Japanese corporate income taxes

Japanese corporate income taxes

With respect to reducing corporate taxes, the ability to file a "blue form" - as opposed to a "white form" - is important, especially for a new business in Japan.

In order to qualify to file a blue form a company must have good accounting practices, and must inform the tax authorities of their inventory pricing method and their depreciation method.

Once accepted by the tax authorities, a company may file a blue form and may carry losses forward for up to five years, and may take special depreciation deductions.

Because most ventures will lose money in their first few years, the ability to carry forward loses is crucial, so newly formed businesses should apply for this blue-form treatment soon after their incorporation.

Most Japanese businesses file a blue tax return, so if your company's accounting system consists of more than a couple old shoe boxes, you should be able to gain this privilege as well.

With respect to deductibility of expenses, typical expenses such as rent, interest payments, royalties paid and management fees are all deductible. Entertainment is generally not deductible for larger companies.

All in all, Japan's tax system is every bit as complicated and convoluted as America's. Although I've tried to show you some of the more important points about Japan's tax system, this should not substitute for up-to-date advice from qualified tax authorities.