Software & Related Costs Considering the fact that most employees use devices and equipments which connect to various networks, it is not surprising that tax auditors see software related transaction as an area to be challenged during the audit. Software transaction can be itemized in general as following items. 1 Purchase Expense 2 Installation Fees… [Read More]
Retained Earning Carried Forward
Retained Earnings Carried Forward If you have invested in Japan and are thinking about dividends, you will need to monitor Retained Earnings Carried Forward for your Japan investment. Under the Japan Company Act, a company is required to reserve 10% of gross amount of dividends. In order words, a company can provide dividends up to… [Read More]
Provision Fund for Bad Dept
Provision Fund for Bad Dept Regardless of accounting policies a company may have, Japan Tax Code has severe limitations on what they allow as provision fund for bad debt in dealing with accounts receivable. Depending on the status of legal liquidation, limit is decided. The most common legal proof is notice from lawyers and court… [Read More]
Prepaid Expence
Prepaid Expence Expenses such as below are in principle recognized based on the service period. 1. Insurance 2. Rent 3. Interest But exceptions apply to those expenses meeting certain condition which allows expense recognition on cash basis. In other words, even if the payment is upfront, a company can claim the full payment amount as… [Read More]
Petty Cash
Petty Cash Having petty cash is not advisable considering risk of bad management. Employee takes less responsibility in preserving receipts and invoices when petty cash arrangement is provided. Hence, many mishandled settlements occur leading to adjustments during tax audit. Obviously, employee takes better ownership of receipts and invoices when expense reimbursement system is in place…. [Read More]
Loss Carried Forward
Loss Carried Forward The amount of carried forward loss a company can use has been extended from 7 years to 9 years in 2012. In order to apply, you are required to submit the blue form notification to the tax authorities and your capital amount needs to be below the threshold of medium and small… [Read More]
Inventory
Inventory A company’s method of estimating inventory is decided by declaring the method to the tax office. Consult with your tax accountant first before submitting the form. It is usually submitted with the establishment notification as soon as the company is registered. Valuation loss is rarely allowed in the Japanese taxation system except being affected… [Read More]
Intercompany Loan
Intercompany Loan During the past few years, intercompany loans has become a hot topic during tax audit in Japan. The reason for this is because many companies do not have a loan agreement in place. This makes it easier for tax auditors to challenge intercompany loan related transactions. You should always consult with your tax… [Read More]
Deferred Assets
Deferred Assets Deferred assets under the Japanese Tax Code consists of 2 categories. One is deferred assets recognized in generally accepted accounting principle such as 1. Inaugural Expense 2. Business Commencement Expense 3. Research & Development Expenditures 4. Share Issuing Expense 5. Bond Issue Cost Another is deferred tax uniquely defined under the Japanese Tax… [Read More]
Equipments
Equipments With prices of computer related equipment going down there may be fewer items to book as assets but in case you do book as assets, below are things you need to be careful. 1. Purchase Price 2. Start of Business Use 3. Usage of Accelerated Depreciation 4. Disposal Date Purchase price of equipment is… [Read More]