Employee Salaries As a general accounting practice in Japan, companies often separate director compensation and employee salaries. Director compensation are more focused during the tax audit compared to employee salaries. When focusing solely on employee salaries, unpaid salaries and bonuses are not tax deductible in principle. But when meeting certain conditions you will be able… [Read More]
Directors’ compensation
Directors’ compensation Directors’ compensation may be considered deductible for most countries, but in Japan, it is limited. In Japan, directors’ compensation has been considered to be a handy method to manipulate financial results from the view of the tax authorities and therefore, there are certain rules for directors’ compensation to be deductible under Japan tax… [Read More]
Cost of Services
Cost of Services Cost of Sales for service sales can get ugly during tax audit in Japan since clear definition is not stated in Japan the tax code. The rule of the thumb is any explanation which can be interpreted as logical to a person who is explained of the service for the first time… [Read More]
Cost of Goods Sold
Cost of Goods Sold Inventory management will be the focal point for cost of goods sold. Some of the key questions you will need to ask is, 1. Are inventory recognized at the right timing when goods are shipped from overseas? 2. Are goods returned being recognized as inventory at correct timing with sales cancelation?… [Read More]
Commisions (Transactions outside Japan)
Commisions (Transactions outside Japan) When making commission payments to non-Japanese entity or individuals overseas, you will need to ask the following questions regarding such commission. 1. Is the commission subject to withholding income tax? 2. Will it be subject to withholding for special reconstruction income tax? 3. Is the tax treaty applicable? In case of… [Read More]
Commisions (Outsourcing Fee)
Commisions (Outsourcing Fee) When engaging with an individual in a subcontractor agreement, careful attention needs to be provided considering withholding income tax obligations. The tax authority in Japan loves to challenge subcontractor engagement to full time employment. In case the subcontractor engagement does not qualify as such under the tax code in Japan, it will… [Read More]
Advertising Marketing
Advertising Marketing Advertising fees are generally paid in advance as prepaid expenses. In preparing consumption tax returns, timing of claiming as consumption tax receivables is at the time service is provided. Advertising fees are highlighted in one aspect for income tax purposes. Japan tax code restricts income tax deductibles by deeming certain transactions as entertainment… [Read More]