Monthly Archives September 2019

Japan Accounting and Tax Services

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Japan Accounting and Tax Services

weConnect is better than other Japan accounting and tax firms, period.

We wrote this content because we want to help companies manage their Japan bookkeeping and accounting in their way, in their accounting system of choice.  We believe our service level is the new standard for English bookkeeping and accounting service in Japan and we want to highlight why we think we can give you a great experience.

When companies are considering how to handle their bookkeeping and accounting they typically consider hiring in-house or outsourcing it to an accounting firm. When considering outsourcing, we know companies will have concerns, so let’s lay them out on the table. Concerns like, “If I outsource, I will not have any control”, “I will not have the same relationship as if I hired staff internally”, “The service will be inflexible”, “Will the people I work with be any good?”, “Will the price be competitive?”, the list goes on.  No matter your experience, we want to explain how we can overcome all of these concerns through our explanations below.  With weConnect as your partner, the entire experience will be better than anything you have experienced before (just look at our testimonials to see the clients who already feel this way about us):

Choose Your Accounting System

weConnect will work with you to use your own accounting system in Japan.  We are experts in Xero, Quickbooks, Oracle, Microsoft Dynamics, SAP, NetSuite, Hyperion, Paprika and other systems.  Most Japanese accountants will tell you that you MUST use a Japanese accounting system to handle the books in Japan like Yayoi Kaikei, Kanjo Bugyo or Freee.  They are either ill-informed or lying to you because this really is just their preference. 

If you do not have a system of choice, we would suggest using Xero as it is extremely user friendly and cloud-based so you can access it anywhere. With it you get a dashboard that let’s you track key financial KPIs and drill down and see transaction level source documentation in case of an audit. Leveraging Xero lets you enjoy modern ways to view your financials while still being compliant with Japanese tax law.


Above: The Xero Dashboard. Access your accounting book, bills and invoices via browser and mobile application from anywhere in the world with unlimited user access.
Above: Financial Statements in Xero. See all traditional financial statements in real-time in the cloud. Click numbers in light-blue highlight to drill down and see the details.

Our Service Is Like Having Your Own In-House Accounting Team

Outsourcing providers often communicate through email and telephone leaving clients feeling distant from those supporting them.  At weConnect, we leverage all the latest communication platforms to give our clients near-instant access to their teams and the ability to start a face-to-face meeting at the click of a button.

We like to use Zoom, Teams, WhatsApp, Skype and Google Hangouts but are open to use whatever makes sense to communicate with clients. These communication platforms allow our clients to develop more intimate and meaningful relationships with our team, and with the ease of video conferencing it feels exactly like hiring a team in-house.

Native English and Japanese Language Ability

Whether you need native English or native Japanese communication, we can make sure the right team is assigned to your team.

Business Continuity

We assign a team to your account so if someone is on vacation, sick or leaves our firm, your service is never interrupted.

Top Tax Experts

Our tax team is led by former tax partners at KPMG Japan and work closely with our accounting team to ensure all the appropriate adjustments are made for all tax compliance, reporting, and filings.

Quality Is King

We hand pick everyone that joins the weConnect team so we can be confident you will always receive the highest level of quality and customer service.

Our Fees Are Medium Range In The Market

We are much less expensive than Big4 (PricewaterhouseCoopers, Ernst & Young, Deloitte, KPMG) but more expensive than a local accounting firm.

Key Takeaways

We believe our high level of expertise leveraging the latest global accounting systems, our in-house accounting staff feel, the ability to speak in native English or Japanese, and our ability to deliver high quality service with no business continuity risk all for a medium price in the market makes us the best accounting firm in Japan. For companies who need financial reporting done for headquarters, we believe we have a very high cultural fit to ensure HQ gets what they need, the local team gets what they need and the gap between the business side and the accounting side becomes as narrow as possible. We provide modern Japan accounting services! Let us know if you would like to understand how to handle your accounting and tax more efficiently. We can even help replace large in-house accounting teams with a more cost-effective (saving 15-50% on cost) streamlined approach. Contact us please 🙂

Japanese Payroll and HR Services

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Japanese Payroll and HR Services

Japan payroll is historically managed through rigid systems, excel files, and lots and lots of paper. When clients work with weConnect we remove all paper from the process by implementing a streamlined employee self-serve system. This system is built specifically for the Japan market with digital government filing capabilities built in.

Life events for an employee–like moving, a new bank account, or a new baby–can trigger either the system or weConnect to take action with one of the four buttons, seen in the screen below.


HR Portal Dashboard: Your Japanese employees will have a fully digital, self-serve experience from their browser or mobile phone to receive payslips, prepare tax returns, receive tax withholding slips and trigger any life event that has an effect on their health insurance, pension, workmen’s compensation or unemployment insurance.


SmartHR Process Flow

HR Portal Process Flow: All paper is removed from the process to enable efficient collection of information for all payroll and social benefit related HR events



HR Portal Payslip: Payslips are received digitally by your Japanese staff


Pay slips, year end adjustments (employee tax returns), social security numbers and all employee information is managed through this system. This creates a paperless process for the employer and employee.

Your dedicated point of contact will report and speak with you in English while dealing with all local payroll, statutory Japanese employment benefit administration, and all annual HR filings with the government.

Key Takeaways

weConnect provides a completely digital payroll service for clients and their employees in Japan. Avoid human error with weConnect.

Different Types of Japanese Companies

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Different Types of Japanese Companies

The top two entity types in Japan are the Kabushiki Kaisha (KK) and the Goudou Kaisha (GK). The KK is a joint stock company, equivalent to the American C Corp. The GK is a limited liability company (LLC). Both entity types limit liability to the amount of the equity investment(s) made and generally allow for full business operations.

Kabushiki Kaisha (KK)

Kabushiki Kaisha Advantages

  • Most common type of entity in Japan with a higher credibility which can be helpful when dealing with local customers, employees and business partners. The GK, while still very credible, is a newer type of entity recently established in 2006, and therefore still has a weaker image in Japan. That being said, the difference between a KK and a GK in terms of image has become impossible to quantify now that the GK has been around for a while.
  • KK allows for a scalable organization, with the ability to have a Board of Directors, list on the stock exchange, and raise additional money through selling shares, etc. In contrast the GK can do none of these things.
  • Clear organizational distinction between ownership (shareholders) and management (directors). In contrast GK investors are legally considered partners, who help run the company, and investment amount is not automatically proportionate to authority over the company or voting rights.

Goudou Kaisha (GK)

Goudou Kaisha Advantages

  • The registration process and ongoing corporate compliance for GKs is simpler and less expensive compared to KKs. KKs are required to submit an Articles of Incorporation, and annually hold shareholders meetings, publish financials and submit other reports, whereas GKs do not have any of these requirements.
  • If the GK is wholly owned by an American corporation, the American corporation has the option to elect the GK to be considered a “disregarded entity,” allowing it to be treated as a branch of the US for US tax purposes. This option does not exist with the KK.

Key Takeaways

If a foreign entity will be wholly owned by another group company as a local support office, with no intention to raise outside capital or list on the Japan stock exchange, it is most common nowadays for foreign companies to set up a GK as it is simpler and less costly to establish and maintain.  That being said and depending on your industry you may weight certain considerations higher or lower, like who your customers are, what precise image are you trying to achieve in Japan, etc.  If you would like to talk about this further we are happy to arrange a time to speak to help guide you to the best decision.  As the team at weConnect has handled over 800 entity registrations across all industries we believe we have the experience necessary to ensure you structure your entity right for what you want to achieve.

Key Establishment Considerations for the Japanese Market

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Key Establishment Considerations for the Japanese Market

Through the years we have developed some key points we like to share with our clients for them to keep in mind when they are beginning to consider setting up an entity in Japan. Please see the points below and let us know if you would like to discus further.

  • You will need a registered address for the incorporation.
  • If you will invoice Japanese customers from your Japan entity you may want to consider structuring your business in Japan as exempt from Japanese consumption tax. This will enable businesses which will be profitable quickly to realize an uplift of revenue by recognizing consumption tax received as additional revenue. The first step is to ensure initial capital is less than JPY 10,000,000.
  • It can be beneficial to have a resident director for smooth setup with banks, signing visa applications for expatriates coming from abroad, and making your business look as domestic as possible if that works strategically for your brand.
  • However, it may be beneficial to avoid electing a Japanese employee as a Director, as their compensation may need to be paid in fixed monthly increments to be a tax-deductible expense for the company, and if they are using company housing only 50% of the housing amount can be recognized as tax-free compared to 90% for non-Directors.
  • If you will need to get your staff a visa, we recommend setting your initial capital to at least JPY 5,000,000 and if you need to get your first employee in Japan a visa you will need someone to sign the visa application. If there is no employee or contractor locally, we can become your resident director and sign the visa application on your company’s behalf.
  • Separate seals for legal, banking and HR functions allows maximum administrative efficiency for company in Japan.
  • Managing your back office compliance with one provider can avoid frustration, repeating explanations of your business and allow you to focus on building your business in Japan.

Key Takeaways

weConnect offers decades of experience to help companies set up optimally in Japan.

Challenges of Opening a Japanese Bank Account

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Challenges of Opening a Japanese Bank Account

Strict KYC

Banks in Japan have strict KYC processes due to anti-money laundering requirements. We have seen countless cases where Japanese banks have rejected applications of newly established entities and branches of foreign headquartered companies. Newly established companies are more likely to be rejected because they have lower credibility.

More Requirements

The bank conducts a stricter assessment for new companies. Sometimes more information is required such as a business plan, financial statements, etc. 

In-Person Visits

Banks generally require the company’s representative director to visit the bank window with the bank seal to open a bank account. If weConnect is helping you to open a Japanese bank account, no bank account visit is required for our recommended branches.

Time-Consuming Process

Companies are unable to open a corporate bank account before they are officially established with an entity in Japan. After incorporation, it can take anywhere between 3 and 9 weeks to open a bank account and another 2-4 weeks to set up internet banking. Actual timelines depend on the actual activities of the business, when operations in Japan will begin, how famous the company is, where the headquarters are located and where funds sent from abroad will originate from. This can be a big challenge if the company needs to pay employees right after establishment. We help guide our clients to the quickest set up possibly for their situation. Until our client’s have their own bank account, we provide access to use the weConnect trust account to pay salaries, insurance premiums and taxes until their own bank is established.

Our positive history with a number of Japanese mega banks ensures applications submitted by us have the shortest application timeframe in the market.

Language Barrier

The bank account application and online banking application are in Japanese, and often the bank requires that the company’s point of contact can speak Japanese.

Key Takeaways

Having a partner like weConnect can be essential to establishing a bank account as business moves into this new market. Japanese banks can historically delay applications for months, or reject the application without explanation.

Options for Bank Account Visibility in Japan

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Options for Bank Account Visibility

Internet Banking English Interface

Internet banking interfaces in Japan are generally in Japanese. Even though a few mega banks do provide English interfaces, they are not as robust as the websites in Japanese nor can they function on inputs in Roman characters (i.e. you must understand Japanese characters to use them still). In addition, the bank charges for English interfaces can be 6x higher than that of the Japanese interfaces.

Online SaaS application to provide view-only access

A cloud based application can be set up to enable the company to view their Japanese bank statement online in English. The application links to the company’s Japanese bank account and pulls data from the bank in real time.

MT940

If the parent company’s bank is a SWIFT member, setting up MT940 allows you to view bank balances and transactions on a daily basis through your SWIFT member bank account in foreign countries.

MT101

If the parent company’s bank is a SWIFT member, setting up MT101 allows you to request fund transfer from the parent company’s bank. However, this will incur a high bank charge. Cancellation or amendment of fund transfers can only be done in Japanese via FAX.

Key Takeaways

weConnect allows you to see and track your Japanese bank accounts in English without the high fees commonly charged by the bank.

Required Initial Tax Filings for a New Japanese Business

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Required Initial Tax Filings for a New Japanese Business

The initial tax filings in Japan include:

Notification of Corporation Establishment

This notification form must be submitted if a new company is established in Japan.

Application for Blue Form Tax Return

Applying for a Blue form tax return will provide your business with various benefits such as the ability to carry forward losses.

Application for Filing Extension

Filing deadline for the corporate tax return can be extended by one month with this application.

Please note that both tax return filing due date and tax payment due date for consumption tax purposes are still within two months after the end of the fiscal year, even if the taxpayer has been approved for the extension.

Notification of Establishment of a Salary-Paying Office

This filing is to notify when a newly established office in Japan plans to pay salaries. When a company is newly established, it is usually submitted together with the application for withholding income tax payment due dates.

Application for Reducing the Number of Annual Withholding Tax Payments

Withholding tax payments should be made once a month. However, for small businesses with fewer than 10 employees, this can be reduced to twice a year by filing this application.

Key Takeaways

Let weConnect help ensure the correct and most strategic filings with the tax office are submitted on time.

Why You Want to Submit Your Initial Tax Filings On Time in Japan

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Why You Want to Submit Your Initial Tax Filings On Time in Japan

Part of the initial tax filing applications is the Blue tax return form. This application must be submitted within 3 months of establishment or before your first fiscal year end. If the deadline is missed it will be not be accepted and you will not be able to enjoy various Japan tax benefits. The benefits of the Blue form are as follows:

Carry forward net operating losses for 10 years

A company can carry forward net operating losses (NOLs) for the subsequent ten (10) years. If NOLs were recognized before March 31, 2018, you may only be able to enjoy nice (9) years of benefit.

Tax credit by increasing gross salary payment

If you increase gross salaries of your labor force from the previous year you may be entitled to a tax benefit.

Lump-sum depreciation of small assets

SME can fully expense a fixed asset when it is acquired if the purchase price is less than JPY 300,000.

Special tax depreciation for certain assets

When certain fixed assets are acquired you may be able to depreciate them more beneficially.

Key Takeaways

Do not miss out on tax benefits the Japanese government is giving away for free by missing the deadline for your initial tax filings.

Japanese Statutory Employment Benefits

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Japanese Statutory Employment Benefits

Japan is rather unique in that 90% of the population has no concept if maintaining their own health insurance, retirement funds or coverage to protect them from work related issues like injuries or losing their job altogether. Below is a quick introduction to the key points related to an employer’s statutory responsibility with regards to what is commonly known in Japan as the Japanese statutory employment benefits or “social benefits” for short.

 

  • All companies in Japan hiring full time or eligible employees must enroll into the below “social benefit” schemes
  • Benefit premiums are split between employee and employer
  • Employee premiums are deducted from gross salary. Employer premiums are additional cost based on gross salary. (e.g. if you pay someone JPY 500,000 per month in gross salary, the company cost approaches JPY 580,000 assuming you, as the employer, offer common non-statutory benefits along with these statutory “social benefits” illustrated below.

*If the employee is 40 years of age or older, the premium rate increases to 5.815% from March 2019 to include Nursing Care Insurance.

**Premium rate for Workmen’s Accident Compensation Insurance is 0.25% minimum. Subject to increase depending on the job’s risk factor.

***information as of December 2019 – please reach out to us for most up to date rates.

If there are any questions about how to hire talent in Japan with or without an entity and ensure these benefits are offered, please reach out to us to speak over a call free of charge. With retention of top bilingual talent in Japan becoming increasingly more competitive, ensuring you properly communicate the benefit package to your candidates is extremely important when having recruitment and hiring conversations.

Key Takeaways

Understanding your obligations when hiring in Japan is important for budgeting, recruitment and compliance. weConnect can help explain what needs to be done to avoid issues internally, and with the Japanese government.

Benefits Your Japanese Employees Will Expect

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Benefits Your Japanese Employees Will Expect

Statutory Social / Labor Insurance (statutory)

Your employees in Japan will expect you to offer health insurance, pension, unemployment insurance and workers’ compensation insurance. Nursing care insurance is also required for employees over the age of 40.

Paid Leave (statutory)

Japan based employees will be granted additional days of paid leave to be added to their annual balance as per the following table. The leave will be effective for two years from the date awarded. This is the statutory minimum, however the company can grant more vacation if it chooses which can be a differentiator in the market when recruiting.

Commuting Allowance (non-statutory)

Although not required by law, most Japanese companies will provide commuting allowance to employees to cover the expense of commuting to and from the office. The expense should be equal to the most economic route between their home and the workplace.

Private Pension (non-statutory)

Many employees expect this benefit from large companies in Japan. Because new companies are not able to offer this benefit in Japan (because of low headcount), except for a few specific programs, foreign subsidiaries usually pay more salary to compensate. Ask us directly for any updated information on the subject.

Other Supplemental Benefits (non-statutory)

Most Japanese talent will not expect anything more than the above. Typically when recruiting, an upgraded title a higher salary, and more responsibility are the most important considerations for Japanese talent. Although extras like housing allowance, car allowance, or life insurance can differentiate when recruiting, Japanese employees do not typically focus on these kinds of benefits when making a decision to move jobs.

Key Takeaways

The benefits Japanese talent expect include statutory and non-statutory benefits. weConnect can help you learn the ins and outs of these benefits, and how to incorporate them into your employment and HR documentation.