JAPAN

Meru Accounting is a leading outsourced accounting and bookkeeping firm, specializing in Japanese accounting, bookkeeping, and financial management. Our team has deep knowledge of various software used in Japan, allowing us to offer precise and efficient financial solutions to our clients.

In Japan, indirect taxes primarily consist of consumption taxes, customs duties, and other specific taxes. Here's an overview of the indirect taxes in Japan:

1. Consumption Tax:

The main indirect tax in Japan is the consumption tax, which is a similar value-added tax (VAT) or goods and services tax (GST). The consumption tax rate in Japan  applies to the sale and importation of goods and the provision of services.

2. Custom duties:

Customs duties are levied on imported goods entering Japan and are regulated by the Customs Tariff Law, rates may vary depending on the type of goods and their country of origin. Being a member of the World Trade Organization (WTO) it applies customs valuation principles for determining the customs value of imported goods.

3. Excise Taxes:

It is imposed on specific goods such as gasoline, tobacco, alcohol, and automobiles, these rates vary depending on the type of product.

Indirect taxes play a significant role in Japan's fiscal policy. They contribute to government revenue which influences consumer behaviour and economic activities.

4. Petroleum and Gasoline Taxes:

Taxes levied on petroleum and gasoline products to fund road construction and maintenance such taxes are included in the prices of petroleum and gasoline products sold in Japan.

5. Local Taxes:

Local governments in Japan may impose their own taxes, including property taxes, prefectural taxes, and municipal taxes.

Some popular bookkeeping and accounting software options in Japan are mentioned below:

1. Freee:

It is a cloud-based accounting software that is widely used by small and medium-sized businesses in Japan offering features such as expense management, invoicing, payroll processing, and tax reporting.

2. MF Cloud:

 Managed by Miroku Information Service, MF Cloud is another cloud-based accounting software tailored for Japanese businesses. It supports various accounting functions including bookkeeping, financial reporting, and tax calculations.

3. Yayoi Accounting: 

Providing  a range of accounting software solutions,  cloud-based options. It is known for its user-friendly interface and comprehensive features that cater to Japanese accounting standards and tax regulations.

4. Accela:

It is popular among larger businesses in Japan. It has robust accounting and financial management features such as multi-currency support, advanced reporting, and integration with other business systems.

5. Money Forward:

It is also a cloud-based accounting and financial management software, known for its ease of use and integration with banking and other financial institutions.

The official currency of Japan is Japanese Yen. It is used across Japan to make financial transactions. Japanese Yen is the monetary unit when recording transactions of a company's ledger or accounting records.

Japanese is the language spoken by citizens in Japan.  Ry?ky?an language is also spoken in some parts of Japan. Japanese and Ry?ky? are the two languages commonly used for maintaining bookkeeping and accounting.

1. Statutory Audits:

Companies go through an annual statutory audit conducted by a certified public accountant (CPA). Its purpose is to ensure the accuracy and fairness of the company's financial statements and compliance with applicable laws and regulations.

2. Audit Criteria:

The audit in Japan follows generally accepted accounting principles which is  referred to as Japanese Generally Accepted Accounting Principles. For listed companies and certain large entities, International Financial Reporting Standards  may also be applicable.

3. Audit Reports:

The audit concludes with the issuance of an audit report by the CPA or audit firm. This report provides an opinion on whether the financial statements present a true and fair view.

4. Audit Exemptions:

Small companies meeting certain criteria may be exempt from the statutory audit requirement. 

5. Corporate Governance and Compliance:

Listed companies in Japan are subject to additional audit and reporting requirements under the Financial Instruments and Exchange Act (FIEA), which includes periodic financial reporting, internal control assessment.

1. Payroll calculator:

Payroll in Japan is calculated based on monthly salaries, which are typically paid on a monthly basis. The calculation includes basic salary, overtime pay, allowances, and bonuses.

2. Year-End Procedures:

At the end of each fiscal year (typically March in Japan), employers must issue year-end statements detailing employees earnings and taxes withheld. It is used for annual tax reconciliation and adjustment.

3. Bonuses and Special Payment:

Year-end bonuses are common in Japan. Such payments are subject to specific tax treatment and may be distributed one or more times per year.

4. Social Insurance Contributions:

Employers in Japan are required to contribute to social insurance schemes, including health insurance, welfare pension insurance, employment insurance, and workers compensation insurance. 

5. Withholding Taxes:

Income tax and resident tax are withheld from employee salaries each month. The tax rates depend on the employee's income level and are determined based on a progressive tax system.

6. Reporting and Compliance:

 Employers are responsible for submitting various reports and filings to tax authorities and social insurance agencies on a regular basis to report payroll information and contributions accurately.

In Japan, the Generally Accepted Accounting Principles (GAAP) are known as Japanese Generally Accepted Accounting Principles (JGAAP). JGAAP is the set of accounting standards and principles that govern the preparation and presentation of financial statements for companies.

Here are the key aspects of GAAP requirements in Japan:

1. Legal Basis:

These laws outline the requirements for financial reporting, disclosure, and audit standards for companies in Japan.

2. Accounting Standards:

The main body responsible for establishing accounting standards in Japan is the Accounting Standards Board of Japan. ASBJ issues Accounting Standards (AS) and Guidance for Practical Implementation (GPI) that prescribe the recognition, measurement, presentation, and disclosure requirements for various transactions.

3. Disclosure Requirements:

There is a significant emphasis on the disclosure of information in financial statements to ensure transparency and comparability, including disclosures related to accounting policies, significant accounting estimates, related party transactions, and contingent liabilities and statements.

There are similarities between GAAP and IFRS,  also some notable differences.  Japan has specific accounting treatments for items such as depreciation methods, inventory valuation, and business combinations that may differ from IFRS.

Meru Accounting helps businesses in Japan handle complex accounting and financial rules around VAT and other tax laws. We also identify audit requirements from JGAAP of Japan which also includes some depreciation methods and business combinations from IFRS and JGAAP. These features are suitable for all the Companies and businesses of Japan to achieve great heights and earn their predefined set of goals.