Working with a certified accountant in Japan
is important for all business owners as it ensures the quality of the services and the company’s compliance with the latest legal tax changes. Investors can choose to request the services offered by a specialized firm once they open a company in Japan
as well as beforehand, should they need guidance or counsel on the applicable tax laws.
Types of accounting services in Japan
Companies looking to outsource the accounting process will generally seek several standard types of services. These have to do with ensuring the ongoing compliance with the reporting for the company and also with the reporting for their employees. Some of the services offered by our team of accountants are the following:
- Bookkeeping services: the preparation of the income statement, the balances, the general and the sub-ledger;
- Annual tax submissions: drafting and preparing the annual financial services for the company in Japan and observing the deadlines imposed by the authorities;
- Consumption tax observance: assistance for all matters concerning the consumption tax - the Japanese value-added tax; includes filing the consumption tax return as needed;
- Payroll: the management of the payments made to the company employees, the allocation of the bonuses as well as submitting the social security contributions and all relevant payments.
An accountant in Japan is able to provide all of these services as well as others, focusing on the accuracy of the reports and the general compliance requirements.
Requirements for a professional accountant in Japan
An accountant in Japan needs to pass a special examination and have a minimum period of experience, before or after the said examination. A three-year professional educational program is then followed once the individual has successfully passed the examination.
In order to become a certified accountant, an individual is required to meet special requirements for qualification and go through all of the steps in the Certified Public Accountants Act - the main legal resource on the examination, registration, obligations and the responsibilities of an accountant in Japan.
The steps are the following:
- Examination: pass the examination with the Certified Public Accountants and Auditing Oversight Board; multiple choice tests and essays are required;
- Practical experience: the future accountant in Japan is required to acquire relevant practical experience in the field for at least two years;
- Educational program: those who pass the examination are required to move on with a three-year professional accountancy program with the Japan Foundation for Accounting Education and Learning;
- Assessment: after the completion of the program, the individual can take a final assessment in a chosen specialization (accounting, auditing, taxation, etc.);
- Registration: after passing the final assessments, an accountant in Japan is required to register with the Japanese Institute of Certified Public Accountants.
Our team of certified professional accountants in Japan includes experts who have followed all of these steps and have relevant experience in the field. Moreover, our team observes the ethical code of conduct for an accountant, which includes issues like professional responsibility, listed below.
Investors who are interested in company formation in Japan
should choose to work with an expert, such as those from our team, who follow these general provisions:
- - Mission: to ensure that they provide reliable financial documents and all other financial data in order to ensure the fair functioning of companies in Japan and the protection of investors and creditors;
- - Professional responsibility: a certified public accountant in Japan shall commit to provide fair services, from an independent position;
- - Services: a certified public accountant in Japan shall provide services related to auditing or attesting financial documents, preparing such documents as needed and providing consultancy on financial matters; the fees for these services are established by the accountant;
- - Registration: individuals who provide accounting services in Japan shall register with the Japanese Institute of Certified Public Accountants (JICPA).
Company formation in Japan
The steps for company formation in Japan include several key issues that need to be handled by investors, such as deciding on the type of business. Our team of accountants can provide pre and post-registration assistance so that investors may know the exact tax and reporting requirements for the legal entity they have chosen.
The following procedures for incorporation are required:
- - Decide on the business form: there are several types of companies in Japan, each with its own particularities and level of liability for the founders; some are more suited to small and medium businesses than others;
- - Draw up the documents: the Articles of Association include essential information on the business, its scope, founders and many other details;
- - Registration: the corporation needs to be registered as per the Companies Act; our team can provide more details on these registration requirements;
- Other steps: a company that has employees must enroll with the social insurance system and notify the National Tax Agency that the corporation was established;
Taxes in Japan
Understanding the tax and filing requirements is essential and an accountant in Japan from our team can help answer your questions from the very beginning. Corporate taxation is based on residence, with a resident company being on that has its main place of business (main office) in Japan. There is no specific requirement to include local management for the purpose of this definition.
Resident companies are taxed on their worldwide income while foreign companies are taxed only in the income they derive from Japan. Nonetheless, foreign companies that have a permanent establishment in the country (for example, a branch) is taxed in the same way as a subsidiary.
The following taxes are relevant:
23.3% standard corporate tax rate, to which a local inhabitants and enterprise tax is added, bringing the effective tax rate to approximately 30% (for a company with a paid-in capital of over 100 million JPY);
2.1% surtax on the withholding tax for certain types of Japanese-source income;
20% withholding tax on dividends usually imposed on those paid to residents and nonresidents; a reduction is possible if a tax treaty is in place;
the consumption tax, similar to the value-added tax, with a standard value of 10% and a reduced rate of 0% and 8%.
Companies in Japan are required to become consumption taxpayers when the taxable sales for goods and services included in this category do not exceed 10 million JPY in the base period. For this purpose, the base period is considered two years before the current year or the first six months of the prior year. Our accountant in Japan can give you more details. We can also provide information on the new consumption tax that will be introduced starting with October 2023.
Other taxes for companies include the payroll tax, real property tax, social security contributions and the stamp duty, along with others for specific licensing and registrations.
Japan has signed more than 70 double tax treaties and for more information on how these can apply to foreign companies we invite you to reach out to our tax specialists.
Filing obligations in Japan
Our team of accountants can help investors understand the tax filing and payment requirements. Companies select the fiscal year the moment they start their operations in the country, however, the accounting period must not exceed 12 months. For branches, the tax year is usually the same as it is for the parent company (head office).
Companies file a tax return every year and pay the final due taxes within two months of closing the tax year. Prepayments are made two months from the end of the sixth month of the year and in this case the amount will be either 50% of the tax payable according to the earnings in the previous year or the actual tax liability for the first six month.
A particularity in the Japanese taxation system, which can be explained in more detail by an accountant in Japan, is the blue or white return. The blue type of return is one that is applied for before the beginning of the year as it includes certain privileges that can be important for the business. These can be related to deductions, accelerated depreciation or tax loss carryforwards. Newly incorporated businesses apply for the blue form before the end of their first year. However, in order to be eligible for the blue form, the company needs to meet a number of requirements in terms of the account system used and their recordkeeping. Our accounting specialists can provide you with more details.
Company owners in Japan are advised to seek proper accounting assistance in order to observe the requirements in force so that they may avoid the appliable penalties. These are issued for an underreport of the total taxes owed as well as for failure to submit the tax returns and make the tax payments in due time. These penalties are not deductible for Japanese tax purposes.
Accounting services for individual taxation in Japan
Entrepreneurs or sole traders can also benefit from adequate accounting assistance when they derive income from Japan. Understanding the individual taxation principles is essential, as is the compliance requirements for individuals (the tax rates applicable in Japan to individuals do not depend on marital status or any other status, this is to say that joint filing is not an option).
Self-employers need to observe similar tax filing and calculation methods as companies, another reason why accounting services are in demand even in the case of freelancers. Sole traders are required to self-report their income and an accountant can help during this process.
The number of certified accounting professionals in the country highlights the fact that these types of services are in demand. According to JICPA, the numbers are rising steadily:
- - there were 31,426 certified public accountants an the end of March 2019;
- - 14% of the total number of professionals in Japan are women;
- - in 2018 there were 31,212 certified public accountants (26,806 men and 4,406 women).
For more information on working with a certified public accountant and the importance of such services for company formation in Japan
, please contact our experts