J A P A N E S E
FAQ
- I have started a business in Japan. What is the first thing to do?
- If you have started a business as a sole proprietor, it is necessary to submit the Notification of starting your own business (available here) to your local tax office. There are two methods of filing an individual income tax return at year-end; ‘white return’ and ‘blue return’. While the choice of ‘blue return’ provides you various benefits, account books are required under certain conditions. Additionally, the choice of ‘blue return’ requires to submit the ‘Application Form for Approval of Filing Blue Return’ (available here) within two months after starting the business.
- What is the difference between ‘blue return’ and ‘white return’?
- As business owners with an income less than three million yen did not used to have the responsibility to keep account books, ‘white return’ used to be commonly chosen by mainly small business owners. However, after the legal change in 2014, all the business owners who chose ‘white return’ are obliged to keep account books. While ‘white return’ with simpler accounts fulfill the required conditions compared to ‘blue return’, it is getting less easy than before. In the meantime, ‘blue return’ has various benefits on the condition of keeping account books by either single-entry or double-entry.
- What are the benefits of ‘blue return’?
- The declaration by ‘blue return’ provides you various benefits, such as exemption and deduction of income by 100,000 yen – 650,000 yen, carryover of loss, etc. The Government of Japan provides benefits to the people who keep account books in order, and more benefits especially to the people who keep account books by using more complicated double-entry. While ‘double-entry’ must be prepared with an accounting software, ‘single-entry’ can be prepared simply with Microsoft Excel.
(available format here)
- Is it necessary to submit account books and receipts to the tax office?
- No, it is not necessary to submit the documents to the tax office. However, these documents must be kept to present in case the tax office inquires. As for the retention period, account books must be kept for seven years, and original vouchers such as invoices, delivery note and receipts must be kept for five years.
- I have the second income besides salary. Is a final return necessary?
- Generally salaried workers who are paid by one place, the amount of their income tax is finalized and settled through the procedure of year-end adjustment performed by their employer. People with the second income are basically required to file a final tax return. However, there is a no-return provision allowed only for the people with the second income of less than 200,000 yen. (Even in such case, please note that you need to declare that income to local tax office and pay inhabitant tax on it.)
- I retired from a company. Is there anything to do?
- There are the income tax and the inhabitant tax as the tax on salary. While the income tax for the year is withheld from current monthly salary, the inhabitant tax of the previous year is withheld from the following years. Therefore, without any income, the payment of the income tax is not necessary though the payment of the inhabitant tax is required even without income. Please note that you might be required to pay the resident tax by yourself if you retired in the middle of the year. Additionally, social insurance which you took out at a company shifts to the national pension and the national health insurance after the retirement. As the amount of the National Health Insurance is determined based on the income of the previous year, the amount can be expensive. If it is difficult to make a payment, it is recommended to consult with a municipal officer.
- What is ‘furusato-tax’?
- ‘Furusato-tax’ is a system that you can have a reduction in the resident tax and the income tax according to the amount of contributions to a region you support. Sometimes you can receive a gift in return from the region.
The amount of the tax reduction will not exceed the amount of contributions. However, the maximum amount of the tax reduction will be the amount of contributions after deducting 2,000 yen, and the amount of contributions which you can have a tax reduction at the maximum changes depending on the amount of income.
To know a guide of the amount of contributions →
https://www.furusato-tax.jp/example.html
To know gifts given in return →
https://www.furusato-tax.jp/
- I am running a private business at the moment. I heard that it is better to set up a company. What are the advantages of organizing a company?
- As there are advantages and disadvantages of sole proprietorship becoming incorporated, we recommend you to make a decision after examining the both sides.
Advantages
You can save taxes.
It is generally said that the incorporation is tax advantageous when the level of annual income is continuously over five million yen. As for concrete figures, please confirm with a tax accountant.You can gain the social reliability.
Some companies do not do business with sole proprietors. Also, corporations are generally advantageous for bank borrowing.Disadvantages
You need to pay taxes even in the red.
In regard to the corporate inhabitant tax, there is a tax on per capita basis to be paid according to the amount of capital stock even if the corporate results are in deficit. There are slight changes in amount depending on the municipalities, however, at least 70,000 yen must be paid.Compulsory social insurance The incorporation requires to join the health insurance and the employee pension insurance.
- Now I am joining the government-managed social insurance system and paying the welfare insurance premium. Is it possible to receive the pension benefits after leaving Japan in the future?
- If a person who does not have Japanese nationality loses the qualification of the national pension / the employee pension insurance and then leave Japan, the person can make a claim on the lump-sum withdrawal within two years after losing the address in Japan(see our service).
Also, a person who has participated in the the pension in the countries which concluded the social security agreement with Japan can receive a pension of both Japan and the partner country by calculating all the participated period of the pension under certain conditions.
http://www.nenkin.go.jp/international/english/international/othercontries.html
