Choosing the Best Fiscal Year-End for a New Company in Japan

One ship drives east and another drives west with the selfsame winds that blow. It’s the set of the sails and not the gales that tell us the way to go. As we voyage along through life, It’s the set of a soul that decides its goal, and not the calm or the strife. － Ella Wheeler Wilcox

Hi, my name is Taisei Koshida, and I am a Certified Public Accountant and Licensed Tax Accountant in Japan.

I specialize in helping foreign business owners understand Japan’s accounting and tax system in English. If you find Japanese tax procedures difficult to navigate, I would be happy to assist you.

In this article, I explain how to choose the best fiscal year-end for your company in Japan and the practical factors you should consider before making your decision.

If Your Business Has Seasonal Fluctuations

It is generally advisable to avoid setting your fiscal year-end during your busiest sales season. If sales increase significantly in the final month of your fiscal year, it becomes difficult to estimate annual profits before the year closes. As a result, you may miss opportunities for tax planning or discussions with your bank.

If You Have Peak Seasons

It is also advisable to avoid scheduling your fiscal year-end immediately before your busiest business season, as accounting and tax filing work can require significant time and attention.

If You Wish to Reduce the Risk of Tax Audits

If possible, consider avoiding a fiscal year-end between February and May, as companies with these fiscal year-ends may be more likely to receive detailed tax audits.

https://kotsicpafirm.com/how-the-tax-office-selects-audit-targets-in-japan/

If You Wish to Avoid Tax Audits Themselves

As explained in the article above, tax officers often begin selecting audit targets in April. Because companies with a January fiscal year-end generally file their corporate tax returns by the end of March, their tax return information may not yet be fully available when the selection process begins. For this reason, some professionals believe that companies with a January fiscal year-end may be slightly less likely to be selected for a tax audit.

At Koshida Accounting and Tax Office, we help foreign business owners understand Japan’s accounting and tax rules in clear English. If you are planning to establish a company in Japan, we would be happy to help you choose the most suitable fiscal year-end and support your accounting and tax compliance.

Please feel free to contact us through our inquiry form.