Tuesday, November 26, 2013

Filing of tax return and payment of corporate taxes in Japan


A corporation must file a final tax return for corporate tax, corporate inhabitant tax and enterprise tax on its income within two months from the day following the last day of each taxable year. An extension of the deadline for filing the final return may be requested, with approval from the director of the tax office, when the entity is unable to file the tax return, by the reason of the accounting audit and other unavoidable reasons. Calculated tax must also be paid within the said two months period. The payment deadline will not be extended even if the deadline for the return were formally approved; interest and overdue tax, which are deductible expenses, for the extended period are imposed in this case.

For more: http://english.uniteds.asia

Wednesday, November 13, 2013

Japan Tax Treaties


Japan has concluded tax treaties with many countries for the purposes of avoiding double taxation of global income and preventing tax evasion. Provisions of tax treaties supersede those of domestic law. In determining Japan tax liability of individuals and corporations domiciled in a country with which Japan has a tax treaty, taxable income under Japanese law may at times be amended to accord with these tax treaties. Provisions have also been established in Japan for reducing the tax on, or exempting from tax, various types of income sourced in Japan.

Monday, October 28, 2013

Overview of Japan withholding tax system


Japan’s tax filing system is premised on the self-assessed income tax payment system where an income earner shall calculate annual income and tax amount, filing tax returns. The income subject to withholding tax is determined in accordance with the income classification of tax law. In principle, withheld tax must be paid to the tax office no later than the 10th day of the month following that in which the taxable income is paid. For the payment to a non-resident or foreign corporation, the withholding tax may be paid by the last day of the month following that in which the income is paid. For withholding tax on residents’ salaries and professional service fees, a special exemption is provided to small businesses with fewer than 10 counts on the payroll, allowing paying withholding income tax in six-month installments twice a year.

For more: http://english.uniteds.asia

Thursday, October 17, 2013

Tax return and tax payment of Japan corporate tax, corporate inhabitant tax and enterprise tax


Japan branch and corporation must file final tax returns for corporate tax, corporate inhabitant tax and enterprise tax on taxable income within two months from the day following the last day of each tax year.  Extension of deadline for filing the final tax returns may be requested, with approval from the director of the tax office, for unavoidable reason (e.g. its audit has not been completed). Owed taxes must also be paid within this same period. The payment schedule and deadline will not be extended even if the deadline for filing the final tax returns were approved; tax deductible late payment charges for the extended period will be imposed if the tax payments shall be overdue.

Japan branch and corporation whose taxable years exceeding six months must file interim returns within two months from the day following the last day of the first six months taxable year, and such entities must pay the interim amount of tax owed accordingly.

For more: http://english.uniteds.asia

Tuesday, October 15, 2013

Treatment of losses in Japan corporate tax law


Net loss in each business year is carried forward for the next nine years (or seven or five years in certain cases) if Blue Form Tax Return is filed for the business year in which the loss arose, and a final tax return is then filed every subsequent year. If a corporation has capital in excess of 100 million yen or is a wholly owned subsidiary of a large corporation with capital of at least 500 million yen, the amount of loss that may be deducted from income is limited. Except in few cases, certain small and medium-sized enterprises filing the Blue Form Tax Return, are allowed to carry back a loss to the business year commencing not more than one year prior to the date of commencement of the business year in which the loss arose, receiving a full or partial refund of the amount of corporate tax in the business year in which the loss was carried back.

Thursday, October 10, 2013

Remittance from Japan branch and subsidiary company to home country


In general, a remittance made by a branch of a foreign corporation to its head office cannot be treated as expenses of the payer branch. But, a remittance made by subsidiary company to its parent company arise from business-to-business transactions, such as distributions of profits and loans (or repayments of loans) may be regarded as payments of costs/expenses of the said subsidiary and, therefore, certain of these costs/expenses are deductible when calculating the taxable income of the payer subsidiary company. However, certain income of the parent company, such as payments of interest, dividends and usage fees, may be subject to the Japan withholding tax at the source at the time of payment.

For more: http://english.uniteds.asia

Monday, October 7, 2013

Calculation of income subject to Japan corporate tax

Taxable income subject to corporate tax for each taxable year is determined with tax adjustments to corporate profits calculated under generally accepted corporate accounting standards and other accounting practices. Costs and expenses incurred in earning profits are deductible.

A foreign corporation face no restriction on the location in which costs and expenses are incurred for deduction. However, detailed statements of costs and expenses incurred and deducted from income in Japan must be settled, and these costs and expenses must be allocated fairly in the prescribed manner. Some examples of items for which there are limits on deductible costs and expenses are:

- Corporate tax and penalty imposed
- Donation
- Entertainment and social expense
- Amount exceeding depreciable limit of depreciable and deferred asset
- Compensation of director

Representative office is, in principle, not subject to Japan corporate tax because it is not supposed to engage in income-generating busiess activity, except publicity/advertising, information gathering, market survey and other non-siginificant, subsidiary business tasks.

For more: http://english.unieds.asia

Friday, October 4, 2013

Mandatory notification to tax offices of corporation and branch in Japan

When corporation or branch office is newly established in Japan, notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. The tax notification must also be submitted when carrying out business activities through locations or parties under the following conditions:

(1) Construction, installation, assembly and others; or control and supervision of such works extends for a period of more than one year.
(2) Engaging in business through agents as described below:

- Parties having and frequently exercising the authority to conclude business agreements on behalf of a foreign corporation.
- Parties storing assets on behalf of a foreign corporation in a volume/quantity corresponding to the ordinary requirements of customers and delivering those assets in response to customers' requests.
- Parties who regularly carry out a siginificant work required for order acquisition, consultation and other activities for the conclusion of business agreements solely or primarily on behalf of a foreign corporation.

The taxes levied in Japan on income generated by the activities of branch and corporation include corporate tax (national tax), corporate inhabitant tax (local tax) and enterprise tax (local tax) (collectively referred to as "corporate taxes"). A whole income for each business year is the tax basis for determining corporate taxes. Except in instances requiring exceptional treatment, the scope of income subject to corporate inhabitant tax and enterprise tax is calculated in accordance with the provisions for corporate tax. Corporate inhabitant taxes are levied not only on income but also, in principle, on a per capita basis (based on its capital and number of its employees at that time).

For more: http://english.uniteds.asia

Monday, September 30, 2013

Overview of Japanese corporate tax for investor in Japan


 
Corporations engaged in economic activities in Japan are subject to taxes in Japan on the profits generated by those economic activities. Income of corporations established in Japan is, as a rule and with the exception of certain non-taxable and tax-exempt income, subject to taxation, regardless of where it is generated. However, for those incomes earned in foreign countries that are taxable in that source countries, foreign taxation deductions are available, whereby taxes paid in the foreign country may be deducted from Japanese taxes.

Domestic-source income:

The scope of taxable income for corporate tax differs by the activity of a foreign corporation in Japan. For the purpose of determining the income of non-residents and foreign corporations subject to withholding tax, domestic-source income (Japan source income) is defined as follows:

(1) Certain interest on public and corporate bonds, interest on savings and deposits derived from offices in Japan
(2) Interest on loans for business operations in Japan
(3) Dividends on shares or securities investment trusts of domestic corporations
(4) Consideration for use of real estate or similar property in Japan; rental/lease of ships or aircraft to residents or domestic corporations
(5) Salaries, wages, bonuses and other compensation for the provision of services in Japan
(6) Retirement allowances and pensions for services rendered as residents
(7) Consideration for the services of freelance professionals in Japan
(8) Certain consideration for rendering professional services in Japan exercised by entertainers, freelance professionals, technicians, etc.
(9) Usage fees or consideration for transfers of patent rights, know-how, copyrights, etc., in connection with services in Japan
(10) Usage fees for machinery and equipment in connection with services in Japan
(11) Prizes offered in Japan for publicity/advertising purposes
(12) Pensions paid on the basis of agreements concluded in Japan
(13) Profit on redemption of discount bonds issued in Japan
(14) Certain income resembling interest income in nature
(15) Certain income from the transfer of real estate in Japan
(16) Distribution of profits in accordance with a silent partnership contract (Tokumei Kumiai contract)
(17) Certain income other than the above derived from the management, ownership, or transfer of assets in Japan
(18) Domestic business income
(19) Distribution of profits pursuant to a partnership agreement provided for by Civil Law, and other kindred partnership agreements

For more info contact: http://english.uniteds.asia

Thursday, September 26, 2013

Extension of period of stay of Visa in Japan


The period of stay is determined together with the Status of Residence when the foreign national lands in Japan or changes his/her Status of Residence while in Japan; you are allowance for stay is set by the applicable statute of immigration law. Consequently, if you wish to continue the same activities in Japan with the present Status of Residence beyond the original period of stay, you must apply for an extension no later than the last day of that period. However, the extension will not be granted if the purpose of the stay has already been completed or there are some issues connected with your Status of Residence. Applications for extensions may be submitted from three months before the expiration date of the original period of stay if that stay is at least six months.
 
For more information contact: http://english.uniteds.asia

Saturday, September 21, 2013

Family members accompanying working foreign nationals in Japan

Spouse and child dependent of working foreign nationals in Japan are categorized as "Dependent" Status of Residence and are permitted to engage in non-work day-to-day activities; work for compensation is prohibited unless exceptional condition is permitted by immigration office of Japan (no more than 28 hours per week part-time work). Applications for "Dependents" may be submitted at the same time as those applications for the working foreign national or after the working foreign national has arrived in Japan.

For more information contact: http://english.uniteds.asia

Friday, September 20, 2013

What is “Re-entry permission” to Japan?

Re-entry means a foreign national residing in Japan leaves Japan temporarily and re-enters Japan with the same Status of Residence as before. Under this system, the foreign national who legally holds “Re-entry permission” stamp on the passport before leaving Japan does not need to apply for another entry Visa at a Japanese diplomatic mission abroad prior to re-entering Japan. In other words, if you are departing Japan without holding this Re-entry permission, you will not be able to return to Japan without obtaining new Visa.

Types of Re-entry permission
There are two types of Re-entry permits: single, which allows only one re-entry into Japan during the period of validity, and multiple, with which one can leave and re-enter Japan any number of times during the period of validity. Multiple is suited for those who must travel back and forth between Japan and the other countries. However, it is not possible to obtain the Re-entry permission exceeding the permitted period of stay in Japan. And, persons staying in Japan on Temporary Visitor Status of Residence are not normally eligible for Re-entry permission.

 For more information contact us: http://english.uniteds.asia

Thursday, September 19, 2013

Relationship between operation types and Status of Residence in Japan

 
A foreign company can establish a business presence in Japan in one of three ways: Representative Office, Branch or Subsidiary company. One of the most frequently asked questions is the relationship between each type of operation and the Status of Residence. In general, they can be summarized as follows:

 Representative of Representative Office ---- "Intra-company Transferee"

 Representative of Branch ---- "Intra-company Transferee" or "Investor/Business Manager"

 Representative of Subsidiary company ---- "Investor/Business Manager"

 A foreigner (except those falling under the category of "Investor/Business Manager") employed by such Representative Office, Branch or Subsidiary company will be "Intra-company Transferee" or other Status corresponding to his/her academic/work record and the nature of his/her work in Japan, such as " Humanities/International Services" "Engineer" etc.).

 

Monday, September 16, 2013

Entry to Japan by Temporary Visitor Visa and status


Japan Temporary Visitor status covers tourism, relative visits, field trips, participation in meetings, business contact and similar activities undertaken staying temporarily in Japan. The periods of stay allowed for Temporary Visitor status are up to 90 days, 30 days or 15 days. However, holders of Temporary Visitor status shall not engage in compensation related activities.

Some examples of allowed activities by this Visa are as follows:

- Staying in Japan for the purpose of field trips and business missions (e.g. business tours and trade fair visits)
- Participating in conferences and meetings
- Business negotiations, contract signing, after-sales service, advertising/publicity, market research and other short-term business activities.

Reciprocal Visa Exemptions for temporary visitor
The countries listed on the website of the Ministry of Foreign Affairs of Japan have concluded reciprocal Visa Exemption arrangements with Japan. Nationals of these countries wishing to engage in activities that fall within the scope of the Temporary Visitor are not required Visa to enter Japan.

However, these Visa Exemption arrangements do not mean you are allowed to work or engage in activities for compensation in Japan.

Ministry of Foreign Affairs of Japan website: http://www.mofa.go.jp/j_info/visit/visa/short/novisa.html

For more information contact us: http://english.uniteds.asia

Saturday, September 14, 2013

Major types of working Visa and Status of Residence related to investment and employee in Japan

Below are the major types of working Visa and Status of Residence related to investment and employee in Japan:

Investor/Business Manager

(1) Activities to invest in commence and operate/manage a new business in Japan.

(2) Activities to invest in an existing business in Japan and operate/manage the said business.

(3) Activities to operate/manage a business in Japan on behalf of the foreign nationals or foreign corporations that have invested in and commenced that business (e.g. CEO or Representative Director responsible for that business).

(4) Activities to operate/manage a business in Japan on behalf of the foreign nationals or foreign corporations that have invested in an existing business in Japan.

Engineer

Activities to engage in services requiring technology and/or knowledge pertinent to physical science, engineering or natural science fields, on the basis of contract with a public or private organization in Japan.

Humanities/International Services

Activities to engage in services that requiring knowledge pertinent to jurisprudence, economics, sociology or human science fields; or to engage in services requiring sense and experience with foreign culture, on the basis of a contract with a public or private organization in Japan.

Intra-company Transferee

Activities on the part of personnel who are, for a limited period of time, transferred to branch or business office in Japan from foreign companies having head offices outside Japan (must clear "Engineer" or "Specialist in Humanities/International Services" criteria).

Legal/Accounting Services

Activities to engage in the legal or accounting business. An applicant must be a foreign attorney, a foreign certified public accountant or those with some other legal qualifications.

 For More info contact us: http://english.uniteds.asia
 

Friday, September 13, 2013

Entry to Japan: difference in VISA and Status of Residence ("Zairyushikaku")


When you are entering Japan, you must have valid passport with valid Visa corresponding to the purpose of entry issued by Japanese embassy or consulate general. Upon entry, you must then receive a landing permission stamp from an immigration officer; the office will determine your Status of Residence and period of stay at this point, except for those who are nationals of countries with which Japan has reciprocal visa exemption arrangements for temporary visitor visa or having re-entry permission.

What are VISA and Status of Residence ?

Visa is a “recommendation” required for entry into Japan, issued in advance by a Japanese diplomatic mission abroad certifying that your passport is valid and that there are no impediments to authorizing you entering within that Visa scope.

Upon landing on Japan soil and entering Japanese immigration counter, receiving landing permission, your “actual status of residence” in Japan will be determined. The Status of Residence constitutes the grounds on which you are legally permitted to stay in Japan; it is a qualification enabling you to carry out the activities stipulated in the Immigration Control and Refugee Recognition Act and to reside in Japan for the purpose of carrying out those particular activities. The scope of activities in which you may engage during the stay is determined according to this Status of Residence. You must not, in principle, engage in any activities generating an income other than those permitted by your Status of Residence.

 
In rare case, you may be refused to enter Japan by the immigration officer at the counter even if you have a valid passport and Visa. Visa is not the guarantee for entering but is simply an initial necessary document for entering Japan.

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Thursday, September 12, 2013

Q: Registration tax imposed on a foreign firm opening an office in Japan.

A: Formalities for a foreign investor opening an office in Japan is not much different from Japanese national doing so. However, imposed tax system varies due to the office’s legal entity status, cash flow, work-flow between a branch and parent company. For example, the branch is taxed solely on Japan source income only if the entity is able to pass size-test, authority-test, cash-flow-test and some other factors. Selecting the type of legal entity, you should consider at least the followings:

1. Types of Corporation
Under Japanese Corporate Tax Law, “foreign corporation” is an entity whose headquarter resides outside Japan, and “foreign-affiliated corporation” is an entity whose controlling interest is dominated by a foreign company. Where former entity is treated a foreign company in Japan but latter is treated domestic company for the sake of tax treatment.

2. Bilateral Tax Treaty
Japan binds bilateral tax treaties with 56 countries as of May 2008. The treaty aims to avoid double taxation and unfair tax treatment in bound countries by superseding domestic law. The application of the Tax Treaty is very effective but needs careful planning and thorough research on the subject.

3. Bilateral Social Insurance Treaty
As to bilateral tax treaty, Japan also binds bilateral social insurance treaty with few countries in the subject of pension plan and health plan. Social insurance system is mandatory for all types of corporation status except in few cases.

For More info contact us: http://english.uniteds.asia

Q: Social security regulation for a foreign firm hiring an employee.

A: Foreign employees and officers working for a foreign corporation or branch in Japan are protected by all types of Japan Labor Insurance law. Because the protection is no different from Japanese employees, everyone who has an address in Japan must be insured by public social insurance system and health insurance system. Four types of insurances are the followings:

1. Workmen's accident compensation insurance
Protect insured form work injury and accident as well as commuting.
2. Unemployment insurance
Protect insured from unemployment and support reemployment.
3. Health insurance
Provide medical care and treatment.
4. Pension plan
Provide security for retirement, death and disability.

If foreign employees are insured by Japan Social Insurance System, there often occurs a problem of double-insurance. Some can be resolved through bilateral social insurance treaty but not to satisfactory extent in most cases.

For More info contact us: http://english.uniteds.asia

Q: Visa issue of officer and employee dispatched to Japan.

A: Regardless of the type of entity, all foreign employees working in Japan must acquire applicable visa permits, so-called “zairyushikaku.” There are many types of zairyushikaku and you must apply for the one best suited to your planned activity in Japan. Immigration Office announces basic criteria for the application as a reference, but the actual application review process is not officially disclosed. Your extension, change of permit and all other immigration works are done through a local office governing your residential area.

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Q: Important reminder on formalities for establishing Japan branch office.

A: A foreign company wishing to setup a branch office in Japan must register its presence at local Register Office. A foreign company branch in Japan without legitimate registration is illegal and will be penalized if it engages in sales activity. As to corporate tax filing, the branch must report the income generated in Japan. Bilateral tax treaty is practical tax saving but need careful long-term planning to be applied effectively.

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Q: Types of incorporation in Japan.

A: There are 3 models you can select for Japan investment.

"Representative office"
A representative office is established as a location for carrying out preparatory and supplemental tasks enabling foreign companies to engage in full-scale Japan business operations. The establishment of representative office does not require official registration or formalities. You may conduct market survey, collect information, purchase goods and advertise but must not engage in sales activities. Further, the representative office cannot open bank accounts or bind a legal contract in its own name.

"Branch office"
A foreign company wishing to engage in sales activities in Japan must establish a branch office or subsidiary company. After appointing a branch manager who is a resident having a legitimate address in Japan, the branch office is permitted to engage in business operations by registering at local Register Office. The branch may open bank accounts and bind a legal contract in its own name. The branch does not have its own legal corporate status but is treated as the same of corporation in terms of the tax filing.

"Subsidiary company"
All types of subsidiary companies are established by following the legal procedures stipulated by Japan Corporation Law. The subsidiary is independent from the foreign company (parent company) meaning the foreign company must bear the liability of an equity participant stipulated by law for all debts and credits generated by the activities of the subsidiary. All subsidiary companies must join social security system when the entity starts to employ in Japan.
Uniteds helps you finalize your Japan business scheme according to updated business law. We suggest you the most reasonable and budged-oriented solution for your first time incorporation, foreign accounting and human resource.
 
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Q: Application of business loan by a foreign firm.

A: There is no limitation for a foreigner or foreign company to set up an office, corporation in Japan. However, receiving a loan from an initial year is very difficult to do. Basic criteria for the loan are stability and continuity of the business including credibility of the owner. If you do not have a long-term VISA (“ZAIRYUSHIKAKU”) in Japan, you must have reasonable guarantee.

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Q: Types of investment you choose to expanding business to Japan.

A: There are 3 types of direct investment you can choose for Japan business.

"Investment through local office establishment"
Any local representative office, corporation and branch fall into this category. Pro: you gain a direct and flexible control of the business. Con: sometimes high cost.

"Investment through exchange or buying of corporate stock including partnership agreement"
You are able to direct the business and act as if you had management resource and power. Pro: you can achieve much of the mutual goals through a positive relationship. Con: differences in managerial goal directly influence a cooperative relationship.

"Investment through merger and acquisition"
Divisional merger and acquisition are included. Immediate operation, acquisition of qualified personnel and operational synergy are targeted. However, cross-cultural synergy and business culture must be assessed carefully.
 
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Q: Government business subsidy to a foreign firm.

A: A definition of “foreign company” is not clearly defined under investment regulation of Japan, but any corporation with more than one third of foreign investment usually is so. Most national administrative organs apply this term when judging the issue of subsidies. Under Foreign Exchange and Foreign Trade Act (“Foreign exchange regulation”), a foreign investor is defined as follows:

1. Non-resident individual person
2. A corporation established under a foreign company law, including the foreign company’s branch in Japan
3. A corporation invested directly or indirectly more than 50% by one of the preceding investors
4. A Japanese corporation dominated more than half by officers who is a non-resident individual person or officers having representation rights

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Q: How to dissolve Japan branch office.

A: To close a Japan branch permanently, you must follow a closing procedure which may take few months depending on the situation. Basic steps are as follows:

1. Resolution by the holding entity to close the branch
2. Peremptory notice to creditor through official gazettes
3. Appointment of tax management personnel
4. Distribution of residual property
5. Close of the branch
6. Drafting of affidavit
7. Registration of the branch closure
8. Notices to public offices

If you are to setup a corporation based on the branch property and assets (in-kind contribution), you still need to follow the preceding procedures.

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Q: How to dissolve incorporated Japan affiliate or subsidiary.

A: To close a Japan corporation permanently, you must follow a closing procedure which may take few months depending on the situation. Basic steps are as follows:

1. Resolution by the board of directors to dissolve a corporation and selection of liquidator
2. Registration of the dissolution and liquidator
3. Notices to public offices of the dissolution and liquidator
4. Peremptory notice to creditor through official gazettes
5. Distribution of residual property
6. Resolution by the board of directors for the liquidation
7. Registration of the liquidation and notices to public offices

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