Effective Ways to Save Taxes When Running a Business in Japan

Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.

I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.

If you are unsure about lawful tax avoidance in Japan, this blog can be helpful for you.

Join the Small Business Mutual Fund（小規模共済）

By participating in this mutual fund, you can deduct the contributions from your individual taxable income. The annual upper limit for these deductions is 840,000 yen.
This fund is designed to help small business owners prepare for their post-retirement financial needs.
You can borrow money within the limit of your accumulated contributions, providing a strategic measure for managing cash flow.

If you cancel the mutual fund within 20 years of joining, a portion of the premiums will not be refunded. Participants usually receive the surrender value as a retirement allowance when they retire. Under the Japanese tax system, retirement allowances are eligible for significant deductions from income, resulting in a relatively lower tax amount.

Join the Management Safety Net Mutual Fund（経営セーフティネット共済）

By participating in this mutual fund, you can deduct the contributions from your individual or corporate taxable business income as expenses. The annual upper limit for deductions is 2,400,000 yen, and you can accumulate up to 8,000,000 yen over several years.

This fund is designed to prevent the impact of bankruptcies. If you are unable to collect accounts receivable payments, you can borrow money up to ten times the amount of your contributions.

Payment of premiums is fully deductible as expenses. On the other hand, if you surrender the mutual fund, the surrender value is considered taxable income and treated as a profit. In essence, this means that taxation is being deferred. Additionally, if you cancel the mutual fund within 40 months of joining, a portion of the premiums will not be refunded.

If your business is incorporated, you can save on taxes in the following way.

https://kotsicpafirm.com/effective-ways-to-save-taxes-when-running-a-business-in-japan-part2/

Our accounting firm has been actively assisting foreign business owners in Japan with accounting and tax matters. Please feel free to contact us through the inquiry form.