Q&A on Japanese Taxation for Multinational Corporations

About the Author

List of Abbreviations

Preface

CHAPTER 1 General Taxation in Japan

Q1 Overview of Taxes in Japan

Q2 Overview of Japanese Tax Audits

CHAPTER 2 Withholding Tax

Q3 Scope of Domestic Source Income

Q4 Tax Conventions

Q5 Withholding Tax on Unpaid Dividends

Q6 Exemption from Withholding Tax for Japanese Branches of Foreign Corporations

Q7 Withholding Tax on Dividends and Relief under Tax Conventions

Q8 Withholding Tax on Dividends and Relief under Tax Conventions (Derivative Benefits Test)

Q9 Withholding Tax on Dividends and Relief under Tax Conventions (Active Business Test)

Q10 Withholding Tax on Interest Payments and Relief under Tax Conventions

Q11 Withholding Tax on Inclusion of Interest into Principal

Q12 Withholding Tax on Royalties for Trademarks and Relief under Tax Conventions

Q13 Application of Tax Conventions to Pass-Through Entities

Q14 Withholding Tax on Fees for Use of Tangible Fixed Assets

Q15 Withholding Tax Refund Claims under Tax Conventions

Q16 Exemption from Withholding Tax for Short-Term Business Travellers under Tax Conventions

Q17 Withholding Tax on Directors’ Remuneration Paid to Non-resident Directors

Q18 Withholding Tax on the Provision of Technical Services by Indian Corporations

Q19 Withholding Tax on Share-Based Remuneration Granted by Foreign Corporation

CHAPTER 3 Corporation Tax

Q20 Blue Form Tax Return Status

Q21 Maintenance of Electronic Accounting Books and Records

Q22 Tax Notifications upon Establishment of a Japanese Company

Q23 Calculation of Corporate Taxation for Japanese Subsidiaries of Multinational Corporation

Q24 Calculation of Corporate Tax for Japanese Branches of Foreign Corporations

Q25 Documentation Obligations for PEs

Q26 Fiscal Year for Japanese Tax Purposes

Q27 Tax Treatment of Small- and Medium-Sized Enterprises (SMEs)

Q28 Revenue Recognition for Tax Purposes

Q29 Non-refundable Revenue Received in Advance

Q30 Deductibility of Reasonably Estimated Provisions

Q31 Tax Treatment of Remuneration for Seconded Directors

Q32 Tax Treatment of Net Guaranteed Directors’ Remuneration Paid in Foreign Currency

Q33 Tax Treatment of Charges for Share-Based Compensation

Q34 Acquisition Cost of Inventories for Tax Purposes

Q35 Tax Depreciation of Fixed Assets

Q36 Tax Requirement to Recognise Depreciation Expenses for Accounting Purposes

Q37 Tax Treatment of Bad Debt Losses

Q38 Timing of Deductibility of Corporate Enterprise Tax

Q39 Transfer of Economic Benefit (‘Donation’) to Foreign-Related Corporation

Q40 Deductibility of Entertainment Expenses for Directors of a Foreign Parent Corporation

Q41 Limitation of Tax Losses Carried Forward

Q42 Exchange Rates for Foreign Currency Transactions

Q43 Definition of Permanent Establishments (PE)

Q44 Commissionaire Transactions and PE

Q45 Overview of Transfer Pricing Taxation

Q46 Deductibility of Transfer Pricing Adjustment

Q47 Donations to Foreign-Related Corporations and Transfer Pricing

Q48 Transfer Pricing Documentation Obligations

Q49 Notification of Ultimate Parent Entity

Q50 Transfer Pricing and Hidden Profit Distributions

Q51 Additional Corporation Tax under the Family Corporation Tax Regime

Q52 Foreign Tax Credits

Q53 Taxation on the Transfer of Shares of a Japanese Corporation

Q54 Tax Treatment on Reorganisation of a Parent Corporation

Q55 Deemed Dividend on Capital Reduction

Q56 Thin Capitalisation and Earnings Stripping Rules

Q57 Tax Treatment upon Dissolution and Liquidation of a Japanese Godo Kaisha (GK) Subsidiary

Q58 Tax Treatment on Dissolution of a Japanese Branch

CHAPTER 4 Corporate Enterprise Tax

Q59 Factor-Based Taxation for the Japanese Branch of a Foreign Corporation

Q60 Calculation of Factor-Based Taxation for a Japanese Branch of a Foreign Corporation

CHAPTER 5 Consumption Tax

Q61 Transactions Subject to Consumption Tax

Q62 Reduced Tax Rates

Q63 National and Local Consumption Taxes

Q64 Interim Consumption Tax Returns

Q65 Simplified Consumption Tax Returns

Q66 Timing of Input Consumption Tax Credit

Q67 Revenue Recognition and Consumption Tax

Q68 Taxable and Exempt Enterprises for Consumption Tax Purposes

Q69 Base Period for Foreign Corporations

Q70 Consumption Tax Refunds for Foreign Corporations

Q71 Shortening of the Consumption Taxable Period

Q72 Consumption Tax-Exempt Sales (Election to Become a Taxable Enterprise)

Q73 Consumption Tax-Exempt Sales (Sales to Foreign Embassies)

Q74 Sales and Purchases of Goods Located in Japan by a Foreign Corporation

Q75 Provision of Services to Non-residents (Storage of Goods in Japan)

Q76 Reimbursement of Expenses

Q77 Tax Treatment of Transfers of Assets Outside Japan

Q78 Tax Treatment of the Cross-Border Supply of Electronic Services (B2B Transactions)

Q79 Tax Treatment of the Cross-Border Supply of Electronic Services (B2C Transaction)

Q80 Requirement to Become a Registered Foreign Service Provider

Q81 Itemised Method and Proportional Method

Q82 Input Consumption Tax Credits for Purchases Related to Sales Outside Japan

Q83 Tax Treatment of Transfers of Small Value Assets: Invoices

Q84 Foreign Exchange for Foreign Currency Transactions

Q85 Consumption Tax Treatment on Bad Debt Losses

Q86 Japanese Invoice System

Q87 Consumption Tax Account Summary