Scope of Services
TAXATION
- Preparation of Financial Statement (Including documents to be attached to Tax Return to be filed)
Profit and Loss Statement・Balance Sheet・Cash Flow Statement - Preparation of Tax Return (for all kinds of taxes)
A・Income Tax・Residential Tax on Incorporated Entities・Corporate Business Tax・Consumption Tax Return
B・Application for Acceptance of Blue Tax Return・Notification of Incorporation or Establishment of Corporation・Notification Forms with respect to Inheritance taxes and other tax-related notification forms - Individual Tax Returns (directors, employees and other persons)
Tax Return in respect of Business Income・Real Estate Income・Income arising from sale or assignment of property (including inheritance taxes)
COUNSELLING
- Consultation on Tax Matters
At our Company offices・via telephone, email or video conference - Bookkeeping・Preparing monthly reports (optional)
- Tax audit (acting as witness, conducting negotiation)
- Salary calculation and payment by electronic transfer
- Year-end adjustments
Tax Returns and Application on Year-end Adjustment・Payroll Report・Statutory Record・Depreciable Assets Tax - Opening corporate bank accounts
- Acting as tax administrator
A person who handles tax payment duties as an agent when an individual or corporate taxpayer lives overseas and does not have an address in Japan.
taxagent.com - Acting as representative director (director/s, auditor included)
TAX REFUND DECLARATION
Foreign dependents as deduction / Consumption Tax / Income Tax on lump-sum withdrawal, etc.
DRAFTING REPORTS / NOTIFICATION FORMS
Base erosion and profit shifting in accordance with the Base Erosion and Profit Shifting (BEPS) Project of the Organization for Economic Co-operation and Development (OECD)
Based on the project’s recommendations, tax reform was introduced from fiscal year 2016, whereby part of the Special Tax Measures Law was amended to shift to a transfer pricing tax system.
Matters of notification of the final parent company
A. Country-by-Country Report
B. Business overview report items (master file)
C. Documents deemed necessary to calculate arm's length prices (Local Files)
※Three types of documents recommended by the BEPS project
Business Investigation (Due Diligence)
Our group of companies and partner specialists (certified public accountants, tax lawyers, attorneys-at-law, social security and labor attorneys, etc.) combine our efforts in conducting an investigation and analysis of the target company’s financial status and well-being.
※ Particularly whether it has any debt or liabilities not indicated or otherwise hidden from its balance sheet.
Glossary
1. Financial Statement | A financial statement reflects the financial status of the company’s「assets and liabilities (i.e. assets, liabilities and net worth)」,「results of operations (i.e. sales, expenses and profits」, 「changes in shareholders’ equity (investment and accumulated profits」, etc. A financial statement serves to show three (3) main concerns, particularly the company’s (i) operational performance, (ii) management of credit, and (iii) tax filings. Although commonly referred to as financial statements, under the Financial Instruments and Exchange Act, certain companies that are required to submit securities reports prepare a schedule of liabilities, while other companies prepare financial statements, which typically come in three (3) forms, namely, balance sheets (B/S9, profit and loss statements (P/L) and cash flow statements (C/F). |
2. Profit and Loss Statement | A profit and loss statement is important as it is lined up together with the balance sheet and cash flow statement. A profit and loss statement is prepared in order to show the company’s profitability or losses it has incurred in a given year. It is also referred to as「P/L」as abbreviation for profit and loss statement. In the profit and loss statement, the company’s profitability is reflected in 5 items, namely, gross profit, operating profit, recurring profit, net profit before tax, and net income. Accordingly, the amount of profit from sales, vis-a-vis the purchase price, cost of labor, rental and other expenses incurred, and the resulting profit or loss generated thereby can be determined. |
3. Balance Sheet | The balance sheet is a financial statement that indicates the kind of property any capital raised was invested in. Reading the balance sheet will let you see what the money invested in the company has been used to purchase any property. Incidentally, since the relationship between procurement and operation is referred to as the company’s “financial status”, the balance sheet may also be called a financial statement useful in determining its financial status. The balance sheet is also referred to as B/S in its abbreviated form. Capital pertains to “debt” and “net assets” as distinguished from property, which pertains to “assets”. Since the amounts of capital and property always match, the formula for calculating capital is to add debt and net assets together. Thus, debits (represented by assets) and credits (represented by liabilities and net assets) comprise the balance sheet. In practice, it is often called by its abbreviated form i.e. B/S. |
4. Cash Flow Statement | The cash flow statement reflects what assets flowed into and out of the company during a certain accounting period, classified in terms of sales activities , investment activities, etc. |
5. Corporate Tax | The corporate tax is the tax levied on the profits of a company, and consists of the income tax, inhabitant tax, enterprise tax and consumption tax on incorporated entities. These taxes must be paid by the company and included in the settlement of accounts for the current period. In addition, the corporate tax may also appear in the profit and loss statement as the abbreviated term for [corporate tax, corporate inhabitant tax and corporate business tax]. |
6. Corporate Inhabitant Tax | The corporate inhabitant tax is a local tax paid by an incorporated entity to the local government having jurisdiction in which its business is located. It is calculated by multiplying the amount of corporate tax with two (2) tax rates, namely, the inhabitant tax rate and the per capita rate, which depends on the amount of the company’s paid-in capital. |
7. Corporate Enterprise Tax | The corporate enterprise tax is basically a local tax levied on a percentage of the business income of a company by the local government having jurisdiction in which its business is located. Corporations with a share capital or contributed capital of more than 100 million are subject to standard tax rates using income, added value and capital as the taxable base. Only a percentage of income is included in the corporate tax, while the calculated taxes corresponding to added value and capital are in principle applied as selling, general and administrative expenses. |
8. Consumption Tax Return | <Consumption Tax Method ※ A Simple Taxation Method B Taxation Method in Principle> Persons liable to pay the Consumption Tax Transactions subject to levy Exemption from Consumption Tax Tax Rate A Taxation Method in Principle B Simple Taxation Method |
9. Blue Return | The blue return is a type of tax declaration used by taxpayers for declaring their income from January 1 to December 31 of every year, calculating the corresponding income tax according to a certain standard. Compared to the other type of tax declaration which is referred to as the white return, the blue return requires various documents to be attached and takes more time to prepare. However, there are many benefits to be derived from filing the same. A typical benefit is the availment of special deduction. A special deduction of up to Six Hundred Fifty Thousand Yen may be availed of in case the blue return is filed according to the prescribed procedure. Other tax saving benefits come in the form of salaries paid to family members which may be claimed as an expense, while a deficit incurred in a given year may be carried forward for 3 years. Accordingly, we recommend the filing of a blue return for individual proprietors who are filing a tax return for the first time, and even for those who have been filing a white return to date. How to submit a blue declaration approval application? |
10. Tax Treaty | A tax treaty is a bilateral agreement between two countries that serves to avoid double taxation whereby income earned by an individual in Japan may also be subject to income tax in his country of origin. A tax treaty thus serves to avoid double taxation of income derived from international business deals and investment transactions such as dividends, interest, copyright and other forms of royalties, and is also intended to prevent tax evasion. |
11. Individual Tax Return | A tax return is the declaration filed by an individual or an incorporated entity for the purpose of determining the amount of liability for income tax and special income tax for reconstruction of said person or entity. In the case of an individual, the tax return must reflect his total annual income beginning January 1 and ending December 31 of every year and must be filed from February 16 to March 15 of the following year by the taxpayer himself or a tax accountant or tax accounting firm acting as an agent. Aside from declaring the amount of income received, the tax return also indicates the resulting tax liability based on said income, which may be in the form of salaries, interest, dividends and such other income, as well as any income tax withheld therefrom, and likewise determines whether, all things considered, there has been an overpayment or underpayment of the actual tax due vis-a-vis the income tax withheld from such forms of income, and accordingly, the necessary tax adjustment is made. While an incorporated entity must file a tax return and pay the corporate tax within the taxable period, a taxable proprietor must also file the corresponding return for the consumption tax within the taxable period. |
12. Business Income | Income derived from the conduct of any and all activities in the agricultural, fisheries, manufacturing, wholesale, retail, and service industries and any other business yielding income is referred to as business income. Business income may come in the form of interest income, capital gains, temporary income and miscellaneous income. When an ordinary salary earner has a sideline, any income earned from it may be classified either as miscellaneous income or business income. However, subject to certain conditions, such income may be treated as business income and depending on the nature of the sideline, income derived therefrom may not be recognized by the tax authorities as business income, regardless of the fact that a return has been filed to declare the same as such. |
13. Real Estate Income | Income derived from the rental of an apartment, condominium unit, or parking lot is referred to as real estate income. An ordinary salary earner who has a sideline and earns income from the management of an apartment, condominium unit or parking lot is obliged to file a tax return. Real estate income is income other than capital gains or business income, and refers to income derived from the following: It should be noted that any income arising from the sale and purchase of real estate may be considered as a capital gain or business income depending on the scale or form of the property |
14. Capital Gains | Generally, capital gains are income derived from the transfer of assets such as land, buildings, shares of stock, golf club membership, etc. However, income arising from the sale of product inventories for business use as well as mountain or forest land are not considered capital gains. |
15. Inheritance Tax | As a general rule, inheritance tax is imposed on all property owned by the decedent, such as cash, deposits and savings, securities such as stocks, public and corporate bonds, as well as tangible property such as real estate. It is also levied on intangible property with economic value such as goodwill, telephone subscription rights, patent rights and other intellectual property. ※ Property located outside of Japan is also subject to inheritance tax. |
16. Bookkeeping | Bookkeeping refers to the act of entering financial details of transactions that occurred in the conduct of the company’s business. The information necessary to be supplied in a tax return must be based on the books of the company. A book is a company’s general ledger showing the flow of money as well as the company’s assets and business condition on a daily basis. The company’s balance sheet and income statement are derived on information recorded in the books of the company which are necessary for filing a blue return. |
17. Tax Audit | A tax audit refers to the survey conducted by a tax office under the jurisdiction of the National Tax Agency for the purpose of checking the accuracy of details provided in the taxpayer’s tax return. There are two types of tax audits, namely, voluntary tax audit and compulsory tax audit. A voluntary tax audit is conducted with the taxpayer’s consent while a compulsory tax audit is carried out by the tax office as to include social sanctions. The tax office also conducts audits of individuals. |
18. Year-end Adjustment | Year-end adjustment is the process of comparing the annual income tax payable by an employee with the amount of income tax deducted from the employee’s monthly salary or bonus, and adjusting the excess or deficiency of income tax of the employee accordingly. The income tax for a given year is calculated when the income for one year has been determined and the tax due is withheld every month. After it has been determined at the end of the year that the total tax withheld for the entire year is more or less than the actual tax due, a year-end adjustment is made in December or January of the following year, and the company will collect any additional income tax due or refund to the employee any amount of income tax overpaid to the tax office. |
19. Payroll Report | A payroll report is a combination of employees’ individual statements and a table summarizing the salaries paid to employees. Individual Statement Summary Table |
20. Statutory Record | A statutory record is a document required to be submitted to the tax office under the income tax lax, inheritance law, and special taxation measures law. There are about 60 kinds of statutory records from which the tax office is able to determine the correct amount of tax due to be paid by a taxpayer. There are six (6) types of statutory records which are simultaneously submitted with the salary income withholding slips Types 〇 Types of Tax Withholding Slips 〇 Types of Payment Records |
21. Depreciable Assets Tax | The tax levied on a company’s fixed assets that it uses in the conduct of business is called the depreciable asset tax. However, the depreciable asset declaration is prepared by the municipality (or the Tokyo Tax Office in the case of Tokyo’s 23 wards) to calculate the depreciable asset tax due. . For this purpose, the company must file a certain form to declare its fixed assets, and based on the contents thereof, the municipality will issue to the taxpayer a notice of depreciable asset tax due for payment. Further, the depreciable asset tax is due not only on real estate such as land, houses and similar structures, but also on other fixed assets such as machinery and equipment used in the business. Example: Accessories for building construction, machinery and equipment, ships, aircraft, land vehicles, transport vehicles, tools, office equipment and fixtures, etc. |
22. Deduction for Dependents of Foreigners | Deductions for Dependents of Foreigners (Gist of 2016 Tax Reform) 〇 Deduction for Dependents 〇 Deduction for Dependents also applies where the dependent-relatives reside abroad 【In case of a Japanese citizen married to example : a Philippine citizen】 【In case of Philippine citizens】 ------------------------ Based on the partial revision of the Income Tax Act (Text based on homepage of the National Tax Agency) To avail of the benefit of certain deductions from their salary or public pension with respect to deduction for dependents, spouse deduction, disability deduction, or special spouse deduction, or deductions for relatives residing abroad, residents must present evidence of kinship and remittance to their relatives (including a translation of documents that are written in a foreign language) to the enterprise obliged to make the withholding from the employee’s salary or public pension, or present such evidence for purposes of year-end adjustment . In other words, residents must have documentary proof of kinship and remittance to their dependents to avail of the applicable deduction. 〇 Kinship Documents 〇 Remittance documents 〇 Important things to note with respect to overseas remittance ※ If you are sending money to only one relative abroad, only that person will be recognized as a dependent. |
23. Consumption Tax | Consumption tax is a tax that is widely and fairly levied on consumption in general. Therefore, as a rule, the sale of any and all assets produced and services offered within Japan are subject to consumption tax and the proprietor pays the consumption tax on sales generated by the business. To prevent the accumulation of tax (where the same assets or services are subject to multiple transactions), the person selling is obliged to deduct the amount of consumption tax due at the time of purchase for the purpose of calculating total sales (purchase eligible for tax credit) and pay the deducted tax amount. The amount corresponding to the consumption tax levied on the business is incorporated into the selling price as a cost and passed on, and eventually various expenses become subject to tax. (In contrast to income tax, which is referred to as a "direct tax", consumption tax is referred to as an “indirect tax”, where the taxpayer and the person who actually bears it are different.) |
24. Income Tax on Lump-sum Withdrawal Payment | When a person has contributed to the welfare pension system of Japan, he is entitled to claim the withdrawal of a certain amount of his contributions upon returning to his home country, and about 20% of such amount to be received is withheld as income tax. The corresponding income tax withheld may be refunded by filing an application for tax refund within five (5) years beginning January 1st of the year following the date of receipt of the lump-sum withdrawal payment. For details |
25. OECD BEPS (Base Erosion and Profit Transfer) | Under current rules, multinational corporations may have difficulty in determining whether they can allocate income to a country other than the country where the economic activity actually took place. This can lead to a situation where the income concerned is not taxed in any country and the corporate taxes paid by multinational corporations are considerable reduced. |
26. Special Taxation Measures | The Special Taxation Measures Law is a law that contains special provisions that are intended to be applied for a limited period of time in order to realize a specific policy. This law covers not only corporate tax, but a host of other special tax items. |
27. Transfer Pricing Taxation | Transfer pricing taxation is a system of taxation whereby the amount of taxable income is calculated on the basis of the price as may be agreed between independent companies dealing with each other on an arm’s length basis, even though the transaction is made between related parties. Under the taxation system of Japan, transfer pricing taxation is applied to transactions entered into by companies and related foreign parties. |
28. Items of Final Notification by a Parent Company | A parent company that is a multinational corporation or is a member of a specified group of foreign corporations having public facilities (PE) in Japan must file a notification on the last day of its fiscal year, indicating its name, head office location, corporate number and the name of its representative who will file such notification electronically (e-tax). |
29. Country Report (CDC Report) | The OECD Transfer Pricing Guidelines provide new rules for transfer pricing documentation and have proposed a three-tiered approach: the master file, local file and national report (CDC report). Please refer to the Japanese Transfer Pricing Documentation for country-specific reports as provided in the 2016 tax reform legislation. |
30. Items in the Business Overview Report (Master File) | A parent company that is a multinational corporation or is member of a specified group of foreign corporations having public facilities in Japan (PE) must file a notification indicating the organizational structure, business outline, financial status, etc. of the corporate group electronically within one year following the last day of the preceding fiscal year. |
31. Arms-length Price (Local File) | The arms-length price is the price considered as established between foreign related parties as if the transaction occurred between independent third parties under similar circumstances. Therefore, it is a reasonable price based on an economically rational business relationship. |
32. Acting Representative Director | An acting representative director is necessary: |
33. Due Diligence | Due diligence (DD) refers to the process undertaken to investigate and evaluate a certain company to which an investment or investments will be made, or the companies involved in a merger and acquisition (M & A)/ There are about seven (7) types of due diligence, namely, finance (in terms of liabilities), business (operational), legal affairs, tax affairs, personnel, information technology, and corporate environment. |
34. Off-Balance Sheet Debt or Off-Balance Sheet Liabilities | This refers to debt that is not recorded in the books of the enterprise. A typical example is contingent debt, such as debt guarantees or potential liability in disputed proceedings. 「Supplement」In corporate accounting, as a matter of principle, it is obligatory to make known the content and amount of contingent liabilities on the balance sheet with appropriate notation. Intentional concealment of debt by not making notes such as “guarantee obligations” or by attributing a loss to another company「skipping」 to conceal the unrealized loss of owned assets, is regarded as window dressing. Moreover, in the case of small and medium scale enterprises, accrued bonuses, obligations related to unpaid bonuses, retirement benefits, allowance for doubtful accounts, etc. may not be reflected in the balance sheet, or may appear only up to a certain extent to comply with transfer limits under the Corporate Tax Law. These are also deemed off-balance sheet debt. |
35. Skipping | Skipping refers to the act of hiding losses by reselling unrealized assets to a third party at a price higher than the market price. When the market value of securities held by a company drops significantly, it is possible to avoid or delay recording of a loss in the financial statements by temporarily selling the same to another company with a different accounting period at a price close to the book value thereof. This transaction may be determined to fall within the meaning of loss compensation prohibited by the Financial Instruments and Exchange Act. |
For more information
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PG Group & Partners
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