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.
Extension of the tax filing period
Under certain circumstances it is possible to get an extension of the time for filing corporation tax returns. These circumstances include both routine reasons for extension and extension for a variety of non-routine reasons.
In cases of natural disaster for similar unavoidable reasons the submission of tax returns, applications, demands, reports or elections and other documentation is not possible by the related deadline that would normally apply, then the relevant tax authority can allow an extension of submission to up to two months from the day that such circumstances ended. These circumstances can be specified in relation to a region or an individual case.
Rarely, but probably more commonly than the above, extension to tax return filing can be allowed for specific companies when natural calamity (perhaps a fire at the company premises rather than an earthquake over a wider area) prevents the completion of the accounts on a timely basis. Finally, and by far the most common case, extension to tax filing is allowed when owing to audit or similar reasons it is routinely not possible to close the accounts on a timely basis. Looking at these in more detail:
Extension owing to natural calamity
The tax office having jurisdiction for the company concerned can allow an extension of the time limit for filing to a specified date when owing to natural calamity the accounts cannot be completed according to a schedule allowing timely filing of the tax returns. An application has to be made for such extension within 45 days from the end of the financial year concerned and should state why the accounts will not be closed by the deadline for submission of the return, the day requested for extension and other prescribed details. The application can be deemed to be accepted by the tax authorities if no confirmation of the extension or denial of the extension is received by two months after ht end of the financial year concerned. Interest will apply from the normal date of payment of tax to the date actually paid under the extension arrangements.
Extension due to non settlement of the accounts due to audit or other matters
Most if not all large companies are allowed an extension of at least one month and possibly longer on the grounds described here. In cases where owing to audit or similar reasons it is routinely not possible to meet the normal two month deadline for tax return submission the tax office having jurisdiction for the company concerned on application may extend the filing deadline for a month, or when special circumstances apply such as inability to hold a required shareholders meeting, for further months specified by the tax office concerned. This extension is permanent, assuming no subsequent withdrawl, change or cessation. Foreign companies with branches in Japan can often receive an extension of more than one month to the tax filing limit.
Application for extensions on these grounds has to be submitted before the final day of the year for which the extension will first apply explaining why the normal deadline cannot be met and if the extension is more than one month the special circumstances that apply and the requested number of months along with other prescribed matters. If there is no response to the application after more than 15 days from the end of the year concerned then the application for one month or longer is deemed to have been granted. The tax authorities can remove or reduce the period of extension if the circumstances under which it is required no longer apply. Companies can also chose not to extend the tax filing deadline by submission of a notification prior to the year end concerned – although I really cannot see this happening very often. Interest will apply for payment of tax beyond the normal due date for payment.
Application for repayment of tax – kanpu/還付
Unlike in most countries in Japan application for repayment of overpaid tax requires a formal process to request repayment and submission of a separate repayment request, although in practice this is still part of the normal return process. As an example, here is the form for a repayment on carry back of loss (on closure of branch or liquidation for example).
Repayment of income taxes that could not be offset against corporate tax
Japanese companies can offset income taxes they have suffered (e.g. withholding taxes on dividends, interest etc) against their corporation tax liability or if this is zero or insufficient for offset reclaim the income tax concerned. Interest on the repayment applies from the day following the date the return concerned was due until the date repaid. The authorities may carry out a brief (not full!) audit to verify that good grounds for repayment exist fairly rapidly in order to prevent interest at quite favorable rates from accruing to the benefit of the taxpayer.
Repayment of overpaid interim corporate taxes paid
Interim corporate taxes paid are used to meet the final corporate tax liability or can be repaid. Interest is paid on amounts repaid from the date the original interim corporation tax return was due in cases where the tax was not used to meet the final payment, provided the final tax return was submitted before the appropriate deadline.
Late filings and amended returns
The table below outlines the time limits for corporate tax filings and revised filings. Corporate income tax returns can be filed after the due date up to the time that a kettei/決定 or tax determination is issued – with such returns called kigengoshinkoku/期限後申告 or Late Returns.
Class Circumstances around filing Time limit for filing Time limit for payment Amount to payment
Late tax filing Late tax returns can be filed up until the time of a tax determination ( kettei) Up until the date of the receipt of the determination notice Date of filing (interest and penalties will apply) Amount returned less interim or advanced tax payments
General tax amended returns Where there is an under payment of tax or an excess loss claimed, until the receipt of an assessment Until the date of receipt of the assessment Date of filing (interest and penalties will apply) Amount of additional tax payable on the return
Amended return after the receipt of an assessment or determination Where there is an under payment of tax or an excess loss claimed, until the receipt of re-assessment Until the date of receipt of the re-assessment notice Date of submission of the revised return Amount of additional tax payable on the return
If the tax payable amount shown on an already submitted tax return is found to be too low or the tax loss amount is too great then up until an assessment – a kousei/更生 – is issued then an amended tax return or shuusei shinkoku sho/修正申告書 can be filed.