In principle the Japanese tax system allows the carry back of tax losses to a prior tax year. Regrettably however such loss carry back has been suspended since 1992 except in certain special circumstances discussed below. This post discusses briefly the circumstances where a carry back of losses may be allowed for a company for Japanese tax purposes. It also includes a translation of an article from the Japanese tax authority web site explaining in more detail critera, timing and other matters related to tax loss carry back. If you are considering whether your company may be able to carry back losses it is essential that you plan well in advance, pay attention to time limits and also get proper professional advice (and not not rely solely on this site). Read More
This post gives an overview of the role of the “blue form tax return” in the Japanese tax system. A Japanese taxpayer becomes a “blue form” tax filer by submitting an election to the authorities and then maintaining their accounting records to an acceptable standard. Read More
This article has a selection of FAQs around basic Japanese corporate taxation together with links to more detailed articles for each topic discussed.
Please do not hesitate to add comments or further questions as these can form the basis of further FAQ items in due course.
Please check this table for the Japanese rate of national tax for years from 1985 to the present day for different Japanese corporate tax paying entities.
In addition to national taxes on income, Japanese companies also have to pay local corporate taxes such as enterprise and inhabitants tax. Later posts will discuss these taxes and give examples of a typical Japanese corporation tax calculation.
Outline – Japanese tax interest and penalties
This post discusses types of interest and penalties – or futaizei/f付帯税- under Japanese tax law. there is a wide range of different tax penalties in Japan with rather confusing and overlapping names similar economic functions. Also, in contrast to UK or US tax practice, penalties and interest cannot be mitigated at the discretion of the tax authorities although mitigation is available in certain prescribed circumstances under the law (such as destruction of records owing to natural disaster – see the comments under each section). Also under some circumstances the economic impact of the interest and penalties can be disproportionate to a subjective assessment of the wrong doing in the facts and circumstances that gave rise to the penalty. For example, penalties may still be very material if you are a day late compared with being a year late with filing your return. Read More
Penalties for failure to file tax returns and requests for tax repayment in Japan are heavy and the rules themselves are complex with plenty of traps for the unwary.
Corporation tax filing and payment
Corporation tax returns are due within two months from the day following the last day of each tax accounting period end and should include the matters prescribed by the relevant jurisdiction tax office (in practice, this means it should be made on the required schedules). The amount shown as due on the return has to be paid. Also where a tax accounting period exceeds six months, then an interim tax return and payment is required. Read More
There are a number of routes in Japan by which a company may end up liable to meet another company’s tax liability.
Some of these routes – such as succeeding to tax liabilities on a merger or of other consolidated group members in a consolidated tax group – are common to other tax systems. Read More
One of the most commonly asked questions in Japanese tax due diligence or risk assessment (including FIN48) is how the statute of limitations operates for Japanese tax purposes. There are some important differences between the Japanese system and the US and UK or UK based approaches, with some key points being as follows:
Comparing Japan to US and UK
In contrast to the US, where failure to file certain tax returns (such as those required by a permanent establishment of a foreign company in the US) can leave an open ended exposure that will not expire with time, in Japan the expiration of the statue of limitations over time will in due course mean that historic liabilities will fall out of the period allowed for assessment, although the timing is extended for failure to make filings when due. Read More