How Are Tax Audits Conducted in Japan? Part 2: What to Expect
【Koshida Accounting Firm Column Date:】
The hardest thing in the world to understand is income taxes. – Albert Einstein
Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant in Japan.
I assist foreign business owners with accounting and tax matters in Japan, including tax filings and tax audits in English.
If your business is selected for a tax audit in Japan, you may wonder how many tax officers will come, how long the audit will last, whether they will continue until they find an error, and how many years they will examine.
Based on my experience assisting clients with Japanese tax audits, this article explains what small business owners can generally expect.
How Many Tax Officers Usually Come to a Tax Audit?
For a small business, usually only one tax officer is assigned to the audit.
During periods when new tax officers are being trained, it is also common for a new officer to attend together with an experienced supervisor.
How Long Does a Tax Audit Usually Last?
For a small company, the on-site visit by the tax office often lasts about two days.
If discrepancies or errors are found, there may be additional communication and discussion with the tax office after the visit. In my experience, the audit often concludes after a period of about one month, including these discussions.
Do Tax Officers Keep Investigating Until They Find an Error?
No, that is not true.
Some tax audits conclude without any significant findings. In addition, when only minor errors are found, the tax officer may simply point them out without requiring an amended tax return.
How Many Years Does a Japanese Tax Audit Usually Cover?
In practice, a tax audit often begins by reviewing the most recent three accounting periods.
However, if the tax office finds serious problems or suspects fraudulent conduct, the investigation may be expanded to earlier years. In serious cases, the tax authorities may go back as far as seven years.
This series continues in Part 3:
Our accounting firm in Japan assists foreign business owners with accounting, tax filings, and tax audit matters in English.
If you need support with accounting in Japan or assistance before or during a Japanese tax audit, please feel free to contact us through the inquiry form.