When Establishing a Company in Japan, Which Month Should You Set as the Fiscal Year-End?

One ship drives east and another drives west with the selfsame winds that blow. It’s the set of the sails and not the gales that tell us the way to go. As we voyage along through life, It’s the set of a soul that decides its goal, and not the calm or the strife. － Ella Wheeler Wilcox

Hi, I’m Taisei Koshida, a certified public accountant and tax accoutant.

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

This blog may help if you are unclear about setting the month of the fiscal year-end.

If Your Business Has Seasonal Fluctuations

It’s wise to create a gap between the month with the highest sales and the fiscal year-end month. This is because if the sales spike significantly in the last month, the annual profit becomes heavily influenced by that month’s results. As a result, you might not be able to implement effective tax-saving measures for unexpected profits or take appropriate steps with banks for unexpected deficits since the fiscal year would have already ended by the time you analyze that month’s figures.

If You Have Peak Seasons

It might be beneficial to ensure that the month following your fiscal year-end doesn’t coincide with the busiest time for book-closing work.

If You Wish to Avoid Rigorous Tax Audits

It’s recommended to set your fiscal year-end outside of February to May. The reasons are detailed in this blog.

https://kotsicpafirm.com/how-the-tax-office-selects-audit-targets-in-japan/

If You Wish to Avoid Tax Audits Themselves

In the above blog, I mentioned that tax officers select audit targets from the fiscal year-end months ranging from June to the following January as the second half selection. Then, the deadline for tax filing for companies whose fiscal year ends in January is the end of March. At the time when tax officers are selecting audit targets in April, the data for these companies may be not yet placed. Therefore, it is believed that companies with a fiscal year-end in January are less likely to be selected for audits by tax officers.

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