How Sole Proprietors in Japan Can Deduct Car Expenses and Home Rent for Business

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

I aim to assist non-Japanese business owners who need help with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.

If you are unclear about the expense ratio in Japan, you might find this blog helpful.

Don’t Claim 100% of Expenses

If you claim 100% of these expenses, there’s a high chance they could be disallowed in the event of a tax audit in Japan. There’s always a certain portion attributed to personal use that is not business-related.

Calculate Your Expense Ratio Reasonably

To prepare for tax audits, it’s important to calculate your expense ratio in a reasonable manner. For car-related expenses, the most accurate method would be to record the distance using an odometer, but in many cases, this can be challenging. Utilizing a standard usage frequency is also acceptable. For example, if the car is used for business during the weekdays and for personal use on the weekends, you should deduct five-sevenths of the expense. In the case of home rent, if you use one room entirely for business, the rate should be calculated based on the proportion of floor space. In other scenarios, consider incorporating standard business usage hours into your calculation parameters to facilitate a reasonable explanation.

Our accounting and tax office has been actively assisting foreign business owners in Japan with accounting and tax matters. Also, not only in the tax and accounting field, our office can support your business in Japan in the fields of visa, registration, social insurance, and law by networking with specialists. Plus, we have networked with specialists in web marketing, building websites, and business consulting suitable for Japanese customers. All services are provided in English. Please feel free to reach out to us through the inquiry form.