Notes for Japanese Expatriates in India
regarding Indian Income tax
by - MLG Associates, Chartered Accountants
Quick reckoner of Tax Rates in Japan
There are reduced rates of tax for certain income earners.
Non-permanent resident (those who have been living in
A company is bound to report and pay within two months of the end
of the tax year (it is usually possible to request an extension of an
Corporate tax on income below 8 million yen is 22% on condition
that the total equity is less than 100 million yen.
In addition to corporate tax (a national tax) there are two classes
of local tax paid by the corporation:
While Inhabitant Tax is not recognized as a deductible expense,
"Enterprise Tax" may be deducted as an expense.
Income from a dividend - is not classed as regular income. A
dividend received by one company from another Japanese company, when the
holding in the payer's equity is 25% or more, only 50% of the dividend
income will be added to the regular tax.
When paying a salary to a foreign resident, 20% should be
deducted at source.
Benefits to senior employees - mainly bonuses and compensation paid
to employees are allowable as an expense. Nevertheless, payments of
unreasonable amounts to directors will not be allowed as an expense.
Entertainment expenses - the allowance on these expenses is
calculated according to a formula that takes account of the amount of the
company equity; the percentage allowed as an expense shall in no case
exceed 90% of the expense, or a maximum of 3.6 million yen a year.
Donations - as a general rule, donations to public or government
institutions are allowable as an expense.
Research and development - a credit of 20% is given for research
and development plus additional credit for the excess of R&D expenses
over those of the previous years. In any event, the total combined credit
is limited to 30% of the corporation tax.
Transactions between affiliated parties - such transactions are
defined as being between 2 parties when the percentage holding, whether
direct or indirect, between the companies is 50% or more. Reasonable proof
of the price of the transfer between the affiliated parties is demanded
from the taxpayer. As a rule, the law specifies 3 methods of calculating
the reasonability of the price of the transfer.
Interest expenses - there is a limit to the interest allowable to
companies with an overseas obligation to foreign shareholders of 50% or
more when the amount of the obligation is more than 3 times the amount of
Offsetting losses - a company that meets the requirements of the
blue form return is eligible to offset the loss forward for the following
An asset that costs less than 200,000 yen shall be depreciated over
An asset that costs less than 100,000 yen shall be fully
depreciated in the year of purchase.
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