Hello, my name is Taisei Koshida, a Japanese Certified Public Accountant and Licensed Tax Accountant.
I help foreign business owners in Japan navigate Japanese accounting and tax matters, especially when language barriers make the process difficult.
Mobile phones are essential for running a business, but many business owners are unsure whether they can deduct the full cost of their monthly phone bill.
This article explains how mobile phone expenses are treated for sole proprietors and corporations in Japan, particularly when the same phone is used for both business and personal purposes.
Cell phones are essential for business. I will introduce the deductibility of cell phone bills.
Mobile Phone Expenses for Sole Proprietors
If you are a sole proprietor and use the same mobile phone for both business and personal purposes, you generally cannot deduct the entire bill as a business expense.
Instead, you should determine a reasonable business-use percentage and deduct only the portion related to your work. This is known as allocating an expense between business and personal use.
There is no standard rule stating that 80% or 90% of every mobile phone bill is automatically deductible. The appropriate percentage depends on how you actually use the phone. You should be prepared to explain the basis of your calculation if it is questioned during a tax audit.
For example, you may estimate the business-use percentage based on call records, data usage, the number of days the phone is used for work, or another reasonable and consistent method.
If you maintain separate phones for business and personal use, the monthly bill for the business-only phone will generally be easier to support as a deductible business expense.
Mobile Phone Expenses for Corporations
If a mobile phone contract is in the company’s name and the phone is used for business purposes, the company can generally deduct the monthly charges as a business expense.
However, the full amount should not automatically be treated as deductible simply because the contract is in the company’s name. If the phone is used substantially for the private purposes of a director or employee, the private portion may need to be separated from the company’s business expenses.
If a director or employee uses a personally contracted mobile phone for company business, the company may reimburse the reasonable business-use portion of the bill. The company should establish a clear calculation method and retain supporting records.
Using separate phones or separate contracts for business and personal use usually makes the accounting treatment easier to explain and support during a tax audit.
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