One seemingly trivial issue which can have great practical importance is obtaining proof that a Japanese company has paid its corporation tax liability.
Evidence of such tax payment is often critical for foreign tax credit purposes or for due diligence purposes. Below is an outline of the Japanese tax payment process with examples in English of receipts or certificates of tax payment and how to obtain them.
Corporate tax payment process
In Japan corporate tax payment is typically made by visiting your Japanese bank branch or other financial institution with a completed remittance slip that includes information about the type of tax, period of payment, taxpayer and tax office to whom payment is made.
The remittance slip is presented at the bank counter and an electronic remittance is then made from the taxpayer’s account to a collection account in the bank for onward remittance to the tax authorities. The bank will stamp the remittance slip to certify the date and act of payment.
Payment can also be made through internet banking for e-tax registered taxpayers or at a convenience store for cash payments.
The above process is explained here on the NTA website (link in Japanese) and click on the photo for a link to a copy of the remittance slip used for these purposes annotated in English. In the absence of a Certificate of Tax payment discussed below this is the document that, along with the tax return, would typically be used as evidence of Japanese tax payment for tax credit purposes.
Note that unlike in some other countries in Japan there are no easy means available to re-allocate tax payments between particular years (for example, when the company has made an overpayment in one year and underpayment in another another year). Payments and repayments are, in principal, dealt with on a year by year basis.
Certificate of tax payment
It is also possible to obtain from the tax authorities a ‘Certificate of Tax Payment’ or in Japanese a ‘nouzeo shoumei sho’ or ‘納税証明書’.
The Japanese National Tax Authority (NTA) website explains this procedure and towards the bottom of this page are links to PDFs of various Japanese forms that can be used as part of the procedure to obtain the certification required. Also see this link or click on the picture to the right for more details.
The procedure allows obtaining the certificates by post and also collection by a representative on appropriate completion of a form appointing someone as agent for this purpose.
Some points to note about the procedure are as follows:
- There are four different types of certificate that can be requested for a particular tax payment period:
- Type 1: The amount of taxes that should be paid, the amount paid and amounts not yet paid.
- Type 2: Certification of the amount of taxaxble income (for individuals, the amount of taxable income reported on their individual tax returns; for corporations the amount of income subject to corporation tax).
- Type 3: Certification that there are no unpaid taxes. There is some flexibility to reference the type of tax for which such proof is required.
- Type 4: Certification that for a specified period that no action was taken for the collection of unpaid or late paid taxes.
- Normally certificates can normally be obtained for tax year ends ending up to three years prior to the date of the most recent tax year end. However this should not be relied on and care should be taken to promptly obtain any certificates they may require.
- Electronic tax filers can receive an electronic certification of tax payment or can apply for a certificate.