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BACKGROUND
Country Overview
Japan is situated in north-eastern Asia between the North Pacific and the Sea of Japan. The area of Japan is 377,835 square kilometres, nearly equivalent to Germany and Switzerland combined or slightly smaller than California. Japan consists of four major islands, surrounded by more than 3,000 smaller islands.
Japan's population is around 126 million. Most Japanese reside in densely populated urban areas. Japan's capital city is Tokyo. The population of the Tokyo Metropolitan Area including the city, some of its suburbs and the surrounding area is approximately 12 million.
There is only one official language spoken in Japan, which is of course Japanese. However, many Japanese are able to understand English to a certain extent.
Economic Overview
The economy of Japan is the third largest after the United States and the People's Republic of China, after maintaining itself as the second largest economy in the world from 1968 until 2010.
Transport Infrastructure
Japan enjoys an advanced logistics network. The land, sea and air logistics infrastructure is well organized throughout Japan.
Also, its geographic proximity to East Asian countries makes it an excellent choice for locating regional headquarters in East Asia.
AUDIT REQUIREMENT
Requirement and Thresholds
Auditing under the Financial Instruments and Exchange Act
- Companies that issue shares listed on a financial instruments exchange or are in the process of listing;
- Companies that filed a registration statement; and
- Companies with a specified number of shareholders
Auditing under the Corporate Law
- Large companies : Capital stock of JPY 500 million or more, or liabilities of JPY 20 billion or more, as of the latest fiscal year-end;
- Companies which adopt a "Company with Committees" corporate governance system; and
- Other companies which appoint an accounting auditors (Kaikeikansanin) on a voluntary basis
Audit requirements for foreign companies
Foreign companies which offer or have offered their shares, investment trusts and / or bonds publicly in Japan are not required to have their financial statements audited by a Japanese CPA or an audit corporation, if the case where financial statements of foreign companies are audited by a professional accountant who is the equivalent of a Japanese CPA or an audit corporation.
ACCOUNTING
Japanese GAAP has been developed over 60years.Significant changes are made over the past couple of years.Still it differs from IFRS in several points.
Japan plan to introduce IFRS in the near future.
TAXATION
Corporation Tax
Both the branch office and the companies are subject to corporation tax, inhabitant tax and enterprise tax on their income. The rates of these taxes are decided by its capital, income and location of the company.
All corporations except those specifically exempt by the law are subject to corporate income taxes imposed by both the national and local governments.
Corporate Income Tax rate (national tax)
| Paid in capital of
JPY 100 million or less | Paid in capital in excess
of JPY 100million |
Taxable income up to
JPY 8 million in a year | 22% | 30% |
Taxable income in excess
JPY 8 million | 30% | - |
Consumption Tax
A tax of 5% is imposed on non-exempt goods and services. When business enterprise purchase goods and services in Japan, it pays this tax to the supplier or the customs office. When a business sells goods or services, it is required to collect this tax from the consumer. Export transactions, international communications and international transportation services are exempt from consumption tax (export tax exemption).
NOTICE
The information on this site is for general guidance only. It is essential to take professional advise on specific issues and their impact on any individual or entity. No liability can be accepted for any errors or omission or for any person acting or refraining from acting on the information provided on this site.
The site includes links to external sites. SK Tokyo Audit Corporation is not responsible for the content of these sites.
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