FAQ

FAQ

 

PAYROLL

We are the Japanese subsidiary of an American company.
An employee of the parent will be sent to work in Japan.
In his contract, he will be guaranteed a certain net salary so his post-tax salary remains at the US level. The Japanese company will pay this.
Is this type of payment method acceptable?

Of cource in various countries tax rates, social security contributions, employment insurance payments etc. are very different.
For example, an employee moving from a country with low tax rates to one with higher tax rates may experience a substantial reduction in his post-tax salary.
In order to avoid this kind of problem, many foreign companies operating in Japan pay a guaranteed net salary to employees sconded here.
Our office has ample experience in performing such “gross-up” calculations for clients.
Do employees seconded from outside Japan, who intend to return home in future, have to enroll in and pay contributions to the social security and labor insurance systems?

We are often asked if and why persons who will not receive benefits have to make contributions to the pension and labor insurance systems.
Pension contributions have to be made, but it may be possible to reclaim a certain amount after returning to one`s home country.
As regards labor insurance, if the employment contract is with the non-Japanese parent, and complies with certain conditions, it is possible to avoid joining the system. We can supply you with further details.
Due to the demands of our business and also confidentiality issues, we would like to outsource all payroll functions and the related payments to staff. Can you provide this service?
We are a company with 100 employees and use a bank in the Tokyo area.

Outsourcing is becoming increasingly common and we are often asked similar questions.
We will act on data provided by you via e-mail or fax, and will carry out the necessary calculations and make payment to the employees` individual accounts.
Due to the ease of communications nowadays, your physical distance from us does not matter.
At present, we are able to handle employee numbers up to about 100.
Our company provides housing or other economic benefits to directors and key employees.
Can you provide support for these and similar non-cash benefits?

Yes. For example, we already have experience in handling payments for legal rent, to International Schools or to the American Club.
We await your requests in this area.

ACCOUNTING

Various developments were reported regarding International Accounting Standards (IAS).
Our company has an American parent and has to carry out accounting in accordance with their rules. Is this acceptable in Japan?

The movement towards IAS and away from tax-based accounting continues and we think it will accelerate
In your company`s case, there is no problem in accounting according to your parent`s rules.
We treat accounting and tax as separate matters. Accordingly whether you wish to conform to GAAP or a set of company rules, we can meet your accounting needs.
Our parent company requires us to provide an accounting report every month.
There are also quarterly and annual reporting requirements.

A monthly reporting requirement is very common among non-Japanese companies. Some companies have tight reporting deadlines for this.
We provide a full reporting service and can meet even tight reporting deadlines, at year ends or other times.
This includes quarterly and other timings. Cash flow statements can also be provided if you require them.
An American parent company plans to set up a Japanese subsidiary or branch, and is looking for a Japanese accounting firm.
It would be necessary for direct communication to be made in English with the
parent. Is this possible for you?

We can hold telephone conferences in English. E-mails and faxes can also be sent or received in English. The reporting mentioned above can also be carried out in English.
We also provide tax advice for companies considering entry to the Japanese market
We also cooperate with a domestic legal firm to provided a full company set-up service.
We are a foreign company in our second year of business and have less than 10 employees. We do not have the means to employ a specialist accounting manager.
Thus we would like to outsource bookkeeping and accounting, payments and payroll work. Can you provide such a service?

In the payroll section, we had a somewhat similar question. We can provide full outsourcing of these services.
So we can take over responsibility for accounting and tax compliance, as well as all payroll matters (including associated procedures such as for staff leaving and joining) and payment of all invoices and other company expenditure. In order to allow you to maintain control, we will of course provide full reports on all amounts paid for on your behalf.
We are the Japanese subsidiary of an American parent company.
Our business pattern is that the subsidiary aids and supports the parent`s product sales. The parent signs contracts and ships products directly to the customers. This means that the subsidiary has expenses but no sales income. Is this acceptable to the authorities?

Your business pattern – sales support or other business development is common among subsidiaries of foreign companies. It does lead to expenses but no sales income, leading to odd-looking accounts and the potential for problems with tax authorities.
However, provided acceptable agreements are put in place for cost reimbursement from the parent, such problems can be avoided. We will be happy to advise you how to go about this.
Our company has an accounts department and we report monthly to the parent. However, the annual book closing and reporting is approaching and we would like external accountants to check our work and provided advice and support.
Can you help us if the work requested is restricted to the annual book clsoing and tax return?

There is no proble with this request. While continuing to do the monthly work yourselves, it will add reliability and quality to your annual work if there is an external check function.
We provide support to companies who do not need monthly help, and give the same service to them as regards their annual accounting and tax requirements.
If we did request your services to handle some of our accounting, tax and other requirements, how are your fees calculated?

We can provide quotations based on either a variable fee dependent on time and level of staff used, or a fixed fee if you prefer this.
We try to be responsive to client wishes in this area. Please contact us for more information and an estimate of charges.

TAX

We are an American company and do business with a Japanese company.
Some of our purchases do not qualify for export exemption from consumption tax and so we end up paying consumption tax to the Japanese company.
How should we treat this
Our own sales are 100% within the US.

In this case you can claim back consumption tax paid to the Japanese company by submitting a tax return. However, you do require a representative in Japan.
We are the subsidiary of a Japanese company. However I and certain members of the staff receive stock options in the parent. There have been various newspaper articles recently about this. Must it be declared as part of the employee`s income?

In recent years interest in stock options has widened – and now includes the National Tax Agency! Formerly the gain was taxed as additional extra income, but now extra employment income is declared at the time of exercise of the option.
In any case, please be aware that declaration of this extra income IS required.
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