{"id":624,"date":"2012-11-07T13:09:58","date_gmt":"2012-11-07T04:09:58","guid":{"rendered":"http:\/\/tk-tax-accounting.com\/?p=624"},"modified":"2024-05-25T02:19:29","modified_gmt":"2024-05-25T02:19:29","slug":"english-officers-salary-for-tax-purposes-directors-auditors-liquidators","status":"publish","type":"post","link":"https:\/\/www.tkpartners.or.jp\/en\/english-officers-salary-for-tax-purposes-directors-auditors-liquidators\/","title":{"rendered":"Officer\u2019s salary for tax purposes (Directors, Auditors, Liquidators)"},"content":{"rendered":"

Case 13<\/p>\n

<Question>
\nI have just started a business in Japan and my tax accountant advised me to decide on the officer\u2019s salary, however, I do not know how it should be decided. According to the accountant, it is important for tax purposes.\u00a0I am thinking about keeping the director\u2019s salary low at first and then increasing it if the company starts recording a profit to certain extent. Is this a viable option for tax purposes?<\/p>\n

<Answer>
\nCompensation paid to officers of Japanese companies is subject to different rules from salaries paid to employees. Officers of Japanese corporations include directors, auditors and liquidators.<\/p>\n

Salary is defined as a continuous payment, based upon a predetermined standard and computed for a period of one month or less. Therefore, it is difficult to change the predetermined salary during the period to be included in the expense. Salaries paid to officers are generally deducted by corporations, but salaries that are of an unreasonable amount may not be deducted. Compensation to officers in excess of that which is specified in the articles of incorporation or which is decided at the\u00a0shareholder meeting is not deductible. Officer\u2019s salaries are categorized as follow.<\/p>\n

<\/p>\n

Officer\u2019s salary<\/span><\/strong><\/p>\n

1.\u00a0\u00a0\u00a0 Fixed regular (monthly) salary
\nThis salary is paid monthly by a <\/span>fixed amount based upon the shareholders meeting. Except in special circumstances it must be paid by a fixed amount, so\u00a0if it is changed without substantial reason such as a serious deterioration of business, the salary is not deductable.<\/p>\n

2.\u00a0\u00a0\u00a0 Predetermined salary
\nThis salary is paid based upon the application form of a predetermined salary to the tax authority. For example, if some officers would like to have some compensation when bonuses are paid to employees, this salary is deductable for tax purposes as long as the application form of the predetermined salary is filed\u00a0a month after the shareholders meeting.<\/p>\n

http:\/\/www.nta.go.jp\/tetsuzuki\/shinsei\/annai\/hojin\/pdf\/5104_2.pdf<\/a><\/p>\n

(Example)<\/p>\n

Annual salary: JPY 10,000,000
\nFixed regular salary: JPY 650,000 \u21d2Total JPY 7,800,000
\nPredetermined salary: JPY 1,100,000 (Paid during\u00a0the summer bonus period)
\nJPY 1,100,000 (Paid during\u00a0the winter bonus period)<\/p>\n

3.\u00a0\u00a0\u00a0 Profit-based compensation
\nPrimarily, this salary is available on condition that companies are\u00a0listed companies in the stock market, and also they have to meet several other requirements. Therefore, we won’t go into details at this time.<\/p>\n

Q&A case<\/span><\/strong><\/p>\n

When a business is just started, the officer\u2019s salary has to be decided within 3 months from the establishment. As mentioned in the above, the officer\u2019 s salary has to be paid by a fixed amount, so if it is changed during the period, the increased salary is not deductable for tax purposes since it makes it possible to make an adjustment of profits.<\/p>\n

Therefore, it is quite important to prepare the business forecast and pay the salary based upon the forecast. If the business result did not achieve the forecast and it is difficult to pay the decided salary, recording the accrued salary is permitted as long as it is paid later.<\/p>\n

Example of changing officer\u2019s salary<\/span><\/strong><\/p>\n

Q& A of the officer\u2019s salary released from the tax authority explains the details of a change in officer\u2019s salary with illustrations. If you need to change the salary, asking your tax accountant is recommended case by case.<\/p>\n

1.\u00a0\u00a0\u00a0 Increased salary at the shareholders meeting (increase)<\/p>\n

2.\u00a0\u00a0\u00a0 Increased the salary during the period without specific reason
\nA decision was made in the shareholders meeting to change the salary in June, and the change was implemented\u00a0the following month of the shareholders meeting.<\/p>\n

(1) The change was implemented without a decision from the shareholders meeting\u00a0the following month of the meeting.
\n(2) Even though a decision was made at the shareholders meeting<\/span> to change the salary in June the change was not implemented in the following months.<\/p>\n

Both of case, the increased salary\u00a0is deductable.<\/p>\n

3.\u00a0\u00a0\u00a0 Increased during the period
\nNo decision was made to increase the salary at the shareholders meeting though,\u00a0a representative director was changed to other directors,\u00a0and the new representative director’s salary was increased.<\/p>\n

The increased salary is deductible.<\/p>\n

4.\u00a0\u00a0\u00a0 Decreased the salary due to a serious deterioration
\nNo decision was made to\u00a0decrease the salary at the shareholders meeting though,\u00a0\u00a0a decision to decrease the salary\u00a0was made in the\u00a0extraordinary\u00a0shoreholdings meeting due tue a\u00a0serious deterioration.<\/p>\n

The decreased salary is deductible.<\/p>\n

5.\u00a0\u00a0\u00a0\u00a0 Decreased the salary due to anxiety of business performance or cash schedule
\nNo decision was made to decrease the salary at the shareholders meeting though, a decision to decrease the salary was made in the extraordinary horeholdings meeting due to anxiety of business performance or cash schedule.<\/p>\n

The decreased salary\u00a0\u00a0is not deductible.<\/p>\n

 <\/p>\n

By Certified Public Accountant (CPA) & Tax Accountant, Koji Takahashi,<\/em>
\nTokyo & Yokohama\u00a0<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Case 13 <Question> I have just started a business in Japan and my tax accountant advised me to decide on the officer\u2019s salary, however, I do not know how it…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":{"0":"post-624","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-news-2"},"_links":{"self":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/624","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/comments?post=624"}],"version-history":[{"count":1,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/624\/revisions"}],"predecessor-version":[{"id":6939,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/624\/revisions\/6939"}],"wp:attachment":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/media?parent=624"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/categories?post=624"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/tags?post=624"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}