Key Considerations for Sole Proprietors in Japan When Claiming Car-Related Expenses and Home Rent as Business Deductions

【Koshida Accounting Firm Column Date:

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.



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