Q

We are a U.S. based company, and we have just registered a branch office in Japan. The main function of the branch is to purchase Japanese electric parts and export them to the U.S. head office.
Do we have to file a corporate tax return in Japan? Can we claim the net consumption tax receivables?

Ａ

Yes, you must file a corporate income tax return in Japan.

Q

We employ staff members who are foreign nationals. Are we obliged to withhold income tax from their salaries?

A

You should first determine whether, for income tax purposes, each employee is a resident or non-resident of Japan
If an employee is considered a resident for tax purposes, you are required to withhold income tax from his/her salary at the same tax rate as a Japanese employee's.
If the employee is considered a non-resident for tax purposes, you are obliged to withhold an income tax of 20%.

Q

How can we determine if an employee is a resident or non-resident of Japan for tax purposes?

A

A person who has had domicile or residence in Japan for more than one year is considered to be a resident.

Q

We employed a person who is foreign national. It was a one year contract employment, but the contract term was shortened to 6 months for a substantial reason. How should we calculate the amount of withholding income tax for the employee?

A

When you hired the employee, (s)he was intended to reside in Japan for one year, so you do not have to recalculate the withholding tax retroactively.

Q

We are a Japanese subsidiary of a U.S. based corporation. Some engineers of our U.S. head office will come to Japan for a 3-month training session. During the training period, their salaries will be paid by the head office. Are they obliged to pay income tax in Japan?

A

No, if they stay in Japan for less than 183 days, they do not have to pay income tax in Japan under the US-Japan tax treaty.

Q

When our employees who are transferred from a foreign post to a Japanese office visit their home country for summer/winter holidays, we cover their travel expenses. Is the home leave travel allowance taxable income for them?

A

No, if the amount of allowance is deemed to be reasonable, they do not have to include the allowance in their taxable income.