Please tell me what tax-related notifications should be submitted to the tax office(s) after incorporating a company or setting-up a branch in Japan.
- ・ Tax Report for Establishment of Japanese corporation
- ・ Notice of Acquisition of the Status of Foreign Ordinary Corporations
- ・ Application for Approval of Filing Blue Return
- ・ Tax Report for Commencement of Payroll
- ・ Application for Payment of Withholding Income Tax Semiannually
＜Prefectural Tax Office, Municipal Office＞
The Tax Report for Establishment of Japanese corporation submitted to the prefectural tax office and municipal office is more or less similar to the tax report submitted to the tax office.
★ Explanation ★
1. Tax Report for Establishment of Japanese corporation
For newly-established domestic corporations, they must file written notifications (and their necessary attachments) with competent district director having jurisdiction over the place for tax payment within two months of the date of establishment, as prescribed in Article 148 of the Corporation Tax Act.
2. Notifications for establishments that have become foreign ordinary corporations
For foreign corporations that have set-up domestic establishments in Japan, they must file written notifications (and their necessary attachments) with competent district director having jurisdiction over the place for tax payment within two months of the date of establishment, as prescribed in Article 149 of the Corporation Tax Act.
3. Application for approval of blue returns
In Japan, there are two methods of filing corporate tax returns in Japan: the “blue return” and the “white return”, where filing the blue return is optional. One of the blue return’s primary merits is how revenue losses in each fiscal year starting on or after April 1, 2018 may be carried forward for ten years or carried back to the previous year. Blue return filers may also receive preferential tax treatment resulting in tax savings. An application for approval of the blue return must be submitted within three months from the establishment date of the corporation, or the closing day of the said accounting period, whichever comes earlier (Article 122, Corporation Tax Act)
＜Case to Take Note of＞
A foreign-owned company that is established on December 1, 2017 sets is fiscal year-end (closing day of accounting period) on December 31, 2017. As the current account period will end in less than three months, the application for blue return approval must be filed by the closing day, which in this case is December 31.
4. Notification for establishment, etc. of office for handling payment of salary, etc.
For a domestic company or branch that pays salaries, etc. must remit income tax withheld from its employees within a set period. Failure to remit withheld tax within the prescribed period will result in additional penalties resulting from the non-payment and, subsequently, late remittance of taxes. Office must also a tax report for commencement of payroll within one month from the day of establishment of a new office that handles salary payments, or commencement of salary payment handling activities of a branch, office, or similar establishment (Article 230, Income Tax Act).
＜Case to Take Note of＞
Even if there is only one representative in the Japanese corporation or branch, the tax report for commencement of payroll must be still be filed. Regardless of the fact that it is only one person, if they receive salary/compensation, they are still considered a salaried individual in Japan.
If no directors’ remuneration is given after establishment until the business takes off, there is no need to file the tax report, as salary/compensation has been given. However, if it is expected that directors’ remuneration and salaries will be paid in the future, there is no problem if the corporation chooses to file the tax report at the time of establishment.
5. Application for special deadline for payment of withholding income tax
Special provisions on the payment deadline of withheld income tax are available for small-to-medium enterprises (SMEs) with less than 10 regularly salaried employees (including part-time workers). In principle, income tax withheld must be remitted on the 10th of each month. However, under these special provisions, withholding income tax may be paid semiannually in six-month installments, paid in July 10 (for tax withheld from January to June), and January 20 (for tax withheld from July to December), as provided for by Articles 216 and 217 of the Income Tax Act. Some of the merits of this semiannual payment period include a lessened burden on having to handle monthly payments, and with the delayed payment deadline may make internal cash management easier.
＜Case to Take Note of＞
If the application for special provisions for due date is submitted on August 1, income tax withheld for the month of August supposedly due for January 20 under the special provisions will still be due on the 10th the following month ― in this case, September 10. As a general rule, the special provisions only apply on the period following the month in which the day of the approval of the application falls. In this case, since application was done in August, provided that the application is approved, the special provisions only take effect on the next month, which means it will only cover withheld tax from the month of September onwards.