Accounting And Tax System In Japan

Copyright 2007 SCS Global Professionals Co., Ltd. All Rights Reserved

Accounting and Tax system in Japan

SCS Global Professionals Co., Ltd.CORPORATE CATALYST INDIA PVT LTD

(In Joint Venture with SCS GLOBAL, Japan)

1


AccountingAccounting

“Triangle System” in the accounting system

� The Corporation Law (Kaisha Ho)

� Financial Instruments and Exchange Law (Kinyuu Shohin Torihiki Ho)

� Corporation Tax Law (Hojinzei Ho)



Law Corporation Law

Financial Instruments and

Exchange Law

Corporation Tax Law

Authorities

Ministry of Justice

Financial Services Agency

National Tax Agency

Purpose Protect the interests of

shareholders and

creditors

Protect the interests of investors

Fairness and certainty of

taxation

Scope Companies Listed Companies Corporations



Corporation Law

Companies Calculation Rules

(Kaisha Keisan Kisoku)

GAAP

‘GAAP’: -Accounting Principles by Corporate Accounting Board(FSA)-Accounting Standards by ASBJ(Accounting Standards Board of Japan)-Guiding Principles by JICPA (Japanese Institute of Certified Public Accountants)Etc. Differences btw Japan GAAP and IFRS, US GAAP?



Internal Control

1. “J-SOX” (Japanese version of Sarbanes-Oxley Law):Section 24-4-4, Financial Instruments and Exchange Law (Kinyuu Shohin Torihiki Ho)

2. Section 362-4-6, 362-5, The Corporation Law (Kaisha Ho)


TaxTax

Major taxes

Company (a)Corporation tax ( 法人税 ) – National(b)Business tax ( 事業税 ) – Local(c) Inhabitant tax ( 都道府県民税・市町村民税 ) - Local(d) Consumption tax ( 消費税等 ) - National & Local(e) Withholding Income Tax ( 源泉所得税 ) – NationalIndividual(a) Income tax ( 所得税 ) – National(b) Business tax ( 事業税 ) – Local(c) Inhabitant tax ( 都道府県民税・市町村民税 ) – Local(d) Consumption tax ( 消費税等 ) - National & Local(e) Inheritance tax ( 相続税 ) – National(f) Gift tax ( 贈与税 ) - National


TaxTax

Tax Rates:

Corporation tax : 30% of taxable income

Business tax : 9.6% of taxable income

Inhabitant tax : 20.7% of the Corporation tax (+ Per Capita Tax (70,000yen-))

Effective Rate ?


TaxTax

Schedule of tax return and tax payment :(a) Interim tax return and interim tax payment

File and pay within two months from the end of the sixth month of the fiscal year.

(b) Final Tax Return and final tax paymentFile and pay within two months from the end

of the fiscal year. (One month extension could be made for the filing due to audit etc. )


TaxTax

Transfer pricing :Transaction between foreign related companies would be subjected to Japanese transfer pricing taxation.Tax Haven :Use of the offshore corporation as tax haven requires to combine the taxable income for the tax purposes.

Thin Capitalization :Interest expenses are disallowed in case of the thin capitalization.


TaxTax

Tax Treaty :Tax treaty has been concluded between 55 countries.

India-Japan :

Dividend Interest Royalty Technical Service

10% 10% 10% 10%

Withholding tax :Company has necessity to withhold income tax for the payment of salary, professional fee, etc.


TaxTax

Carry forward loss :

Carry forward loss (taxable loss) would be expired after 7 years.

Foreign tax credit :

Japanese corporations which pay foreign national or local taxes based on income may take a credit against Japanese corporation tax subject under the foreign tax credit rules.


TaxTax

Individual Tax :

(a) Income tax rate 0-1,949,000yen : 5%1,950,000yen - 3,299,000yen : 10%3,300,000yen - 6,949,000yen : 20%6,950,000yen - 8,999,000yen : 23%9,000,000yen - 17,999,000yen : 33%18,000,000yen - : 40%

(b) Inhabitant tax rate : 10%


TaxTax

Individual Tax :

Deduction from income

(a)Basic exemption : 380,000yen(b)Exemption for dependents : 380,000yen(c)Exemption for spouse : 380,000yen(d)Exemption for working students : 270,000yen


TaxTax

Individual Tax :Source of income subject to taxation• Non-resident :

Income in sources of Japan(b) Resident (i) Non-permanent resident: (A resident taxpayer of non Japanese nationality who has had domicile or residence in Japan for an aggregate period of five years or less within the last ten years.)

Income in sources of Japan : TaxableIncome from sources in abroad :

Paid in Japan - TaxablePaid in Abroad - Remitted to Japan is

taxable (ii) Permanent resident : All income is taxable


TaxTax

Schedule of tax return and tax payment :

(a) Estimated income tax prepayment(i) Paid between July 1st - July 31st(ii)Paid between November 1st - November 31st

(b) Final Tax Return and final tax paymentFile and pay by 15th March for the prior

calendar year


TaxTax

Consumption tax :

(1)Tax rate : 5% (National tax 4% and Local tax 1%)

(1)Tax payer (a)Company and individual which transfers

property or provides services in Japan in return for payment.

(b)Company and individual who removes foreign goods from a bonded area.

It is not necessary for a taxpayer to have a residence or domicile in Japan in order to be subject to the Consumption tax.


TaxTax

Consumption tax :

Schedule of tax return and tax payment:(a) Interim tax return and interim tax payment

Tax payer must file interim tax returns and make interim tax payments if the amount of Consumption tax on their return for the prior year exceeds certain limits.

(b) Final Tax Return and final tax payment(refund)Tax payer must file and pay within two months

after the end of tax periods. (Generally refund would be made within two months after the filing)


SCS Global SCS Global Company Name: SCS Global Professionals Co., Ltd.Established: September 2002President: Kinichi Shotoku (Japanese and US CPA)Head Office: Tokyo

10th flr Zenkoku Tobacco Center Bldg.,2-16-2, Nishishinbashi, Minato-ku,Tokyo, Japan 105-0003http://www.scsglobal.co.jpPhone: +81-3-5403-7117Fax: +81-3-5403-7118

Offices: China, Vietnam, Philippines, Malaysia, Thailand, Singapore, Indonesia, India, USA

Corporate Catalyst (India) Pvt Ltd JP House, 118 Shahpur Jat, New Delhi 110049, IndiaPhone: +91-11-4100-9999Fax: +91-11-4100-9990http://www.ccindia.com

THANK YOUTHANK YOU