How the Tax Office Selects Tax Audit Targets in Japan
【Koshida Accounting Firm Column Date:】
Hi, my name is Taisei Koshida, and I am a certified public accountant and licensed tax accountant in Japan.
I support non-Japanese business owners and individuals with accounting and tax matters in Japan, particularly when dealing with the Japanese tax system in English can be difficult.
If you are wondering how the Japanese tax office selects businesses for tax audits, this article explains the timing of audit target selection and how the tax office’s fiscal year can affect when an audit is conducted.
Based on my experience assisting clients with tax audits in Japan, the timing of the selection can also affect how an audit is conducted.
When Does the Tax Office’s Fiscal Year Start in Japan?
The fiscal year for the tax office starts in July.
When Does the Tax Office Select Tax Audit Targets in Japan?
In practice, tax audit targets are generally selected twice a year.
First Half Selections
The tax office selects audit targets at the start of July. These selections generally include businesses with fiscal year-ends from February to May.
Second Half Selections
The tax office selects another group of audit targets at the start of April. These selections generally include businesses with fiscal year-ends from June through the following January.
Although the second half of the tax office’s fiscal year starts in January, the selection process begins in April. This is because tax office staff are occupied with individual income tax returns, or kakutei shinkoku (確定申告), from January through March.
Why Tax Audits Selected in July May Be More Thorough
Just as driven and competent salespeople in the private sector strive for good results at the start of a new fiscal year, tax officials are highly motivated during the first half selections.
In my experience, this strong focus on achieving results, including the collection of additional taxes, can lead to more rigorous and meticulous tax audits.
Need Help with a Tax Audit in Japan?
Our accounting firm in Japan assists foreign business owners with accounting, tax filings, and tax audits in English.
If your business has been selected for a tax audit, or if you have questions about the tax system in Japan, we can help you understand the process and communicate with the Japanese tax authorities.
Please feel free to contact us through the inquiry form.