Does Changing Tax Accountants Increase the Risk of a Tax Audit in Japan?

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

I support foreign business owners and entrepreneurs with accounting and tax matters in Japan, including tax filings and communication with the Japanese tax office in English.

If you are considering changing your tax accountant in Japan, you may wonder whether doing so will increase your risk of a tax audit.

In general, simply changing tax accountants does not itself trigger a tax audit. However, changes in accounting or tax treatment after switching accountants may affect how your financial statements look from year to year.

This article explains the difference.

A New Tax Accountant May Change Your Accounting or Tax Treatment

When you change tax accountants, the new accountant may handle certain accounting or tax transactions differently from the previous accountant.

This can affect the continuity of your financial statements from year to year. For example, sales, profits, expenses, or inventory balances may suddenly increase or decrease because the accounting treatment has changed.

Significant changes in financial figures can attract the attention of the tax office and may increase the likelihood of a tax audit.

In this sense, changing tax accountants can indirectly increase audit risk if the new accountant changes the accounting or tax treatment in a way that creates unusual fluctuations in your financial statements.

Changing Tax Accountants Is Not Itself a Tax Audit Trigger

On the other hand, simply changing your tax accountant is not itself a reason for the tax office to select your business for a tax audit.

The tax office looks at the contents of tax returns, financial statements, past filing history, and other information when selecting audit targets.

Therefore, merely replacing your tax accountant does not automatically increase your risk of a tax audit.

The more important issue is whether the change results in significant differences in accounting or tax treatment from previous years.

Should You Worry About a Tax Audit When Changing Accountants?

Usually, no.

Changing tax accountants in Japan does not by itself trigger a tax audit.

However, when changing accountants, it is important to maintain consistency in accounting policies and to clearly document any changes in accounting or tax treatment.

If a treatment needs to be changed, the reason for the change should be explained and supported by appropriate records.

Accounting and Tax Support When Changing Accountants in Japan

Koshida Accounting and Tax Office provides accounting and tax services in Japan for foreign business owners and entrepreneurs.

If you are considering changing your tax accountant, we can review your existing accounting records, tax returns, and accounting policies to help maintain continuity and identify any issues before the transition.

If you are looking for an accounting firm in Japan that provides English support, please feel free to contact us through the inquiry form.