Tax minimization, also known as tax avoidance, is the utilization of legal methods to change a person’s financial situation in order to reduce the amount of income tax he or she has to acquit. In this article, our company formation advisors in Japan explain how the Japanese tax minimization can be achieved.
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Tax minimization in Japan through tax incentives for legal entities
The tax minimization in Japan can be achieved by accomplishing the criteria needed to qualify for certain tax incentives set in place by the local government for legal entities.
These tax incentives include:
• A 10% tax credit gained for the promotion of income development if a company increases its employees’ wages by minimum 5% from the base year and other criteria are met. Our company registration agents in Japan can further explain what these other criteria consist of. We can also help entrepreneurs who are interested in setting up a company in Japan;
• A tax credit for generating jobs which has been risen to JPY 400,000 per individual for fiscal periods on or after April the 1st 2013 until the 31st of March 2018, if certain requirements are satisfied.
The tax credit obtained for the promotion of income development and for generating jobs can be issued in the same fiscal year, if specific adjustments are effectuated.
For fiscal periods starting on or after the 1st of April 2017, the R&D taxation has been modified. According to the new regulations in this country, the R&D credit usually is between 6% and 10% of the R&D expenses, although this rate can vary.
Tax minimization strategies in Japan
Individuals who want to minimize their taxes in Japan can do so following certain strategies, such as:
• Taking on a tax-deferred retirement plan: these are retirement contributions and investments which accumulate free of taxes until the funds are withdrawn;
• Reducing non-deductible interest loans with home equity loans: a method of eliminating non-deductible debts is by obtaining a home equity loan;
• Other strategies: our Japan company formation consultants can provide more details on what these other strategies may consist of.
If you have more questions about tax reduction strategies for foreigners in Japan, or for help to open a company in Japan, please get in touch with us.