Takashi Yamaguchi, English Speaking Japanese Tax Accountant

Year-end tax procedures

Now we are in the final week of 2019.
It is a busy time for business and family events towards the end of the year, but here are some tax procedures you had better to complete or should get started before the year end.

Procedures to be done before the year end

Selections for Consumption Tax 

There are a number of special measures that taxpayers can arbitrarily choose when filing a consumption tax return, however, most of them require advance application to the tax office.
A sole proprietor and a company with fiscal year ending on December 31 are necessary to submit the application to the tax office by the end of the year in order to apply the measures from the following year.
The following two are typical cases require the advance application.

Selection to be taxable enterprise

As a small-business is exempted from consumption tax payment obligation, it does not have to file the consumption tax return.
The small-business means an enterprise with 10 million yen or less turnover for the base period of current tax period.
The tax period is usually a calendar year (January to December) for a sole proprietor, a fiscal year stipulated in articles of incorporation for a corporation.
A tax payer is allowed to shorten the tax period by filing application but assumption for the explanations here is the default tax period, i.e., calendar year or fiscal year. 

Even enterprise exempted from payment obligation of the consumption tax (exempt enterprise) is allowed to file the tax return selecting to become a taxable enterprise (Consumption Tax Law Article 9 para 4). 
A tax benefit of being a taxable enterprise is to be able to claim tax refund for the tax period when amount of purchase of goods or service surpassed turnover of the same period.
To claim the tax refund, you need to file the final return of the consumption final tax, however an exempt enterprise is not allowed to file the tax return even if it is eager to get refund. Therefore, such exempt enterprise is given an option to change it tax status to a taxable enterprise.  

To make selection for the taxable enterprise, you need to file a document “Application form to be taxable business operator for the consumption tax” with the tax office. You will be regarded as a taxable enterprise in following tax periods of the tax period the application was filed. 

Selection of simplified method

A “simplified method” is a special computing method of creditable tax amount in the consumption tax tax return.
For the consumption tax filing purpose, in principle, consumption taxes on purchased goods or services (input taxes) should be reported based on receipts, invoices and booked amount. However, under the simplified method, certain percentage of consumption tax on turnover is deemed as input taxes and reported.
This method is applicable to the tax period provided that turnover of which base period was 50 million yen or less. However, the application requires filing of a document “application of consumption tax simplified filing method” with the tax office in advance (you can file the tax return applying the simplified method from following tax period of the tax period the application was filed).

Year-end adjustment on payroll

If you have employees, you need to make “year-end adjustment” on salary (including bonus) lastly paid before end of calendar year.
The employees to whom paid or payable salary (including bonus) amount is 20 million yen or more and who filed “Application for (Change in) Exemption for Dependents of Employment Income Earner” are subject to the year-end adjustment. 
Besides, if the employee wants to claim tax deductions such as spouse deduction or life insurance premium deduction in the year-end adjustment, such employee has to file necessary applications with the employer.
Before the last salary for the year is paid, the employer is supposed to collect all necessary application forms from employees and verify if each employee satisfies requirement for respective deductions, then compute annual income tax due mount of each employee.
Since certain deductions such as deduction for dependent family living abroad require evidence or certification, the employee should secure timely provision of necessary documents to the employer.

Procedures better to start before end of the year

Distribution of the wage & tax statement, filing of the statutory reports

Though the due date is end of next January, you should get start soon after making the year-end adjustment.
Any change of employee’s spouse or dependent (marriage/divorce, birth/death) or condition for deductions (earnings of spouse/dependent has exceeded the income threshold, etc.) entails re-do of the year-end adjustment. Accordingly, the employer should urge all employees prompt reporting of such changes. 

Reporting of depreciable assets

The due date is end of next January as same to the statutory reports.
The assets should be reported are depreciable assets (fixed assets in use of business other than lands or intangibles) held as of January 1 of each year.
If you have kept ledger of such fixed assets, you would be able to prepare the report just copying it to the tax forms. However, if not, you have to confirm asset newly purchased, sold or scrapped one by one. Especially, as it would take your time and effort to find out the missing properties, you would better to start inventory check earlier before new year.  

Payment of withholding income tax

If you are making the tax payment monthly basis, you may have less concern.
But if you are granted to make tax payment semi-annual basis, you should remember that you have to pay income taxes withheld during July to December period by January 20th of following year.  
It would better to settle expenses which are subject to withholding tax as earlier as possible before the year-end so that you can finalize tax amount payable for next January.
Re-do of the year-end adjustment entails change of withholding tax amount payable for January.
Urging employees to report change of spouse/dependent is recommended as it would help earlier determination of withholding tax amount payable for January. 

Filing of income tax return

The due date is March 15th of following year (March 16, 2020 as for the 2019 tax filing).

Preparation for year-end closing

A sole proprietor needs to prepare financial statements (income statement) as well as the tax return.
If you complete accounting for January to November before the end of the year and resume bookkeeping for December immediately after the new year, the year-end closing would proceed smoothly.
There may be some accounts payable or receivable that you did not notice until the end of the fiscal year. It would better to finish the work that can be done before new year to have sufficient time for the year-end closing process so that you can pay more attention to things that are often overlooked.

Sorting out and verification of evidences 

You should make sure all necessary documents, such as certification of life insurance premium payment, dividend notice, receipt of donation payment, certificate of housing mortgage balance, statement of securities trading account, are at your hands.
If there is any missing information, you should contact concerned party for re-issue of such document as soon as possible.


Filling out tax return forms per se would not take much time. However, sorting out and confirmation of information needed for tax filing takes time.
If you completed such process before end of the year, it would make the following process much smoother in any event of you prepare tax return by yourself or outsource to a tax accountant.  

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