Fringe Benefit

Fringe Benefit

Posting items under fridge benefits are target of withholding income tax adjustment. The tax auditors will be looking into transactions which can be defined as salary under the withholding income tax guidelines in Japan. This is one of the areas cultural aspects comes into play. Whether or not a transaction can be defined as employee salary is completely dependent on the context of Japanese business culture. Therefore, some of the fridge benefits which may not have an issue as deductible expense under your country’s tax code may end up in different treatment in Japan. Ask for tax accountant or ask your Japanese employees if some of the fridge benefits you plan to provide are common practice in Japan.

There are basically 2 rules if you wish to stay safe in order not to get challenged for salary adjustment for withholding income tax. One rule is that fridge benefit must be provided equally to every employee. Second rule is value amount of the benefit is not considered luxurious or upscale for the type of expenditure.