| Consumption Tax in Japan |
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| _How to prepare for consumption tax audit |
When reviewing if your consumption tax is properly handled or not, there are 2 questions you will need to ask yourself.
- Is your exempt transaction on sales correctly declared?
- Is your credit for taxable purchases correctly declared?
Whether or not your exempt transaction on sales is correctly handled will depend on how it is treated in the initial startup of your business or at the time new transaction comes into place. Careful confirmation on tax circumstance is critical in the beginning stage so as not to accumulate falsely handled transactions.
On the other hand, credit for taxable purchases will be reliant on how accurately your accountant is processing them regularly. In the past, we have seen cases when we succeed from other accounting offices which do not specialize in foreign companies mishandle fees such as oversea business trip expenses, telecommunication expenses and allocation expenses from related parties. Accountants whose experience is concentrated on Japanese domestic companies may not be able to foresee transactions, ultimately overstating total credit for taxable purchases. Below you will be able to see some examples of accounts you will need to look out for when dealing with consumption tax in Japan.