Japanese Business Glossary

扶養控除申告書 (fuyo kojo shinkokusho) is the Declaration of Dependent Deductions form in Japan. This document is used by employees to declare their dependents in order to qualify for tax deductions related to those dependents.

By submitting this form, employees can reduce their taxable income, thereby lowering the amount of income tax withheld from their salary. Dependents typically include children, elderly parents, or other family members who rely on the taxpayer for financial support.

The form must be submitted to the employer, who will then adjust the employee's tax withholdings accordingly. This form is usually submitted at the beginning of the tax year or when there is a change in the number of dependents. Properly completing and submitting the form ensures that the employee receives the appropriate tax benefits, contributing to more accurate and beneficial tax withholding throughout the year.

免税事業者 (menzei jigyosha) refers to a tax-exempt business or individual in Japan. These entities are exempt from the obligation to collect and remit consumption tax (similar to VAT or sales tax) on their sales.

Typically, small businesses and freelancers with annual taxable sales below a certain threshold qualify as tax-exempt businesses. This threshold is currently set at 10 million yen, meaning businesses or individuals with taxable sales below this amount in a base period (usually the previous fiscal year) are not required to charge consumption tax on their goods or services.

Being a tax-exempt business simplifies tax reporting and reduces administrative burdens, as these businesses do not need to account for consumption tax in their transactions. However, they also cannot claim input tax credits for the consumption tax paid on their purchases.

This status can be advantageous for small businesses and startups by lowering their tax liabilities and easing their entry into the market. Understanding the requirements and benefits of being a tax exempt business is crucial for effective financial planning and compliance with Japanese tax regulations.

退職所得 (taishoku shotoku) refers to retirement income or severance pay in Japan. It is the lump-sum payment or pension received by an employee upon retirement or resignation from their job. This type of income is subject to specific tax treatment, which often results in favorable tax rates compared to regular income.

The calculation of taxes on on retirement income involves several steps. First, the total amount of retirement income is reduced by a retirement income deduction, which varies based on the number of years of service. The remaining amount is then divided by two, effectively lowering the taxable income. Finally, the standard income tax rates are applied to determine the tax liability.

This preferential tax treatment recognizes the long-term contributions of employees and aims to provide financial support as they transition into retirement. Proper reporting and calculation of retirement income are crucial for ensuring that retirees receive the correct tax benefits and avoid any issues with tax authorities.

減価償却 (genka shokyaku) refers to depreciation in Japan, the accounting process of allocating the cost of a tangible asset over its useful life. This method recognizes the gradual decrease in value of assets like buildings, machinery, and equipment due to wear and tear, usage, and obsolescence.

In accounting,* genka shokyaku* (depreciation) allows businesses to spread the expense of an asset over several years, matching the cost with the revenue generated by the asset. This process provides a more accurate representation of an asset’s value and the company’s financial position.

Several methods can be used for calculating depreciation, including the straight-line method and declining balance method. The choice of method and the specific rules governing depreciation, such as useful life estimates and residual values, are determined by Japanese tax laws and accounting standards.

Implementing depreciation helps businesses reduce their taxable income by accounting for the decreasing value of their assets. Properly managing depreciation is essential for compliance with tax regulations, accurate financial reporting, and effective long-term financial planning.

寡婦 (kafu) refers to a widow in Japan, a woman whose spouse has passed away. In the context of Japanese tax law, a widow also encompasses certain tax benefits and deductions available to widows, aiming to provide financial support and ease the tax burden on single-parent households.

A woman qualifies for the widow deduction if she meets specific criteria, such as not being remarried and having dependent children or meeting other requirements set by tax regulations. The deduction reduces the widow's taxable income, thereby lowering the amount of tax she owes. There is also a special category called "特別寡婦" (tokubetsu kafu), or special widow, which offers an even higher deduction for those who meet additional criteria, such as having a minor dependent child and a lower annual income.

These tax deductions for widows recognize the financial challenges faced by single-parent families and provide some relief by reducing their overall tax liability. Properly claiming this deduction requires understanding the eligibility criteria and ensuring accurate documentation when filing tax returns.

The term 勤労学生控除 (kinro gakusei kojo) refers to the working student deduction in Japan. This tax deduction is available for students who are working while pursuing their studies. It allows eligible students to reduce their taxable income, thereby lowering the amount of income tax they need to pay.

To qualify for this deduction, students must meet certain criteria. They must be enrolled in an educational institution, such as a university, high school, or vocational school. Additionally, their earned income must primarily come from employment rather than other sources like investments. There is also a limit on the amount of income that can be earned to be eligible for this deduction.

The purpose of the working student deduction is to alleviate the financial burden on working students, enabling them to balance their educational and employment commitments without facing excessive tax liabilities. This policy acknowledges the efforts of students who work to support themselves while continuing their education.