brief overview of “Special Income Tax for Reconstruction”)
During the period from January 1, 2013 through December 31, 2037, an additional 2.1% of the base income taxes called “Special Income Tax for Reconstruction” apply for the reconstruction funding after the Great East Japan Earthquake. Regarding withholding tax, a person who makes the payment has to also include this “Special Income Tax for Reconstruction” together with the withholding income tax. However, in the case of payment by non-residents, a lower tax rate (also covering exemptions) than mandated by domestic law is applied, in accordance with international tax treaties. Consequently, “Special Income Tax for Reconstruction” is not imposed. For instance, the tax rate of Royalties under domestic law is 20%, but under the Japan-U.S. tax treaty, it’s 0%. Therefore, in this case, “Special Income Tax for Reconstruction” is not withheld.
3. Labor Management(Restoration Income Surtax imposed on salary, etc.）
“Restoration Income Surtax” and “Restoration Corporation Surtax” were newly established under the “Act on Special Measures Concerning Securing Financial Resources Necessary for the Implementation of Measures to recover from the Great East Japan Earthquake” (Act No. 117 of 2011) promulgated on December 2, 2011. For salaried workers, Restoration Income Surtax is withheld from all salaries and other financial remuneration that are paid on or after January 1, 2013.
The amount of Restoration Income Surtax one owes is equivalent to 2.1% of the amount of national income tax to be withheld. In practice, the total amount to be withheld is calculated by multiplying the amount of taxable income by the sum of the national income tax rate and Restoration Income Surtax as follows:
Amount of taxable income x Aggregate tax rate (%)* = Amount of income tax and Restoration Income Surtax to be withheld
*Calculation of aggregate tax rate:
Aggregate tax rate (%) = Income tax rate (%) x 102.1%
For more information, please do not hesitate to contact us.
4. This Week’s Words of Wisdom
When I was young I observed that nine out of every ten things I did were failures, so I did ten times more work.
(George Bernard Shaw)
George Bernard Shaw, a Nobel laureate, who is also known as the original writer of “My Fair Lady”, was a person who worked very hard. I too think that the only way to succeed is to keep trying until you do. I also feel that, in order to maximize our chances of success, we should regularly analyze our methods for progress with a view towards improving them.