Frequently Asked Questions
Frequently Asked Questions About Tax and Accounting in Japan
Here you can find practical answers to frequently asked questions about tax and accounting in Japan.
Koshida Accounting and Tax Office assists foreign individuals, entrepreneurs, and small businesses with Japanese tax filings, accounting, international tax matters, and other tax procedures in Japan, with support available in English.
The answers below cover practical topics such as starting a business, business expenses, tax audits, consumption tax, tax returns, international taxation, and accounting in Japan for small businesses.
How does Japan's corporate tax system work for small businesses?
Japan’s corporate tax system is complex because companies may be subject to national corporate tax as well as several local taxes.
For this reason, many companies use a tax accountant in Japan to handle corporate tax filings and ongoing tax matters. For small businesses, professional support can also be useful for corporate tax planning in Japan and for estimating future tax liabilities.
omplex. Therefore, almost all Japanese companies leave tax matters to a tax accountant in Japan.
How do I obtain the necessary licenses and permits for my business in Japan?
Administrative scriveners specialize in obtaining many types of business licenses and permits in Japan.
Our office specializes in tax and accounting, but we are part of a professional group that supports foreign individuals and companies starting businesses in Japan. The group includes an administrative scrivener, so we can introduce an appropriate specialist when necessary.
How Are Business Travel Expenses Treated in Japan?
Business travel expenses can generally be treated as deductible expenses in Japan if they are considered reasonable and necessary for business purposes under normal social standards.
Typical deductible travel expenses include transportation, accommodation, daily allowances, and other costs directly related to business activities. However, expenses that are excessively luxurious or personal in nature may be denied during a tax audit.
For companies in Japan, it is also important to prepare an internal business travel expense policy (travel expense regulations). Having clear internal rules helps explain the purpose and calculation of travel expenses during tax audits and reduces tax risk.
Keeping supporting documents such as receipts, travel schedules, meeting records, and business purposes is strongly recommended.
Also, if your company has proper travel expense rules in place, it may pay travel allowances that can be treated as deductible business expenses.
Can you assist with setting up an e-commerce business in Japan?
Our office specializes in tax and accounting, but we are members of a group that supports foreign people and companies starting businesses in Japan. The group includes a web marketer and a website builder with broad knowledge of the Japanese web world.
What accounting standards are used in Japan?
In Japan, listed companies generally apply accounting standards that are relatively close to international standards, while many small companies use accounting practices designed for small and medium-sized businesses.
As a result, financial statements for small companies in Japan are often simpler than those of listed companies, and some types of allowances and provisions are less commonly seen.
For foreign entrepreneurs, understanding these differences is an important part of accounting in Japan for small businesses.
companies use accounting standards that are almost international, most small companies use accounting standards for small companies. Therefore, it is rare to see allowances and provisions in a small company’s financial statement.
What are the tax obligations for foreign companies in Japan?
The main Japanese taxes that may apply to foreign companies doing business in Japan include corporate taxes and consumption tax.
Japan’s effective corporate tax rate is often around 30%, although the actual rate depends on factors such as taxable income, company size, capital, and location. Japan’s standard consumption tax rate is 10%, subject to applicable rules and exceptions.
Foreign companies may also need to consider international tax issues such as Permanent Establishment (PE), withholding tax, and tax treaty provisions depending on how they operate in Japan.
An Easy Explanation of Consumption Tax for Doing Business in Japan
What types of business structures are available in Japan for foreign entrepreneurs?
In Japan, many people initially start a business as a sole proprietor and later incorporate after the business becomes sufficiently profitable.
For foreign entrepreneurs, the appropriate structure also depends on visa status. If you need a Business Manager Visa, establishing a company is often the more practical option. If you already have a status of residence such as a spouse visa that allows you to run a business, starting as a sole proprietor may also be possible.
For the main types of Japanese corporations, please see the following article.
Do I need a local partner to start a business in Japan?
A local partner is not always legally required, but having support in Japan can make some practical procedures much easier.
In my experience, opening a bank account is one of the biggest initial hurdles for foreign individuals and companies starting a business in Japan. Having a Japanese director or other reliable local support can make the process smoother.
If you intend to operate a business in Japan while living outside Japan, local cooperation can become particularly important.
ost significant initial hurdle for foreign people and companies starting a business in Japan. If you have Japanese cooperation, like the company’s directors, it will be smoother at that time. Plus, if you want to run a business in Japan without staying in Japan, Japanese cooperation is essential.
How do I transfer profits from my Japanese business to my home country?
There are several ways to transfer profits from a Japanese company to an overseas owner, including dividends and director’s compensation.
The Japanese and foreign tax treatment differs depending on the method used, and cross-border payments may create double taxation in some cases. Tax treaties and foreign tax credits may help reduce double taxation.
For this reason, the payment method should be considered as part of international tax planning before funds are transferred overseas.
What are the costs associated with starting a business in Japan?
Starting a company in Japan usually costs around JPY 500,000 for company registration and related procedures. If you need a Business Manager Visa (commonly called a management visa), immigration support fees are often around JPY 300,000, depending on the complexity of the case.
After establishing the company, bookkeeping and tax filing are also necessary. Hiring an accounting office for ongoing support and annual corporate tax returns typically costs at least JPY 300,000 per year.
On the other hand, starting as a sole proprietor (self-employed business owner) is much cheaper because there are generally no registration fees for setting up the business itself.
The best structure depends on your visa status, expected income, business type, and long-term plans in Japan.
What accounting and tax services does your office provide in Japan?
Our main services include bookkeeping, preparation of Japanese tax returns, tax consultation, corporate tax planning, and support during tax audits.
We provide accounting and tax services in Japan for entrepreneurs and small businesses, including English support for foreign business owners. We also assist with international tax matters when clients have income, assets, companies, or transactions outside Japan.
Our goal is not only to prepare accurate tax returns but also to maintain accounting records that can be properly explained if a tax audit occurs.
Koshida Accounting Office Fee Schedule
What is the Invoice System in Japan?
Japan’s Qualified Invoice System determines the documentation requirements for businesses claiming input consumption tax credits.
In general, a consumption-taxable business calculates the tax payable by subtracting eligible input consumption tax from consumption tax collected on taxable sales. Qualified invoices are important when claiming these input tax credits.
For more details, please see the following article.
Why are there so many different licensed specialists in Japan?
Japan has many nationally licensed professions, and each profession has its own legally defined area of work.
For example, tax accountants specialize in taxation, administrative scriveners handle many visa, license, and administrative procedures, judicial scriveners specialize in certain registration procedures, and lawyers handle legal matters.
As a result, businesses in Japan often work with several different specialists depending on the issue involved.
Do businesses in Japan need to keep invoices and receipts electronically?
Yes. Under Japan’s Electronic Record Keeping Law, electronic invoices, receipts, and other transaction records received by email or through online systems must generally be retained in electronic format. Proper record management can help businesses comply with Japanese tax requirements and prepare for a tax audit.
For more details, please refer to our blog, ” Japan’s Electronic Record Keeping Law: A Practical Guide for Businesses.”
Can your accounting office handle bookkeeping for my business in Japan?
Yes. Our office can handle bookkeeping and prepare accounting records for your business in Japan.
Usually, clients provide the basic source data, such as electronic bank and credit card records. We also normally ask clients to enter basic information from receipts and other documents into Excel.
We then use this information to prepare the accounting records. If you would like us to manually enter all of the source data as well, additional bookkeeping fees may apply.
What is the corporate tax rate in Japan?
Japan’s effective corporate tax rate is generally around 30%, although the exact rate depends on factors such as taxable income, capital, and the location of your company. In addition to national corporate tax, companies are also subject to local corporate tax, corporate inhabitant tax, and corporate business tax.
For a detailed explanation of how these taxes are calculated, please read our blog, ” Japan Corporate Tax Rate Explained “
Is there VAT in Japan?
Yes. Japan has a VAT-type tax called consumption tax. The standard rate is 10%, while a reduced rate of 8% applies to certain food and beverage transactions.
In practice, Japanese consumption tax can be one of the more complicated areas of tax in Japan, particularly because of issues such as taxable and non-taxable transactions, export transactions, and the Qualified Invoice System.
For more details, please see the following article.
An Easy Explanation of Consumption Tax for Doing Business in Japan
How common are tax audits in Japan, and should businesses be worried?
Japan’s tax system is based largely on taxpayers filing their own tax returns, so tax audits are a normal part of checking whether those returns are correct.
A tax audit does not necessarily mean that the tax office suspects serious wrongdoing. In many cases, it is simply a procedure for confirming the figures and supporting documents reported in the tax return.
For that reason, businesses do not need to be excessively afraid of a tax audit if their accounting records and tax filings have been properly prepared.
Can I change a director's compensation during the fiscal year in Japan?
You can change a director’s compensation during the fiscal year, but the tax treatment requires careful consideration.
Under Japanese corporate tax rules, a change made outside the permitted conditions may result in part of the director’s compensation becoming non-deductible for corporate tax purposes.
For this reason, the amount and timing of director’s compensation are important parts of corporate tax planning in Japan.
When Launching a Company in Japan, Determining the Director’s Compensation Amount is Crucial
Can I choose my company's fiscal year-end month in Japan?
Yes. In Japan, a company can generally choose its fiscal year-end month when it is established.
The choice can affect the timing of tax filings, tax payments, and tax planning, so it is worth considering before incorporation.
month. For details, please see the blog.
When Establishing a Company in Japan, Which Month Should You Set as the Fiscal Year-End?
When selecting an accounting office in Japan, what should I consider?
You should choose an accounting firm in Japan that fits the size, needs, and character of your business.
A large accounting firm may be suitable for a large company with complex reporting requirements, while a smaller accounting office may provide more direct and flexible support for a small business.
International taxation is also not a specialty of every accounting office in Japan, so businesses with overseas income, assets, owners, or transactions should confirm whether the accountant has relevant experience.
I also think the representative’s policy, personality, and approach to business are important. Tax accuracy is essential, but taxation is only one part of business management. Our office aims to maintain tax accuracy while explaining the practical options available so that clients can make their own business decisions.
n accounting office that fits you and your business. Selecting a large accounting office may be better if your business is large. If it is rather small, a small accounting office may be fit for you. International taxation is not common for ordinary accounting offices. Also, the accounting office representative’s policy, personality, and thoughts are important. The offices that insist on only tax accuracy are not recommended because taxation is just part of management. While maintaining tax accuracy, our office advises you on several ways to choose for your business.
Do accounting records for a business in Japan need to be prepared in Japanese?
In practice, accounting records used for Japanese tax filing should be prepared in a form that Japanese tax authorities can understand and review.
This is particularly important during a tax audit, when tax officers may need to examine account titles, transaction details, invoices, receipts, and other supporting records.
For foreign business owners, our office can provide accounting in Japan with English support while maintaining the accounting records needed for Japanese tax purposes.
is necessary because tax officers can properly conduct tax investigations.
What Japanese tax and accounting work is included in your monthly advisory service?
Under our monthly advisory service, we handle most of the routine tax and accounting procedures required for your business in Japan.
These services can include preparing accounting records, filing tax returns, submitting tax-related documents to the relevant authorities, estimating future taxes, and providing tax planning advice.
This allows foreign entrepreneurs and small businesses to receive ongoing accounting and tax support in Japan rather than dealing with each procedure separately.
verything related to Japanese taxation, such as submitting documents to a tax office or others, preparing an accounting book and tax returns, and doing tax planning, if you contract monthly advisory services with our office.
My company has been notified of a tax audit in Japan. Can you assist us and attend the audit?
Yes. We first review your company’s situation and the scope of the tax audit. If we are able to accept the engagement, we can help you prepare for the audit and attend discussions with the tax office as your tax accountant.
mpany’s situation, and I will assist you if it is possible.
My company has been notified of a tax audit in Japan. Can you assist us and attend the audit?
Yes. We first review your company’s situation and the scope of the tax audit. If we are able to accept the engagement, we can help you prepare for the audit and attend discussions with the tax office as your tax accountant.
I want to start a business in Japan while living outside Japan. Can you assist me?
Yes. I can assist with the Japanese tax and accounting aspects of starting and operating a business in Japan.
Our office is also part of a professional group that supports foreign individuals and companies starting businesses in Japan. When necessary, I can introduce specialists in areas such as visas, company registration, legal matters, and other procedures outside my own tax specialty.
is a group member supporting foreign people and companies starting businesses in Japan. Therefore, I can introduce each specialist who is essential when starting a business in Japan.
Can you assist me in getting a Japanese management visa?
My accounting office can not assist you with it directly. However, we are a member of a group that assists foreign people or companies starting businesses in Japan and can, therefore, introduce you to a visa specialist.
Can your office help me file past-due Japanese tax returns?
Yes. We can review your situation and assist with past-due Japanese tax returns when appropriate.
If you have failed to file a required tax return in a previous year, it is generally better to review the issue and correct it before a tax audit begins.
our past tax returns if needed.
Is incorporation necessary when starting a business in Japan?
No. You can start a business in Japan as a sole proprietor without incorporating a company.
However, if you need a Business Manager Visa, establishing a company is often a practical option. If you already hold another status of residence that allows you to operate a business, such as certain spouse-related statuses, starting as a sole proprietor may also be possible.
Can I file my tax return by myself in Japan?
Yes. Many sole proprietors in Japan with relatively small and simple businesses prepare and file their own tax returns.
In my experience, however, corporations are much more likely to use a tax accountant because corporate tax returns are considerably more complex.
Whether you should file by yourself depends on the size of your business, the complexity of your transactions, and whether you have international tax or accounting issues.
Can I ask your office to prepare a Japanese tax return on a one-time basis?
Yes. Our office accepts certain one-time tax return engagements in Japan.
For example, an employee who has overpaid Japanese income tax may be able to file a tax return to claim a tax refund. We can review the situation, determine whether a refund may be available, and prepare the Japanese tax return when appropriate.
The requirements for a tax refund in Japan depend on the individual’s income, deductions, withholding tax, and other circumstances.
Tax and Accounting Support in Japan
Koshida Accounting and Tax Office provides accounting and tax services in Japan for foreign individuals, entrepreneurs, and small businesses.
Our services include bookkeeping, tax filings, corporate tax planning, tax consultation, and support with international tax and accounting matters. English support is available for clients who find Japanese tax and accounting procedures difficult.
If you have a question that is not covered in this FAQ, please feel free to contact us.