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20th, a foreign subsidiary, Keiei Zaimu”, Benjamin E. Mays

May 12, 2010

1. Taxation (Source: “Zeimu Tsushin Magazine”)

 

   Under the Foreign Dividend Exclusion (FDE) System introduced in the 2009 tax reform, 95% of the dividends received from a foreign subsidiary, in which the Japanese parent company has continuously held at   

   least 25% direct ownership for six months or longer, are excluded from taxable income.

 

   It is to be noted that if the foreign subsidiary qualifies as a Specified Foreign Subsidiary (SFS) per the Tax Haven Legislation, dividends received from the SFS will be fully excluded from taxable income.

 

   An SFS is defined as a foreign corporation of which more than 50% of its outstanding shares are directly or indirectly owned by Japanese companies and/or resident individuals and certain non-residents with 

   special affiliation with the Japanese company or resident individual (affiliated foreign corporation), and is located in a tax haven country with an effective tax rate of 20% or lower (applicable from the fiscal year of  

   the affiliated foreign company beginning on or after April 1, 2010).

 

2. Accounting (Personal opinion based on the article from “Keiei Zaimu”)

 

   On April 13, the Financial Services Agency (FSA) held a conference on the CPA system in Japan.  The conference discussed the possibility of a two-tier system of the CPA certification to address a solution to  

   the current issue of massive unemployed CPAs.

 

   As previously mentioned the proposed new system is nothing but a foolish ploy aimed to blur the responsibility of the FSA and is only a source of additional confusion.

 

   I believe that the underlying problems behind this issue are as follows:

   ①    FSA is to be blamed for increasing the number of CPA passers without any sufficient assessment of the current market condition.

   ②    The proposed two-tier system does not consider the possibility of adopting incentives for companies hiring CPA exam passers over new university graduates.  Moreover, the new proposed system is not 

        a relief to those truly in need given the fact that the majority of unemployed passers are those with prior work experience and the employment rate of new graduates (with CPA certifications) is high.

   ③    Under the proposed two-tier system, not all examinees passing the CPA exam are likely to engage in accounting practice.

 

   In light of the above, FSA’s decision to drastically increase the number of CPA passers by three times is the fundamental cause of this problem.  FSA should seriously acknowledge its mistake and take  

   responsibility for the social confusion it has caused.

 

   The only solution to this issue is to reduce the number of passers as quickly as possible.  The Japanese Institute of Certified Public Accountants (JICPA) should officially express its opinion that it is against 

   any proposals by the FSA that would arouse additional confusion in the market of accounting professionals.

 

   As of May. 6, the article author has the information that the idea of increasing the number of passers was originally proposed by JICPA, however it is still unconfirmed.

 

3. This Week’s Words of Wisdom (Source: “English words of wisdom to enrich life”)

 

   “The tragedy of life doesn’t lie in not reaching your goal.  The tragedy lies in having no goals to reach.” (Benjamin E. Mays)

 

    Life is interesting because each individual sets a goal for oneself. This is true regardless of whether the goal is self-directed or subject to external controls or impositions.  However, if a goal is motivated and set

    in the latter sense, there is always the risk of it being abruptly deprived by external factors.  “Better be the head of a dog than the tail of a lion.”

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