Accounting support for foreign multinational clients in Japan requires an understanding of JGAAP (Japanese Generally Accepted Accounting Principles) and foreign and international standards such as USGAAP and IFRS (International Financial Reporting Standards). Accounting for a Japanese business can prove more difficult than companies expect due to the language barrier, Japan-centric transactions like social benefits and consumption tax, and the requirement to record in the original JPY amount.
With these hurdles in mind, Tricor Japan has built a team specifically geared toward providing foreign-affiliated clients with the support necessary for global finance function. We enable our clients to confidently rely on us for correct monthly accounting and financial reporting through the following strengths:
- Focused Expertise: Back-office outsourcing, specifically of the finance function, is our focus. We strive to have the best people, processes and technology to give clients what they want more conveniently and affordably.
- Best People: Our company focus allows us to tailor our search for and develop the best available talent.
- Best Utilization: Tricor assigns three to seven staff members to any finance function in order to allow proper segregation of duties and achieve the right balance of review, communication and escalation points. This structure ensures all employees are efficient, saving time and money.
- Best Processes: We maintain clear and detailed processes and instructions and frequently review and improve processes to make sure they are still appropriate and effective. These processes include tight quality control, efficiency measures and multipoint review.
- Leveraging Technology: Our employees can easily use our clients’ preferred systems, but many clients opt to use Tricor’s Navision (Microsoft Dynamics ERP), which provides an English interface and can be accessed remotely for read-only access. We also utilize a database and business intelligence tool as a “fifth eye control” that tracks tasks, identifies errors and queries for further accuracy, completeness and timeliness. Routine work is automated wherever possible for further efficiency and to minimize the possibility of human error.
- Consolidated Back Office: Tricor excels not only in finance but also in all back-office services. We assign a specialized team to handle all facets of market entry for clients new to Japan. For larger clients that require only a few back-office functions, we have high-volume teams to deliver the support they need. By having all back-office functions under one roof, more significant gains can be achieved in communication and efficiency.
If you would like our help with your Japan accounting and financial reporting, please contact us here.
Tricor Japan Accounting Clients:
Order and inventory management systems can be daunting to set up. This is especially true when entering the Japanese market, which comes with a whole new set of hurdles. Multinational companies often think the only solution is localization of their global ERP system. However, this can be time-consuming and costly.
Tricor offers its own Japan-localized ERP system, Microsoft Dynamics. Whether a company is first entering the market or taking over the business from a distributor, the system allows the process to get off to a smooth start while they determine the best strategy for the long run. Anything from customers, credit limits, sales orders, purchase orders and invoices to inventory can be managed by Tricor’s in-house system, and items like customer names, inventory costing method, invoice format, processes, controls and policies can be customized to clients’ needs. The flexibility of the systems is such that we can manage small parts of the process, such as invoicing, or the full spectrum of order and inventory management for businesses of all sizes and complexity. A fully integrated interface with any third party logistics warehouse management system can also be developed depending on requirements (full scope).
If you would like to speak to one of our service directors regarding how we can help with your order and inventory management needs, please contact us here.
Japan employment contracts are the lawful bond between a company and its employees. Depending on the structure of the contract, the company’s liability may be fixed or unlimited, its obligations to the individual may be minimal or generous and the contract’s term may be defined or without end. Constructing an employment agreement that is compliant with labor law and minimizes the risks of the company is important for every multinational organization looking to do business in Japan. More important, drafting employment agreements with articles understood by the head office is vital to preventing any labor issues. Tricor Japan can help make this process as transparent as possible to avoid surprises in the future. Supported by the Tricor Labor and Social Security Office and its group of in-house labor attorneys, we are able to work in a number of ways to help clients come away with usable contracts quickly.
Ways we can Work
- Revise a company’s foreign employment agreement and localize it to Japan
- Draft an agreement from scratch based on a company’s internal policies and requirements
- Provide a compliant template free of charge that can be used right away. (Tricor can help customize the template to your standards. Please contact us if you would like us to send you the template.)
For all Japanese companies that hire employees, payroll and social benefits must be administered in accordance with labor law. Most companies that offer this service outsource it. With the support of the Tricor Labor and Social Security Office, which holds the license necessary to provide third party administration of social benefits, Tricor Japan provides in-house bilingual end-to-end service to support Japan payroll calculation and social benefit compliance.
Tricor Japan’s payroll and social benefit consultants, including a number of certified labor and social security attorneys, provide a comprehensive menu of services covering the day-to-day legal, financial and administrative tasks of managing a workforce. These include:
- Monthly payroll calculations, bonus calculations and advisory
- Preparation of proposed journal entries for payroll-related transactions and related advisory services
- Retirement benefit payroll calculations
- Tax gross-up calculation services for net of tax benefits and allowances paid to expatriate executives
- Payment services for net salaries, bonuses and taxes
- Assistance for year-end adjustments for withholding income tax (see Year-End HR Compliance)
- Preparation of annual reports for submission to the tax authorities (see Social Insurance Annual Report and Labor Insurance Annual Report)
Social and Labor Insurance Administration
- Initial Registration for admission to social and labor insurance programs and withdrawal procedures in the event a client closes their office (see Company and Employee Enrollment into Social Insurance ).
- Assistance with employees joining and leaving the company.
- Assistance in preparation of annual reports for social insurance premiums and occasional monthly adjustments.
- Assistance in preparation of annual labor insurance reports.
- Assistance of insurance benefit claims and making other necessary notifications to authorities.
Human Resource Management
- Working, holiday management and related advisory services.
- Assistance in coordinating and supporting the local payroll functions with the Head Office.
- Assistance in developing and modifying employment regulations and employment contracts.
Online Human Resource Support
Tricor also offers an employee self-service (“ESS”) system called Humatrix8 enabling clients to take their payslips, leave management, time and attendance tracking and expense reports (see Humatrix 8 for more information on this service).
As Tricor Japan is more than just a payroll processor, we can support the financial side of the service by producing journal entries that can communicate seamlessly with clients’ finance function. Our payroll division is also certified with two privacy and system management certifications, which adhere to many companies’ internal compliance and policy for vendors:
- Information Security Management System Certified ISO/IEC 27001:2005 for payroll and social insurance administration security
- Privacy Mark Certification No. 17000526 (03) for personal information security
Select Payroll and Social Insurance clients:
All companies that hire employees must enroll initially into the corporate social and labor insurance programs (commonly referred to as the “social benefits”) of Japan. These programs consist of health insurance, pension, nursing care (for employees over the age of 40), workman’s compensation and employment insurance. Tricor can help enroll both the company and its employees in these programs.
Enrollment of the company is done at the same time as initial employee enrollment. If there are no employees within the company, enrollment is not required.
Premiums for these social benefits are paid for by both the employer and employee (approximately a 50/50 split in the cost). The employee portion will be taken directly from their gross monthly salary along with other statutory deductions such as withholding tax and inhabitant tax. (The inhabitant tax deduction does not begin until after the employee’s first year of work in Japan, as the tax amount is based on their first year of residence in Japan). The below chart visualizes the breakdown of the roughly 50/50 split in Japanese social insurance cost to both the employee and employer.
When employees join or leave the company, social insurance filings must be made with the relevant government agencies including the Health Insurance and Pension Office, the Labor Standards Inspection Office and Hello Work for unemployment records.
After 6 months to a year, and depending on head count and industry, companies can become eligible to apply for Specialized Health Insurance Unions, effectively replacing corporate health insurance and affording employees more benefit for less cost. Both company and employee enrollments are separate filings and can be handled by Tricor.
Through the premiums paid for these social benefits, smaller contributions are also paid for disaster relief, welfare and others.
Generally Provided Benefits
Companies are not required to but often provide the following benefits above and beyond the required social insurance:
- Commuting allowance
- Use of private health insurance associations (e.g., Foreign Transportation and Finance Health Insurance Association)
- Congratulatory and condolence leave and payment
- “Zaikei” savings accounts (a non-contribution IRA, although a salary can pay into a fund)
- Corporate housing through government-supported legal rent schemes
- Retirement benefits
- Annual health checkup subsidy
- Stock (RSU) option (only available when the parent company has a global stock option plan; a tax return must be filed at the time of stock exercise)
- Subsidies for group insurance (20 people or more), such as life insurance
Every year in July, Japanese companies are required to collect and submit payroll information to the Health Insurance and Pension Office for recalculation of health insurance and pension contributions. This procedure is called the Annual Review of Social Insurance Premium. The new premium determined in this process is then effective from September to August of the following year.
Based on the reported individual remuneration amounts that were paid to the employee in the three preceding months (April, May, June), the calculation produces the new “monthly standard remuneration” as determined by the average compensation and can be used to identify the appropriate deduction for social insurance. This newly calculated deduction is then applied from the month of September and deducted on the October payroll.
The remuneration used in this calculation must include all wages and allowance(s) paid on a monthly basis, including variable payments such as overtime pay. Bonus payments paid on an annual or semi-annual basis are excluded from the calculation, as such payments are subject to a separate method of premium contribution.
There are special cases where employees receive ad hoc raises or decreases that would change social insurance premiums mid-year. This less common ad hoc process is called the Geppan Process . Please reach out to us if you would like to know more.
Every year in July, Japanese companies are required to collect and submit payroll information to the Labor Standards Inspection Office for recalculation of labor insurance contributions for employment insurance and workman’s compensation. This procedure is called the Annual Renewal of Labor Insurance.
Labor insurance contributions are based on actual gross salary paid between April 1 of the previous calendar year and March 31 of the current calendar year, and a rough prediction of total gross salary expected to be paid between April 1 of the current calendar year and March 31 of the next calendar year. The reason for this is the labor insurance calculation year runs April to March and does not follow a standard calendar year.
The detailed procedure consists of two major processes:
- Finalizing the actual premiums for the previous labor insurance calculation year
- Calculating the estimated premiums for the current labor insurance calculation year
The total gross salary is finalized after the March payroll from actual numbers. At the same time, based on the previous calculation year’s total gross salary, an estimate for the next calculation year is determined. When finalizing the premium, general contribution (and a special contribution for victims, with a premium rate of 0.002%) is calculated and added to the finalized total premium. After finalizing the previous calculation year’s premium, the differences (plus or minus) are adjusted and included in the next calculation year’s payment. Payment of labor insurance is due July 10 after the report is finalized and submitted. If the total to be paid for the year exceeds JPY 400,000, the payment may be divided into three separate payments. The two additional payments are then due at the end of October and the end of January within the labor insurance calculation year.
In Japan, each company is required to take care of a number of human resource compliance items at year’s end. The start of internal procedures truly begins in October with the initial data collection for the year-end adjustment (YEA, “Nenmatsuchosei” in Japanese). The YEA is actually the process in which the company takes care of individual tax returns on behalf of employees, a stark contrast with countries such as the United States where employees take care of their own tax compliance. Beyond this there are filings to update the inhabitant tax amounts of employees called the Annual Payroll Report to the Local Authorities (“Shiharai Hokokusho” in Japanese) and a filing to the tax office to disclose all withholding taxes during the year called the Statutory Payment Record (“Houteichosho” in Japanese). Tricor can help its payroll clients handle these statutory compliance items each year.
Year-End Adjustment (submitted in December):
Depending on whether employees paid too much or too little withholding tax during the course of a calendar year, an adjustment is made at the end of the year to correct for any changes in salary and personal information (number of dependents, a long-term loan with tax benefits, etc.) that may affect this value. This adjustment occurs before December payroll and the adjusted tax amounts are reflected on the employees’ annual Japanese income tax return.
Annual Payroll Report to the Local Authorities (submitted in January):
This report is submitted to the ward offices (subsections of Tokyo, like boroughs in New York City) for the calculation of inhabitant tax. The inhabitant tax is exactly as it sounds: a tax paid by the employee directly to the ward that employee lives in. This tax supports local government services and projects. This report is submitted by January 31 with data from the previous calendar year regardless of FYE, and premiums for the next year are determined through this process.
Statutory Payment Record (submitted in January):
This document is submitted to the tax office as a record of all withholding of income made on behalf of individuals and entities throughout the year. Totals for payroll, lease agreements with landlords, payments to independent contractors and basically anything that requires income tax to be withheld will be calculated and packaged for delivery to the tax office. As of 2013, the legal requirements have been extended to include stock details provided to employees even if no withholdings have been triggered from those payments. The new reporting requirement applies to Japanese subsidiaries where 50% of equity or more is held by a foreign entity and to Japanese branches of foreign entities. Such entities are required to submit a report to the national tax office detailing the exercise or award of equity compensation to resident employees by the foreign parent entity. This filing becomes less administrative if Tricor is involved with the accounting of the subsidiary.
Tricor can help support Japanese companies with the compliance requirements detailed above.
Once a company has been in business for at least 6 to 12 months it may become eligible for industry specific health insurance associations. If your company is able to enroll into these specific associations the coverage would effectively replace the government health insurance program all companies have to enroll into initially. These associations attempt to group similar professionals (with similar risk profiles, e.g. employees who sit in an office all day as opposed to those doing construction) into the same association to reduce risk and thus increasing benefit while reducing cost to those enrolled. Pension, Employment Insurance and Workmen’s Compensation Insurance would remain unchanged and is still provided through the government. Tricor can help explain to the local or head office the options for any specific industry health insurance association and the benefits of each for your specific situation.
There are quite a number of industry specific health insurance associations in Japan. Tricor Japan is part of a specific association for Accounting, Tax and Audit professionals which provides the employees with cheaper premium cost and more benefit as well as Disney land tickets once a year (this also reduces the company portion as well). We would be happy to help you evaluate the best association for your company. Please reach out to us for a more targeted consultation on this particular issue.
For your reference, please see a comparison chart on the relative benefits of Government Health Insurance vs. a special Health Insurance Association for the IT Industry:
The Rules of Employment (ROE) is the basis of the internal HR policy that governs the relationship between employees and the company. It is also the basis of any labor dispute should a claim ever be raised. Filing the ROE requires the consent of all employees, and once filed, it is difficult to make changes since the employees must agree to the changes. Even though this document is not required to be filed with the Labor Standards Inspection Office until your Japan business reaches 10 employees, we encourage clients to think about drafting earlier rather than later to avoid any issue with employees.
The drafting and filing of a company’s ROE requires consent from each employee currently under contract with the company. New employees who join after the filing date must accept the ROE before joining the firm. Since this is a consensus-based document, it is important to entertain filing before you are statutorily required to do so. One of our social security attorneys at the Tricor Labor and Social Security Office will be able to help structure and draft Rules of Employment that fit your needs in Japan.
Rules of Employment Minimum Requirements
- Start and finish times, breaks, days off, leave of absence (including child care and family care leave) and work shift arrangements where work is to be performed by two or more teams of workers
- Methods of determining, calculating and paying wages (excluding special bonuses and other pay), wage calculation periods and dates of payment, as well as matters pertaining to increase wage
- Language pertaining to resignation or dismissal
Additional Recommended Rules of Employment Policies
- Retirement allowances
- Extraordinary wages, etc.
- Workers’ accident compensation
- Awards and disciplinary measures
- Responsibility for meal expenses, etc.
- Safety and hygiene
- Job training
Tricor Japan has developed an in-house software called Humatrix 8 with electronic pay slips (ePayslip), leave management (eLeave), time and attendance (eTime & Attendance) and expense modules (eExpense) to meet the growing global demand for online back-office and HR software solutions. The modules are housed within a bilingual interface, allowing global companies operating in both Japanese and English to implement the software seamlessly and monolingual managers or employees to process applications without issue.
Tricor Japan will be able to support clients looking to take advantage of the ever-changing compliance landscape of Japan in the near future while passing off a large part of HR administration to the employee and system.
- Fully bilingual
- Employee self-service functions with automated confirmation messages
- Accessible from anywhere in the world on any device
- Compatible with any payroll software
- Local labor law and company policy built into the system, allowing for reduced administration
- Intuitive calendar view design
To arrange a live demonstration, please contact us here.
In Japan, Article 13 of the Industrial Safety and Health Hygiene Law states that a company with more than 50 employees must have a company doctor who will help them with their personal health management and who will advise the company on employees’ health management issues. This stems from Japanese beliefs related to corporate social responsibility and risk management.
Effectively “terminating” or “firing” employees in Japan is more of an art than a science. Every employee is different, from the way they feel to how they view their contribution to the company, and in most cases it is best practice to agree to a separation instead of just letting someone go. Details like how long the employee has been at the firm, their age, how employable they are, their salary, etc., should be taken into consideration to effectively persuade an employee to leave the company amicably. Despites everyone’s best efforts it does not always end pretty and a small percentage of employees will fight a labor battle. This is why keeping clear documentation and evidence of roles, responsibilities, targets, etc., are very important. Before rushing into any termination procedures it may be good to speak with one of our HR specialists to gain a local perspective on the situation.
Japanese labor law can be daunting to foreign companies, as Japan’s employee-centric labor laws support lifetime employment, two-man labor unions and terminated employee reinstatement. Foreign companies tend to err on the side of caution with their HR management compared with how things are handled in their home country. Tricor understands this fear and can help companies navigate Japanese labor law. Feel free to reach out to us here with a detailed account of your current HR situation. One of our HR advisory team members will respond as soon as they can.
The banking system in Japan is rather archaic in that it still requires people to physically go to the bank counter to make payments, but progressive in that there are virtually no paper checks with payments mostly being made through wire transfer. Foreign companies occasionally want to utilize their global banking partners in Japan but often find that there are some challenges associated with this kind of banking structure, including the inability to make utility, phone, tax and statutory payments. Tricor can help walk you through the important issues that need to be addressed prior to finalizing your banking structure in Japan.
Important Banking Points:
- Certain payments – such as tax, phone and utilities – cannot be made in Japan from foreign banks (e.g., Bank of America, Citibank, HSBC). To simplify matters, companies may want to set up an account with a Japanese bank to handle these kinds of transactions. Setting up a Japanese bank account with a Tricor partner bank, Sumitomo Mitsui Banking Corporation or Mizuho Bank Ltd., takes only about 10 business days and offers our clients free setup, reduced transaction fees (as much as 50%) and expedited or waived Know Your Client procedures.
- Certain payments (e.g., tax payments) will need to be made at the bank counter, where an employee will need the bank book or seal to release the funds (seals are used in place of signatures in Japan in many cases). Companies must designate someone on the ground to 1) maintain the bank book and seal and 2) go to the bank counter to make these payments. This can be outsourced to Tricor.
- All bank charges are the responsibility of the client, including foreign remittance fees on both the payer’s and the receiver’s end.
- Online banking in English is available from some Japanese banks (e.g., SMBC), but often foreign companies run into the following problems:
- Vendor names/bank accounts in Japan are usually displayed in one of the character sets in the Japanese language (Hiragana, Katakana or Kanji), making the ability to upload payments and read statements difficult. Sometimes clients can manage when things are slow, but when activity increases, reconciling the bank account can become cumbersome if someone understands very little Japanese. Zero banks are immune to this problem in Japan regardless if they are domestic- or foreign-affiliated institutions.
- Cash movement statements can be hard to view on a monitor even if it is written in English.
- Banking in person is still required to pay all phone bills and some utility bills. Our partner banks have Japanese online modules called “Pay-Easy” where these types of invoices can be paid online, minimizing administrative support fees. These modules are not available through their English online banking interfaces.
- English interfaces come with costly monthly account fees and high fund remittance fees. Sometimes the cost can be 3 to 5 times that of a Japanese interface. These are the direct costs from the bank and not related to any professional fees a company like Tricor would charge.
Once an entity is formed, the initial tax filings of the entity are required to be filed within two months of the incorporation date or before fiscal year end. Failure to do so will label the entity as noncompliant and limit the tax benefits realized. If filings are submitted late, any benefits to be received from the filings will be pushed to the following fiscal year. Initial tax filings are the first step in establishing a compliant company in Japan. All companies must complete these.
Initial Tax Filing Key Points:
- It is mandatory to complete your new entity’s initial tax filings within two months after company establishment or before FYE.
- Initial tax filings require filings to the National Tax Office and the Local Tax Office.
- Blue Form status filing can be done within three months of establishment or before FYE.
- If you do not file on time you may not be eligible for Blue Form status. Please see below for more information on this.
Blue Form Tax Status
Application for Blue Form tax status must be submitted within three months of the date of establishment or one day before the last day of the fiscal year (whichever comes first). Benefits include:
- Special depreciation benefits (e.g., shortening of years for certain depreciable assets)
- Special deduction benefits and tax credits
- Establishment of certain reserves and provisions in deductible expenses
- Ability to carry forward tax losses within your entity for the subsequent nine years
- Good standing with the tax authorities
If you do not apply for your Blue Form tax status, your entity will be given White Form tax status. White Form tax status grants zero additional benefits and is the default status. This status is less desirable for companies wanting to maintain a pristine image in the Japanese market.
Summary of Initial Tax Filings
Tax Report on Establishment of an Entity – National Tax Office (1 report), Local Tax Office (1 report)
- This is basically a registration to the tax offices that you have established an entity in Japan and you are abiding by the rules. You need this filing to even be able to file your annual corporate tax returns.
Application for the Blue Form Tax Return Filing Status – National Tax Office (1 report)
- Application for Blue Form tax return filing status (described above), which is not required, but you should apply in order to enjoy extra benefits. If this is not applied for your entity will be reduced to the default White Form status, which has limited benefits and potentially draws negative attention to your entity.
Tax Report on Commencement of Salary Payment etc., for Withholding Tax Purposes – National Tax Office (1 report)
- This report needs to be filed the first month of your first salary payment. You do not need this prior to hiring, but most companies file this ahead of time in preparation of future payroll.
Tax Report on Semi-Annual Payment of Withholding Taxes – National Tax Office (1 report)
- Companies with under 10 employees can enjoy semi-annual payment schedules of withholding tax. In order to enjoy this benefit, this report must be filed.
Application for One-Month Filing Extension – National Tax Office (1 report), Local Tax Office (1 report)
- This application is not required by law, but we file this as an added benefit for our clients to ensure the maximum time frame to file tax returns at the end of FYE.
Every subsidiary or branch office in Japan must file annual tax returns. This refers to annual corporate (national and local), consumption and fixed asset returns. Tricor Japan, through the license held by Tricor Tax Corporation, can provide filing support on behalf of any company in Japan.
Each filing has its own requirements and due date. Generally when companies grow larger, tax compliance becomes more detailed, but the following should apply to any new company entering the market. If you have any questions regarding your specific situation, please reach out and let us know how we can help.
Tax Filings and Due Dates:
- National Corporate Tax Return (within 3 months of FYE – if extension is applied).
- Local Enterprise Tax Return (within 3 months of FYE – if extension is applied).
- Local Inhabitants Tax Return (within 3 months of FYE – if extension is applied).
- Consumption Tax Return (within 2 months of FYE).
- Fixed Asset & Depreciation (January 31 regardless of FYE).
- In principle, withholding income tax payments fall on the 10th of the month following the month when a salary payment is made.
- If semi-annual payment authorization is given:
o Withholding income tax payments on salary and bonus for the first 6 months falls on July 10
o Withholding income tax payments on salary and bonus for the second 6 months falls on January 20
o Withholding income tax payments on salary and bonus become a monthly requirement once a company has 10 or more employees
- Interim corporate tax payment (depending on corporate tax amount, it must be paid within 2 months from the end of first half of the fiscal year)
- Interim consumption tax payment (depending on the amount, monthly, quarterly or annually payments are due)
Consumption Tax Payer Status Determination
A Japanese company may automatically become a consumption tax payer and thus automatically be required to file a consumption tax return. However, there are cases where a choice is available.
- The determination of whether a company is a consumption taxpayer for the current taxable (fiscal) year is based on the amount of taxable sales in the taxable year prior to the preceding taxable year (“basis period”). For instance, if the current taxable year is FY 2016, the basis period is FY 2014. If the amount of taxable sales was over JPY 10,000,000 (JPY 10,000,001 ~) in the basis period, the company will be a consumption taxpayer for the current taxable year. When the basis period is shorter than one year, the amount of taxable sales will be annualized to help determine the status.
- In addition to the rule above, if both total taxable sales and total salary/bonus, etc., (i.e. payments subject to the Japanese withholding income tax), for a company in the first 6 months of the preceding taxable year (if the current taxable year is FY 2016, the preceding taxable year is FY 2015) was over JPY 10,000,000 (from 10,000,001), the company will be a consumption taxpayer for the current taxable year (in this case, FY 2016).
Newly Established Company
Regardless of the principle rules, a newly established company whose share capital is JPY 10,000,000 or more will have mandatory taxpayer status for the first two taxable years. In the case of a Japanese branch, the capital threshold of JPY 10,000,000 is determined by the foreign company’s entire capital (not the capital allocated to the Japanese branch).
Election for Taxpayer Status
Even if a company is not a consumption taxpayer, the company can choose to have consumption taxpayer status by submitting an application. The submission due date is prior to the commencement of the taxable year when the company wants to be a consumption taxpayer. A newly established company that wants to be a consumption taxpayer from the first taxable year onward must submit its application by the end of the first taxable year.
The frequency of tax audits of the Japan subsidiaries of foreign multinational firms has increased considerably in recent years. In general, any foreign firm should expect to have its first tax audit within 3 to 5 years from the date of incorporation. It is important to note that this is simply a guideline and a tax audit can happen any time. Tricor handles a number of tax audits each year for our clients. During the tax audit we liaise with the tax office and attend in-person meetings at our offices in Tokyo or the client’s office. We always prepare in conjunction with client representatives in order to act in the best interest of the client during the audit.
During a Japanese Tax Audit
At the outset of a tax audit, the tax auditor will usually make a call to the tax vendor of the client. For our clients this is Tricor Tax Corporation. The tax auditor will confirm the intended scope and the timeframe of the tax audit. A typical tax audit will proceed as follows:
- Tricor Tax Corporation receives a phone call from the tax auditor explaining the intention, scope and timeframe of a tax audit.
- Tricor Tax Corporation informs the client of the situation and prepares according to the client’s instructions.
- Tricor Tax Corporation liaises with the tax auditor to coordinate the tax audit meeting location and time. We normally suggest our office as we typically have all the records on hand.
- Tricor Tax Corporation holds a tax audit meeting with the tax auditors.
- Tricor Tax Corporation handles all inquiries during the meeting and all follow-up inquiries after the meeting in the best interest of the client.
- After all inquiries have been addressed, the tax auditor will either agree to the client’s tax position or provide suggested adjustments based on their findings.
- If the tax auditor agrees, they will send a letter signifying the end of the tax audit.
- If the tax auditor suggests adjustments, the client must submit amended tax return(s). Until the amended tax return(s) are filed, the tax audit remains open. Once the filing(s) are made the tax auditor will send a letter signifying the end of the audit.
Note: The tax office can only audit a fiscal year that occurred within the last seven fiscal years. This means in FY 2016, the furthest they can go back is FY 2009.
Bilingual IT support can be costly in Japan. For clients that do not have the size and scale to hire internally, Tricor offers outsourced IT support at rates less than one-tenth the cost of hiring. From setting up infrastructure to remote and on-site support, we can communicate in English with your head office and locally in Japanese to cover all of your IT needs. Some of our most utilized support and services include:
IT Setup and Management
- Communication and coordination with headquarters
- Hardware purchasing, vendor point of contact and post-purchase issue resolution
- Installation of network IT infrastructure
- Setup of PCs (desktops/laptops)
System Administration and IT support
- Creation of client computer profiles for fast restoration
- Application support (installations, repairs and users guides)
- Remote and on-site support depending on client needs
- Proactive network monitoring
- Management and migration support for small, medium and large organizations
- System deployment or decommissioning
- Install, maintain and manage new infrastructure
- Expansion and upgrades
- Reduction in business size