1. Accounting (Source: “Keiei Zaimu Magazine” NO3126)
IASB completed the profiles concerning the use of IFRS’s in 66 jurisdictions, including all of the G20 countries plus 46 others. According to the research, 55 jurisdictions (over 80 per cent of the profiles) have adopted IFRS’s for at least some companies in their capital markets. The remaining 11 jurisdictions have yet to do so. Six of the these, which are classified as G20 jurisdictions, are the United States, Japan, China, India, Indonesia, and Saudi Arabia. We often hear of EU Member States using “Carve-out”, but, according to the results of the research, we can see that 99.5% of them use “pure IFRS’s”. It’s a rare case in which jurisdictions adopting IFRS’s use “Carve-out”.
2. Taxation (Source: “Zeimu Tsushin Magazine”)
As of December 31st, 2013, a new system for reporting overseas assets applies to Japanese permanent residents who own overseas assets valued at over JPY50 million.
Be forewarned that this requirement includes individuals of foreign nationality who have been residing in Japan for a period of over 5 years during the last 10 years. Persons violating the laws through non-reporting or misstatement are to face a maximum of 1 year’s imprisonment or a fine of up to JPY500,000. These penalties will be applied to all reporting required after January 1st, 2015.
3. Labor Management(Dependent Verification for Employees’ Family Members Residing Abroad)
All persons who receive salary/remuneration (employment income earners) are required to submit “Declaration of Income Deductions for (and Changes in) Dependent Family Members etc. for Employment Income Earner” to their company when newly hired and in successive years in order to claim various income deductions for tax purposes, such as dependent spouse deductions, dependent deductions, deductions for persons with disabilities, etc. When the form is submitted, we check the income amounts and ages of the employees’ dependents living in Japan by confirming their tax exemption certificates or withholding records.
In fact, the same needs to be done for family members residing abroad if claimed as dependents, so what are the necessary processes to qualify them as dependents of employees in Japan for Japanese tax purposes?
(1) Verification of age and family relationship The family member’s age and family relationship to the employee can be confirmed by official documents issued by the government of the country in which the family member resides, such as marriage certificates, birth certificates, etc.
(2) Verification of monetary support provided by employee Since monetary value differs from country to country, it is often difficult to determine if the family member’s income is within the dependent criteria based simply upon the amount itself. Instead, the family member is qualified as a dependent if he/she receives monetary support from the employee on a regular monthly basis. Considering that the monetary support should be applied to living expenses, the family member may not be qualified as a dependent if the money is only sent once or twice a year in a lump sum, which is considered as allowance, rather than living expenses.
Employers can confirm the validity of money transfers by asking the employee to submit copies of international money transfer statements or passbooks containing records of regular remittances to the dependent.
*Employers need to be careful and verify that the employee is not sending money to his/her own bank account outside Japan.
*In cases where employees give money to their family members in person without using bank services due to such reasons as, international restrictions on specific countries or just to save costs on international money transfers, employers can ask employees to submit receipts of currency exchange. The money to be given to the family member has to be converted from Japanese Yen to the local currency.
If the above documents are unavailable and it is difficult to determine if the employee’s family member qualifies as a dependent, the safest approach is not to count him/her as such for tax purposes in the payroll calculation for that year until necessary documentation is submitted. Even if employees fail to submit these documents by the required deadline, they can reconcile their final tax return personally at a later date (it will be the tax office’s decision whether the family member is qualified as a dependent or not).
For more information, please contact our HR Consulting Group.
4. This Week’s Words of Wisdom
An education is not how much you have committed to memorize or even how much you know. It is being able to differentiate between what you know and what you don’t. (Anatole France, novelist).
In the world of tax accounting, it’s the royal road of the solution to strictly find facts. If we do it correctly, we can reach an accurate result by applying our expert knowledge to the task at hand. The whole basis is the means of observing the things in front of you. We might say that the purpose of education is to learn how to find facts with respect to each subject.