Newsletter #012 Starting and Running a Business in Japan – Part 8 How Do You Decide the Business-Use Percentage?

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 be based on how you actually use the item.

Example 1: Home Office

Suppose you have a home of 100 square meters.

You use one room of 20 square meters only as your business office.

A simple way to consider the business portion may be:

20 square meters ÷ 100 square meters = 20%

If your monthly rent is ¥100,000, the business portion may be ¥20,000.

But the actual calculation may need to consider how the space is used.

The important point is:

Why is 20% reasonable?

You should be able to explain it.

Example 2: Internet

Suppose your internet connection is used for both business and personal purposes.

It may be difficult to calculate the business use simply by looking at the monthly bill.

You might consider actual usage, business working hours, or another reasonable method that reflects how you use the service.

There is no magic number such as 50%.

The method should match the actual situation.

Example 3: A Car

Suppose you use your car for:

• visiting customers,

• going to suppliers, and

• personal shopping and travel.

You may be able to treat the business portion of certain car-related costs as business expenses.

For example, if your records show that 60% of the car's use is for business, you may use 60% as a basis for certain expenses.

But you should be able to explain how you arrived at 60%.

Keeping a simple record of business trips can be very helpful.

Keep Evidence of Your Calculation

This is one of the most important points.

If you claim part of an expense as a business expense, keep some evidence showing how you calculated the percentage.

For example:

Home office: 20% based on floor area.

Car: 60% based on business and personal mileage.

Phone: Business use based on usage records.

The exact method will depend on the expense.

Do Not Start With the Percentage

A common mistake is to start with a percentage:

“I think 50% should be okay.”

Instead, start with the facts:

How is this item actually used?

Then decide what percentage reasonably represents the business use.

This is a much safer way to think about mixed expenses.

One More Point

The business-use percentage is not necessarily the same for every expense.

For example, the percentage used for a home office may be based on floor area, while the percentage for a car may be based on business mileage.

The calculation method should fit the type of expense.

Key Takeaway

There is no universal business-use percentage.

The important question is not:

“What percentage can I claim?”

It is:

“What percentage can I reasonably explain based on how I use the item?”

Keep the calculation and supporting records with your accounting documents.

Coming Next

Starting and Running a Business in Japan – Part 9

What About Your Car?

Next time, we will look more closely at one of the most common mixed expenses:

a car used for both business and personal purposes.

Prepared by　Kyoji Yasui Tax Accountant Office

Helping foreign business owners understand Japan's tax system with clear, practical guidance.