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Helping foreign business owners understand Japan's tax system—one topic at a time. When you run a business in Japan, keeping receipts is important. But receipts are not the only records you need to keep. Good records help you calculate your business income correctly and explain your expenses if the tax office asks questions. Let's look at what you should keep. 1. Keep Documents That Explain Your Expenses For business expenses, keep documents such as: Receipts and invoices — s

Helping foreign business owners understand Japan's tax system—one topic at a time. Last week, we learned that the cost of some business assets must be deducted over several years through depreciation. But what happens when you buy a relatively inexpensive item, such as a computer or office equipment? In some cases, you can deduct the full cost in the year you start using it for business. Let's look at three important rules. 1. Items Costing Less Than ¥100,000 If an item costs

Helping foreign business owners understand Japan's tax system—one topic at a time. 1. You Buy Something for Your Business. Can You Deduct the Full Cost? Suppose you buy a computer for your business for ¥300,000. Can you deduct the full ¥300,000 as an expense in the year you buy it? Not necessarily. In Japan, the cost of certain assets that you use for several years must generally be divided over their useful life. This process is called depreciation. Common examples of assets

Helping foreign business owners understand Japan's tax system—one topic at a time. If you use your car for both business and personal purposes, can you deduct the car expenses from your business income? Yes, but you need to separate business use from personal use. Let's look at a simple example. 1. How Much Do You Use Your Car for Business? Suppose you drive your car 10,000 km in one year. Business trips: 6,000 km Personal use: 4,000 km Total distance: 10,000 km Your business

Helping foreign business owners understand Japan's tax system—one topic at a time. In our last newsletter, we talked about expenses that are used for both business and personal purposes. But there is another question: How do you decide the business-use percentage? For example, if you use your home, car, or phone for both business and personal purposes, how much can you claim as a business expense? There is no single percentage that applies to everything. The percentage should

Helping foreign business owners understand Japan's tax system—one topic at a time. In our last newsletter, we looked at business expenses. But what happens when you use something for both your business and your personal life? This is a common question for small business owners. A Simple Example: Your Home Suppose you work from home. You pay rent for your home every month. Can you deduct all of the rent as a business expense? Usually, no. Part of your home may be used for busi

Helping foreign business owners understand Japan's tax system—one topic at a time. One of the most common questions from business owners is: “Can I deduct this expense from my business income?” The answer is not always simple. The first thing to understand is this: Was the money spent for your business? A Simple Example Suppose you buy a computer for your business. You use it to prepare documents, communicate with customers, and manage your business. This is generally a busin

Helping foreign business owners understand Japan's tax system—one topic at a time. In our last newsletter, we talked about the Blue Return. One important requirement is good bookkeeping. But what does that really mean? You do not need to be an accountant to understand the basic idea. Keep a Record of Your Business Good bookkeeping means keeping a clear record of what happens in your business. For example: How much did you sell? Who paid you? What did you buy? What business ex

Helping foreign business owners understand Japan's tax system—one topic at a time. In our last newsletter, we talked about the first steps when starting a business as a sole proprietor. One important question is:　Should I choose the Blue Return? For many business owners, the answer is yes.　But why? What Is the Blue Return? The Blue Return is a Japanese tax system that gives certain tax benefits to business owners who keep proper accounting records and meet the required condit

Helping foreign business owners understand Japan's tax system—one topic at a time. If you decide to start your business in Japan as a sole proprietor, what should you do first? There are several tax procedures, but you do not need to learn everything at once. Here are the main steps. 1. Notify the Tax Office When you start a business, you should submit a Notification of Opening a Business to the tax office. For businesses started from 2026, the deadline is generally the filin

Helping foreign business owners understand Japan's tax system—one topic at a time. When starting a business in Japan, one of the first decisions is: Should I operate as a sole proprietor or establish a company? There is no single answer. The best choice depends on the size and future plans of your business. Sole Proprietor Starting as a sole proprietor is generally simpler. The business profit is reported as part of your individual income, and you pay income tax on your taxab

Helping foreign business owners understand Japan's tax system—one topic at a time. Starting a business in Japan means dealing with several different types of taxes. You do not need to understand everything at the beginning. First, it is useful to know the basic tax map. 1. Income Tax If you operate your business as a sole proprietor, the profit from your business is generally included in your personal income and subject to income tax. 2. Corporate Tax If you operate through a

Helping foreign business owners understand Japan's tax system—one topic at a time. Over the past few weeks, we have introduced some important items in Japan's 2026 Tax Reform. The rules are complicated, but you do not need to understand every detail. The important thing is to know which changes may affect you and your business. If You Are a Sole Proprietor Check the changes to the Blue Return Special Deduction. From 2027, the maximum deduction will increase to ¥750,000, but a

Helping foreign business owners understand Japan's tax system—one topic at a time. What Is Required for the New ¥750,000 Deduction? Starting with income tax for 2027, the maximum Blue Return Special Deduction will increase from ¥650,000 to ¥750,000. However, the new ¥750,000 deduction will not be available automatically. To qualify, a taxpayer must generally meet the following requirements: Keep proper accounting records using double-entry bookkeeping File the tax return by e

Helping foreign business owners understand Japan's tax system—one topic at a time. What Will Change? Japan plans to revise the Blue Return Special Deduction starting with 2028 tax returns (for the 2027 tax year), subject to the final approval of the tax reform legislation. Currently, there are three deduction levels: ¥100,000 ¥550,000 ¥650,000 Under the proposed reform, there will be four deduction levels: ¥0 ¥100,000 ¥650,000 ¥750,000 (new) The biggest change is the introduc

Simple tax updates for foreign business owners and residents in Japan. This week, we look at important consumption tax changes included in Japan's 2026 Tax Reform proposals. Some measures are already scheduled, while others are still under discussion. 1. Changes to the Transitional Input Tax Credit Japan plans to gradually reduce the percentage of the input tax credit available for purchases from suppliers who are not registered as invoice issuers. Businesses should review th

This week, we look at several important corporate tax proposals in Japan's 2026 Tax Reform. Please note: Some measures are still proposals and may change before becoming law. 1. Changes to Tax Incentives for Employee Wage Increases Japan plans to revise tax incentives that encourage companies to increase employee salaries. If your company has employees in Japan, these changes may affect future tax planning. 2. New Tax Incentives for Business Investment The government plans to

Individual Income Tax – Three Important Changes This week, we look at three important income tax topics included in Japan's 2026 Tax Reform proposals. Please note: Some of these measures are still proposals and may change before becoming law. 1. Higher Income Thresholds ("Income Wall") Japan plans to raise several income thresholds that determine when income tax and certain tax benefits apply. For many employees and part-time workers, this means they may be able to earn more

Japan's 2026 Tax Reform Package includes several important changes for individuals and businesses. Over the coming weeks, we will explain the key topics in simple English for foreign business owners and residents in Japan. Some of the main topics include: Individual Income Tax Higher income thresholds ("income wall") Proposed separate taxation for crypto assets Changes to the Blue Return Special Deduction Corporate Tax Documentation requirements for related-party transactions

Electronic Records: Don't Forget Emails and PDFs In our previous articles, we explained what related-party transactions are and why supporting documents are important. This week, we focus on one more important point: How should these documents be kept? Electronic records are also tax records Today, many business transactions are handled electronically. Examples include: emails, PDF contracts, electronic invoices, cloud-based documents, online approvals. These records may be i