When you start a business in Japan, you might wonder when tax officers will first come to your company. In this blog, I will explain tax investigations as a certified public accountant and tax accountant.  

1. What Companies Will Tax Officers Come to?

First, in most cases, they will not come until your business’s annual sales figure exceeds 50 million yen. After that, they will come when sharp movement happens in business figures, such as a sudden increase or decrease in sales or profit. It’s common for small businesses to occur once from 5 years to 10 years.

2. How Many Tax Officers Come?

One young tax officer usually comes for small businesses. However, he is controlled by his boss. If something wrong is found, you have to explain it in detail so that everyone, including the boss, can understand that there are no doubts about avoiding tax payments.

3. How Long Does a Tax Investigation Last?

In most cases, they will come to a company for two days. If some points are revealed, they will do more research to determine the facts, such as visiting your clients or suppliers. The tax investigation usually ends a couple of months from the first day they come.

4. What Do Tax Officers Do?

First, they have a hearing with a CEO for around an hour about the business’s overview. Then, they review documents, such as received and sent invoices, to confirm whether non-recorded sales transactions and fictitious outsourcing costs exist. If there are rapidly increasing items of expenses, such as travel fees, they will research it intensively.

5. How do Tax Investigations Come to an End?

A tax investigation is finished smoothly when tax officers can not find anything wrong. When they find something, negotiation starts. In most cases, they and you compromise, such as admitting this point but refusing that point.

6. What Is The Worst You Should Avoid?

Tax officers always insist that you conduct disguise and conceal to elude paying taxes, even though it is just an error. If you admit it, you are considered a dishonest taxpayer and listed on the blacklist, which leads to additional penalty tax rates of 30% and the frequency of tax investigations growing. You must never accept their insistence when you did not do that.

7. What Should You Do If a Tax Office Tell You a Tax Investigation Will Be Conducted?

You should study the accounting books for the last three years and work out a plan to fight against the tax investigation. When you have already hired a tax accountant, you can leave it to him. By the way, you can delay the schedule a tax officer offers if you are busy, but you must accept a tax investigation sometime within a moderate amount of time.

8. What Is the Best Way To Avoid Unexpected Additional Tax Payment In Tax Investigation?

The best approach is to choose a reliable tax accountant from the beginning and communicate well with him. This way, you can file proper tax returns and not be afraid of tax investigations.

As one of the membes of the group ‘ Business Support in Japan’, I have many experiences and deeply and wide knowlage as well as strong desire to support forign people and companies who starting businesses in Japan. Please feel free to contuct me if you have any questions and concerns.