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Tax and Accounting system in Japan
1. Tax return for foreign company's Japan branch
Q
| Our company is registered as a Japan branch which the head office is in Europe. Our company purchases electric parts in Japan and exports theses to Europe. Should we file corporate income tax in Japan and can we claim consumption tax? |
A
| You have to file company tax with a financial statement of Japan branch and also present a consolidated financial statement of head office include Japan branch.
You can claim consumption tax. When you report about special case for term, you can claim consumption tax every 3 months. |
2. Taxation of transfer price of Japan branch
Q
| Our company is registered as a Japan branch which the head office is in Europe. Our company purchases electric parts in Japan and exports theses to head office in Europe. Do we apply to transfer price taxation when we set the export price under valued ? |
A
| If it was subsidiary in Japan, it would be applied , but in case of Japan branch, transfer taxation is not applied to. |
3. The differences between salary for foreigner and Japanese
Q
| We have employed foreigners only for 6 months and paid salary to them. Do we collect withholding tax from them same as Japanese employees? |
A
| It depends on your employees status, resident or non-resident. (It doesn't matter they are foreigners or not.) If they are resident in Japan, tax rate is the same as Japanese. If they are non-resident, it is 20%. When they are usually working for 1 year or more in Japan, they will be resident, but if they return their country in 6 months, you collect 20% withholding tax from their salary. |
4. Difference between residents or non-residents
Q
| What is the difference between resident and non-resident on taxation? |
A
| On income taxation, a definition of resident is that people have an address or have been living in Japan more than 1 year. It doesn't matter of nationality or title of resident in Japan. Even Japanese who have an address in abroad and are living in out of Japan almost years or are on business trip abroad for a long time are non-resident on taxation. |
5. How to change tax treatment residents to non-residents
Q
| We will employ foreigners for 1 year contract. If they return their country in 6 months for some reasons, can we withhold their income taxes? |
A
| You don't go back to the past. You withhold income tax from the month when they are decided to return their home country. |
6. Tax exemption for foreign people who stay for short term
Q
| Our company is subsidiary which the head office is in U.S. Engineers from our head office will get training in Japan for 3 months. Their salary will be paid by our head office. How about income taxation? Do we have to collect withholding tax from their salary? |
A
| Under the tax treaty, you don't have to collect withholding tax if they stay in Japan not more than 183 days and also their salary is paid in U.S. |
7. Travel Expense of home-leave for a foreign employee
Q
| We will pay for the travel expense of home leave at Christmas holidays for an employee who is on loan form the head office. Do we need to recognize that expense as his/her salary? |
A
| You don't need to impose income taxation when you think that the expense is reasonable for using as their annual home leave fee. |
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