Japan: Tax & Auditing Requirements

Taxation requirements

Adapted from this source by JETRO (the Japanese external trade organization). This source by PWC provides a more simple overview of the corporation taxation system in Japan. Japan’s corporation taxes are composed of multiple components. These include corporate tax (national tax) local corporate tax (national tax) corporate inhabitant tax (local tax) enterprise tax (local tax) and special corporate tax (a national tax which is paid to local governments in tandem with enterprise tax). This set of taxes are collectively referred to as ‘corporation taxes’. Corporation taxes vary by income bracket for “Small and medium-sized enterprises” and are paid at a flat rate for “Enterprises” (not to be confused with GK/KK). The differentiating characteristics for enterprise sizes are described in the JETRO source above.

Rates may vary considerably depending on the local taxation components in the particular jurisdiction in which the company is headquartered and operating (where the office address is registered). A comprehensive assessment of corporation tax for startup/new subsidiary firms can be found here. Finally, tax returns and tax payments for corporation taxes must be filed within two months from the day following the last day of each taxable year.

Auditing requirements It is typical for the National Tax Agency to audit Japanese firms within 3-5 years of starting business in Japan. For Virtual Currency Exchange Service Providers, additional requirements do exist. In particular:

  • VCESPs must segregate their own cash from users’ cash, by:
    • Using a bank etc., or
    • Placing cash in a specific trust
  • The VCESP must segregate users’ virtual currency from its own virtual currency, by both
    • Making a clear distinction between the users’ virtual currency and its own virtual currency such that the users’ virtual currency is immediately identifiable, and;
    • It must ensure that third parties to which management of the VC is outsourced (if applicable) that all thirdparties make a clear distinction between the VC of providers and users such that the users’ VC is immediately identifiable.
  • All VCESPs must regularly undergo an audit of the status of the segregated management by a public certified accountant or audit firm at least once a year.

Key sources

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