Japanese Business Glossary

仕入税額控除 (shiiresu zeigaku kojo) refers to the input tax credit deduction under Japan's consumption tax framework. This mechanism allows businesses to offset the consumption tax they owe on their sales by the amount of consumption tax they have already paid on their purchases. This helps prevent double taxation and ensures that the tax is ultimately borne by the final consumer.

For instance, if a business has a consumption tax liability of ¥1,000,000 from its sales but has already paid ¥800,000 in consumption tax on its purchases, it only needs to remit the net amount of ¥200,000 to the tax authorities.

The recent introduction of the Invoice System (適格請求書等保存方式 or "qualified invoice system") on October 1, 2023, has brought significant changes to this process. Under this system, businesses must use qualified invoices to claim input tax credits. Qualified invoices must include specific details such as the seller’s registration number, applicable tax rate, and tax amount for each rate.

Additionally, there are transitional measures in place to ease the burden on businesses. From October 1, 2023, to September 30, 2026, businesses can claim 80% of the input tax credit on purchases from non-registered suppliers. This percentage will drop to 50% from October 1, 2026, to September 30, 2029​.

Understanding and complying with these regulations is crucial for businesses to optimize their tax liabilities and ensure they are not overpaying.

寄付金控除 (Kifukin Kojo), donation tax deduction, refers to tax deductions available in Japan for certain types of donations. These deductions can be categorized into income deductions (所得控除) and tax credits (税額控除).

Income deductions apply to donations made to the government, local municipalities, or designated public organizations. The deduction amount is calculated as follows: the total donation amount for the year minus 2,000 yen equals the income deduction amount. For example, if you donate 30,000 yen in a year, the income deduction amount would be 28,000 yen (30,000 - 2,000)​​.

Tax credits are available for donations to specific organizations such as political parties, certified NPOs, and public interest corporations. The calculation methods vary by the type of recipient organization. For political parties, the tax credit is 30% of the total donation amount minus 2,000 yen. For certified NPOs and public interest corporations, the tax credit is 40% of the total donation amount minus 2,000 yen.

To claim these deductions, you need to file a tax return (確定申告) and provide the necessary documentation, such as donation receipts. Note that donations made through the Furusato Nozei (hometown tax payment) program may have slightly different calculation methods and are subject to specific rules and limitations​.

事業所得 (jigyo shotoku), business income, refers to the income earned from running a business or being self-employed. This type of income includes profits generated from business operations, sales, and services provided by individuals or business entities.

Business income is distinct from other types of income, such as salary (給与所得 = kyūyo shotoku) or investment income (譲渡所得 = joto shotoku).

In Japan, business income is subject to various taxes, including income tax and consumption tax. Business owners must keep detailed records of their income and expenses to calculate their taxable income accurately. They may also be eligible for certain deductions and credits to reduce their tax liability.

基礎控除申告書 (kiso kojo shinkokusho), basic deduction declaration form, refers to a document used in Japan for claiming the basic deduction when calculating personal income tax. This form is essential for employees and individuals who want to apply for the basic deduction, which reduces their taxable income.

The basic deduction is a standard amount that every taxpayer is entitled to deduct from their income. The purpose of this deduction is to lower the tax burden on individuals, ensuring that a portion of their income is not subject to tax.

Filing this form typically involves providing personal details, income information, and any other relevant financial data. This information is then used by the tax authorities to determine the correct amount of basic deduction and, consequently, the amount of income tax owed.

If you are an employee, your employer usually provides this form, and it should be submitted as part of your year-end tax adjustment (年末調整, nenmatsu chosei). For those who file their taxes independently, the form is submitted along with their tax return documents.

住宅借入金等特別控除申告書 (jūtaku kariirekin-to tokubetsu kojo shinkokusho) refers to the special mortgage loan deduction declaration form in Japan.

This form is used by taxpayers to claim a special tax deduction for interest paid on mortgage loans for the purchase, construction, or renovation of a qualifying residential property. The deduction aims to reduce the taxpayer's income tax liability by allowing a portion of the mortgage interest to be deducted from their taxable income.

The form must be submitted to the tax authorities to apply for this deduction, and it typically requires detailed information about the mortgage loan, the property, and the taxpayer's financial situation.

源泉控除対象配偶者 (gensen kojo taisho haiguusha) refers to a dependent spouse eligible for a specific tax deduction in Japan. This concept is part of the Japanese income tax system, where certain conditions must be met for a spouse to qualify for this deduction.

The spouse must be legally married to the taxpayer and have an annual income of 1,500,000 yen or less. Additionally, the taxpayer's taxable income must be 10 million yen or less. The taxpayer must also claim the spouse as a dependent on their tax return.

If these conditions are satisfied, the taxpayer can receive a deduction, reducing their taxable income and overall tax liability. This system is designed to support households where one spouse earns significantly less or is a homemaker, providing financial relief to the primary income earner.