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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

Why Are Supporting Documents Important? Last time, we explained what a related-party transaction is. This week, let's look at a simple question: Why does Japan require supporting documents for these transactions? The tax office wants to understand the transaction When two unrelated companies do business, the price is usually decided through normal market negotiations. However, when related companies do business with each other, the tax office may ask: Why was this price chose

Japan has special tax rules for transactions between related parties. A related-party transaction is a transaction between companies or persons that have a close relationship, such as: a parent company and its subsidiary, companies under common ownership, or other parties with significant control over each other. Examples include: licensing intellectual property, providing services, or selling goods between related companies. Why is documentation important? When a Japanese co

Japan will introduce a new filing simplification rule from January 1, 2027. This change affects: employers issuing salary withholding slips, and pension payment reporting. What will change? Currently, employers often need to submit: a withholding slip to the tax office, and a salary payment report to the local municipality. Under the new rule: 👉 If the required information is included in the salary payment report submitted to the municipality,　the withholding slip will be tr

Following past week’s topic about meal benefits, this week we look at other common employee benefits in Japan, including: commuting allowances, and parking support. These benefits can also receive favorable tax treatment. 1. Commuting allowance In Japan, commuting costs paid by the company are generally: not taxable for employees, if they stay within the tax-free limit. This includes: train or bus commuting, and in some cases, car commuting. The government plans to increase s

Japan will gradually reduce the temporary consumption tax credit for purchases from: non-invoice businesses, or tax-exempt suppliers. This is part of the transition rules under the Invoice System. What will change? Currently, businesses can still claim: 80% of the input tax credit for these purchases. However: From October 2026 → reduced to 70% Later, it will decrease further: 50% then 30% finally 0% Why this matters If your company buys goods or services from: freelancers, s

Last time, we explained the difference between the Simplified Tax Scheme and the General Tax Method . Now the key question is: Which one saves more tax? Simple answer Low expenses → Simplified is often better High expenses → General is often better Case 1: Simplified is better The Simplified Tax Scheme may save more tax if: Your business has low costs You mainly provide services You have few purchases 👉 You can keep more tax because the fixed rate may be higher than your ac

If you run a business in Japan, you may need to choose between: the Simplified Tax Scheme , or the General Tax Method This choice can affect how much consumption tax you pay. What is the difference? 1. Simplified Tax Scheme Available if your sales are JPY 50 million or less Uses a fixed percentage (deemed rate) No need to calculate actual purchase tax 👉 Simple and easy to manage 2. General Tax Method Calculates tax based on actual sales and purchases More accurate, but more

This week’s topic is about a common mistake in filing deadlines related to Japan’s consumption tax. Many small business owners misunderstand how to apply the Simplified Tax Scheme after using the 20% Special Rule . Key point: The special rule is limited If you used the 20% Special Rule , you may apply the Simplified Tax Scheme more flexibly. However, this special treatment applies only to the following tax year . 👉 It does NOT apply to all future years. Common misundersta

Japan plans to increase the tax-free limits for employee meals and allowances starting April 1, 2026 . This change is part of the FY2026 tax reform. 　　　What will change? 1. Company-paid meals (cafeteria, etc.) Current limit: JPY 3,500 per month New limit: JPY 7,500 per month If the conditions are met, this amount is not taxed as income for employees. 2. Late-night meal allowance (cash instead of food) Current limit: JPY 300 per time New limit: JPY 650 per time 　　　Important

Even with recent tax reforms, many tax troubles involving foreign residents in Japan come from misunderstandings , not from the tax rate itself. Below are foreigner-specific points to be careful about. 1. “Same tax rules as my home country” is a dangerous assumption Japan’s tax system is very different from many countries. Common misunderstandings include: Assuming all income is taxed only when paid Believing deductions work automatically like in other countries Thinking yea

After looking at the tax reform outline and its relation to tax returns, the key question for many foreign residents is simple: “How will this change affect me?” Below is a practical summary of what is likely to change — and what is not. 1. Lower income tax for many foreign residents The planned increase in: the basic deduction , and the minimum employment income deduction means that many foreign residents will have less taxable income . This mainly benefits: Employees with l

As Japan enters the tax return season , many foreign residents are preparing to file their individual income tax returns . This year, it is important to understand how the recent income tax reforms relate to tax returns , and what they do – and do not – affect. Do the new income tax changes apply to this tax return? In short: mostly no, but preparation is important . The income tax changes announced in the FY2026 Tax Reform Outline are future oriented . They mainly apply to i

In this series, we start with individual income tax , because the tax return season is approaching and many foreigners are directly affected. Why individual income tax comes first Most foreign residents earn salary income or business income in Japan. Income tax changes affect monthly payroll , year-end adjustment , and final tax returns . Even small rule changes can change the amount of tax you pay or get refunded . Main Income Tax Changes in the FY2026 Outline 1. Increase

In December, Japan’s ruling parties — the Liberal Democratic Party (LDP) and the Japan Innovation Party — announced the FY2026 Tax Reform Outline . This “tax reform outline” is an important policy document. It shows what tax changes the government plans , before they are turned into laws and included in the national budget. What does the Tax Reform Outline mean? In Japan, major tax changes usually follow this process: Tax Reform Outline is announced (December) Budget bills

Following last weeks’ notice, here are practical tips to help foreign residents and business owners avoid unlicensed tax preparers in Japan. 1. Check the License A licensed tax accountant in Japan is called a Certified Public Tax Accountant (Zeirishi) . They are registered with the Japan Federation of Certified Public Tax Accountants’ associations and have an official registration number. You may ask directly : Are you a licensed Zeirishi? What is your registration number?

As Japan enters the tax filing season , foreign residents may be approached by individuals offering low-cost tax return preparation or tax advice. Please be careful — using an unlicensed tax preparer can be illegal and risky. In Japan, only a licensed Certified Public Tax Accountant (Zeirishi) is legally allowed to provide paid tax advice or prepare tax returns. Hiring someone without this qualification may result in incorrect filings , additional tax assessments , penaltie

This week’s topic is important for sole proprietors in Japan , and it is also relevant for small corporations . If you plan to apply the Simplified Consumption Tax Scheme starting January next year , you must submit the required notification by December 31 of this year .　Missing this deadline may result in a higher consumption tax burden . 　 What is the Simplified Consumption Tax Scheme? The Simplified Consumption Tax Scheme is available to businesses whose taxable sales in

Japan’s financial regulator, the FSA, is working to reclassify cryptocurrencies such as Bitcoin and Ethereum as regulated financial products. As part of this overhaul, crypto profits may be taxed under a flat 20% “separate taxation” regime — instead of the current “miscellaneous income” system with rates up to 55%. The reform is expected to be included in the 2026 tax package and may take effect as early as 2026 or 2027, depending on parliamentary approval. Exact details — su

[Overview] The National Tax Agency and related notices have updated the tax-exempt limits for commuting allowances. This summary highlights key points for employers. For exact amounts and detailed application rules, please consult the official NTA publications. [Key Points] 1. Enactment/Effective Date: The amendment was announced and effective on November 20, 2025 . 2. Retroactive Application: The change applies retroactively to commuting allowances paid from April 1, 2025 o