FAQ for new corona by the National Tax Agency, such as cases where extension of the corporate tax filing deadline is allowed

On April 13, the National Tax Agency announced a FAQ regarding tax filing and tax payment in response to the new corona.
The following is an excerpt from the FAQ to help you get a glance.

Examples of reasons for allowing the extension of corporate taxes, etc.

Due to the presence of the following people, the business activities have to be reduced, and the infectious diseases are affecting your business partners and affiliates.

  • A tax agent (including its staff) is infected with an infectious disease.
  • Corporate officers, accountants, etc. are currently staying in foreign countries and have restrictions on entry and exit.
  • The employee in charge of the accounting department is infected with an infectious disease, or there is a fact that he/she has a deep contact with the patient with an infectious disease.
  • Many of the employees in the accounting department have taken leave due to the effects of temporary school leave and the company’s direction to take leave to prevent the spread of infection.
  • Take urgent measures such as delaying the date of the ordinary general meeting of shareholders so as not to invite a large number of shareholders.
  • Someone refrains from going out due to poor physical condition.
  • There must be a person living in a local government that requests to work from home on weekdays. Someone is working from home, etc. by corporate recommendation to prevent the spread of infection.
  • When applying for this extension, please describe specific facts, such as the status of the employees, tax accountants, department closures and work restrictions, and the outline of emergency measures.

About the grace of payment

    • There is a grace system for payment as a remedy for those who cannot afford to pay national tax at one time due to a lack of funds. Even before the deadline, you can consult about the deferral payment system, so please contact the taxation department in charge of your district by phone.
    • For those who cannot pay the national tax at one time due to the deterioration of cash flow, by applying to the tax office, a maximum of one year’s installment payment will be permitted, and overdue tax will be reduced or exempted.
    • For details, see the link below.
      https://www.nta.go.jp/taxes/nozei/nofu_konnan.htm

Reduction of executive salary when performance deteriorates

    • Under Japanese corporate tax law, for monthly salaries of officers to be tax-deductible, in principle, that amount must be the same each month. If the amount changes during the year, the difference amount will not be included in the deduction. This is to prevent the amount of corporate income from being understated by fluctuating the amount of executive salary.
    • If the executive salaries’ revision is due to the deterioration of business performance, the executive salaries paid before and after the revision is regarded as the “regular fixed amount,” which is tax-deductible. If it becomes difficult to pay the office rent and employees’ salaries, and if it is unavoidable to reduce the officers’ salary due to the relationship with the bank and shareholders, it will fall under this “revision due to the deterioration of business performance”.
    • At present, even if numerical indicators such as sales have not deteriorated significantly, it would be considered that the business environment has deteriorated significantly at this point when the movement of people and goods has stopped due to the effect of the new coronavirus infection. If it is highly likely that the financial situation will suddenly deteriorate if we do not take the improvement measures such as reduction of executive salary, in such cases, the revision of the executive salary will fall under the revision due to the deterioration of business performance.