If you plan to start a business in Japan, you should be aware of the uniqueness of Japanese taxation.

1. The Year-End Tax Adjustment; Nnematsu Chousei

In Japan, all businesses must calculate employees’ income taxes, collect and pay them from the end of the year to January.

2. Tolerant for Entertainment Expenses

A broad range of entertainment expenditures are considered expenses for tax purposes in Japan, such as golf play fees, as long as they are related to entertainment. However, the limit for small businesses is 8 million yen. On the other hand, for large companies, half of all expenditures are considered expenses.

3. Exemption from VAT, Japanese Consumption Tax

Roughly saying, small Japanese businesses whose sales are under 10 million yen are exempted from consumption tax. However, even if they invest a lot of money, they can not get a refund without a particular application in advance.  

4. Fixed Director’s Fees

For tax purposes, a company can not pay bonuses to directors, even if the company’s profit grows unexpectedly in the middle of the fiscal year. Bonuses are considered non-expenses for tax purposes in Japan.  

5. Withholding Tax for Directors’ Fees

In Japan, even directors’ fees are the scope of withholding tax.