Friday, October 4, 2013

Mandatory notification to tax offices of corporation and branch in Japan

When corporation or branch office is newly established in Japan, notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. The tax notification must also be submitted when carrying out business activities through locations or parties under the following conditions:

(1) Construction, installation, assembly and others; or control and supervision of such works extends for a period of more than one year.
(2) Engaging in business through agents as described below:

- Parties having and frequently exercising the authority to conclude business agreements on behalf of a foreign corporation.
- Parties storing assets on behalf of a foreign corporation in a volume/quantity corresponding to the ordinary requirements of customers and delivering those assets in response to customers' requests.
- Parties who regularly carry out a siginificant work required for order acquisition, consultation and other activities for the conclusion of business agreements solely or primarily on behalf of a foreign corporation.

The taxes levied in Japan on income generated by the activities of branch and corporation include corporate tax (national tax), corporate inhabitant tax (local tax) and enterprise tax (local tax) (collectively referred to as "corporate taxes"). A whole income for each business year is the tax basis for determining corporate taxes. Except in instances requiring exceptional treatment, the scope of income subject to corporate inhabitant tax and enterprise tax is calculated in accordance with the provisions for corporate tax. Corporate inhabitant taxes are levied not only on income but also, in principle, on a per capita basis (based on its capital and number of its employees at that time).

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