ASTHOM PARTNERS Welcomes UK-based Greenback Alan LLP as a New Member
~ Providing Services Across 13 Countries and 35 Locations Worldwide ~
On June 19, 2024, the UK accounting firm Greenback Alan LLP (HQ: Spa Road, London; Managing Partner: Stephen Dabby) joined the global accounting network “ASTHOM PARTNERS”. With this addition, the member firms of ASTHOM PARTNERS now include AGS Consulting Co., Ltd. (HQ: Chiyoda-Ku, Tokyo; Chairman: Atsushi Kanzawa, President: Yoshihide Hirowatari, hereinafter “AGS”), Hotta Liesenberg Saito LLP (HQ: Torrance, California; Global CEO: Shunsuke Saito, hereinafter “HLS”), and Greenback Alan LLP.
(more…)Vol 1. Outline
In accordance with the tax reforms for 2024, a special tax reduction (“Teigaku Genzei”) will be implemented for the income tax and individual inhabitant tax. The related payroll and administrative tasks will get somewhat complicated. Through this three-part series (No.1 Outline of the tax reduction, No.2 Monthly payroll procedure, and No.3 Year-end payroll procedure (“Nenmatsu Chosei”), we will explain about the tax reductions and related administrative procedures.
Here, it will be focused on the case of salaried employees.
(1) Income Tax
(1) Individuals (Only residents of Japan) : JPY 30,000
(2) Spouse and dependents of the same household (Only residents of Japan) : JPY 30,000 per person
The tax reduction will be executed by deducting from the tax withheld in the first payroll in June and thereafter, and any amount not fully reduced in June will be deducted sequentially in the subsequent months. It is called Monthly tax reduction procedure.
(2) Inhabitant Tax
(3) Q&A
1. What happens to any tax reduction not fully deducted from my salary?
This reduction will not apply to any salaries paid from January 2025 onwards. The portion that cannot be fully deducted will be paid as a benefit. If the case is anticipated, the benefit will be provided by employees’ municipality before the year end.
2. Does the tax reduction also apply to bonuses?
Yes, this applies to withholding tax for bonuses as well.
As far as your spouse’s income is less than JPY 480,000, you are eligible to get your spouse’s tax reduction. However, if it exceeds JPY 480,000, a tax reduction will be granted from the spouse’s own withholding tax.
【Treatment for spouse’s tax reduction】
Even if the total income is expected to exceed JPY 18.05 Million, the monthly reduction procedure is executed in the same manner. The reduced taxes will be adjusted at the time of the year-end procedures.
A Special Reduction of Personal Income Tax and Inhabitant Tax for FY2024
Vol 2. Monthly Tax Reduction Procedures
The Employees who are employed with a company as of June 1, 2024, and are residents, to whom “Column 甲(kou)” of the Withholding Tax Amount Table is applied for withholding at source of salaries, etc. (hereinafter referred to as “employees on the reference date”)
(1) Employees to whom “Column 乙(otsu) or 丙(hei)” of the Withholding Tax Amount Table applies for withholding at source of salaries, etc. to be paid on or after June 1, 2024 (employees who have not submitted an Application for Exemption for Dependents),
(2) Employees who start working for a company on or after June 2, 2024,
(3) Employees who retired from a company on or before May 31, 2024,
(4) Employees who left Japan and became non-residents on or before May 31, 2024.
The following points should be checked with reference to Application for Exemption for Dependents.
(1) Confirmation of a spouse living in the same household who is a resident
A spouse qualified for withholding deduction who is listed on the
Application for Exemption for Dependents and those whose total amount of income is JPY 480,000 or less, are considered to be spouses living in the same household.
(2) Confirmation of the number of dependents who are residents
The dependents qualified for deduction who are listed on the Application for Exemption for Dependents (扶養控除等異動申告書) and those under 16 years of age (listed as a matter related to inhabitants’ tax).
(3) Application pertaining to a spouse living in the same household, and not listed on the Application for Exemption for Dependents
A spouse living in the same household and dependents under the age of 16 years who are not listed on the Application for Exemption for the dependents may be included in the number of employees of the tax reduction amount if the employer receives an “Application for Fixed-amount reduction of Personal Income Tax for Withholding Tax”（「源泉徴収に係る定額減税のための申告書」）.
It should be checked that the application to confirm that the estimated total income of a spouse living in the household is JPY 480,000 or less.
“Application for Fixed-amount reduction of Personal Income Tax for Withholding Tax”（「源泉徴収に係る定額減税のための申告書」）
In case of any changes for spouse and dependents (marriage, divorce, birth, death, and so on) during the tax reduction period, the monthly deduction applied in the first month will be kept (no changes during the tax reduction period), and these changes will be reflected and adjusted at the time of year-end adjustment or final tax returns.
The reduction amount should be presented as “Amount of fixed-amount reduction (income tax): JPY XXX”（「定額減税額（所得税）×××円」） or “Fixed-amount reduction: JPY XXX” （「定額減税××円」）in an appropriate section of the payment slips (salary, bonus, and so on).
The above is not required for the pay slips issued at the year-end as the withholding records(源泉徴収票) with reduction amount are issued at the same time.
As for the tax payment slips (”Noufu-sho＜納付書>”), tax withheld after the reduction should be filled in the column of “Tax Amount (税額)”. It is not necessary to describe the tax reduction applied on the tax payment slips.
It should be furnished even in the case of no withheld amount after the reduction.
A Special Reduction of Personal Income Tax and Inhabitant Tax for FY2024
Vol 3. Year-End Tax Reduction Procedure
Detailed guidelines will be released on the NTA website in September 2024.
As those employees, whose annual taxable income is over JPY 18,050,000, are not eligible for the tax reduction, the amount deducted in the monthly tax reduction procedure will be added back to the tax amount due in the year-end adjustment (“Nenmatsu Chosei<年末調整>”).
The year-end adjustment is not applicable to those who have JPY 20 Million or more in annual salary income.
The total taxable income data shown in the Application for Basic Exemption (基礎控除申告書) is referred to judge whether the annual taxable income exceeds JPY 18,050,000 or not.
In computing the annual tax amount, this tax reduction is deducted from the amount after applying special deduction for housing loans (if applicable).
The annual tax amount is calculated by multiplying the income tax amount after deducting the amount of tax reduction at the year-end adjustment by 102.1% (special income tax for reconstruction).
To calculate the amount of tax reduction at the time of year-end adjustment for each qualified employee, confirm the presence/absence of a spouse living in the same household and the number of dependents (all limited to residents) as of the time of the year-end adjustment using the “Application for Exemption for Dependents” and “Application for Exemption for Spouse” (配偶者控除申告書), and calculate the sum of “JPY 30,000 for the individual themselves” and “JPY 30,000 for the spouse and each dependent living in the same household”.
The monthly reduction procedure will not be carried forward to next year. In this case “Amount not deducted JPY XXX” (控除外額XXX円) is stated on the withholding slip (源泉徴収票). The amount not deducted will be provided by employees’ municipality after 2025. If anticipated, it will be provided as benefits.
【References】
Guide for Fixed-amount Reduction of Personal Income Tax for FY2024 Pertaining to Withholding Tax System for Salaries – National Tax Agency
Disclaimer: All views expressed in this article are solely for informational purposes and should not be construed as legal advice. This information is for reference only and is bound to change in case of any amendments or changes to applicable laws. We do not assume any responsibility or liability for any errors or omissions in the content of this article, and do not make any warranties about the completeness, reliability and accuracy of the information expressed in this article.
1. Uncertainties regarding Real Estate Transfer Tax have been eliminated
2. Shareholder Managing Director : Private Use of Company Car is to be assumed
3. Meals from the Employer as Non-Cash Benefits will apply from 2024
4. New Income Limits for Parental Allowance (Elterngeld)
(more…)| Target | Timing of Clarification | New Clarifications to be Added |
| All Workers | At the time of conclusion of the labor contract and at the time of renewal of fixed-term labor contract | 1. Scope of changes in place of employment and duties |
| Fixed-term Contract Workers | At the time of conclusion and renewal of fixed-term labor contract | 2. Existence and details regarding the renewal limits(Total contract period or maximum number of renewals) + If the maximum renewal period is to be newly established or shortened, the reason for this should be explained in advance. |
| At the time of renewal of a contract for which the right to apply for indefinite conversion occurs based on the indefinite conversion rule* | 3. Opportunity to apply for indefinite change of working conditions after changing to indefinite labor contract + In determining the working conditions after the indefinite change of employment, the company shall make efforts to explain matters that take into consideration the balance with other regular employees |
1. Update in Mandatory Electronic Invoicing.
2. Gastronomy from 1st January, 2024: VAT Rate jumps back to 19%.
3. Private use benefit from company cars: Changing the calculation method can save taxes.
4. Due to increase in the annual income threshold as of 1st January, 2024: Reassess public health insurance obligation.
5. Low-value assets.
6. Special depreciation according to Section 7g Individual Tax Law.
(more…)As well known, the Electronic Data Preservation Act (hereinafter referred to as “EDPA“) was originally scheduled to take effect from January 2022. However, the application of this act has been postponed to January 2024. There have been multiple revisions made to this act, which has made it difficult to understand what is mandatory and what has been mitigated. In this article, we will focus on electronic transactions and illustrate their position in the EDPA, and how they can be relevant to your business.
The overall relationship between the various tax and accounting documents, and the EDPA can be summarized as shown in the diagram (Exhibit-1) below.
As you can see from the diagram (Exhibit-1) above, under the EDPA, it is only electronic data exchanged through electronic transactions that is mandatory to be stored in an electronic manner. This applies not only to the data received, but to the data sent as well. For tax and accounting documents exchanged other than electronic transactions, either conventional hard copy storage or electronic data storage is permitted.
So, what are the requirements for this method of electronic storage of all electronic transaction data?
Initially, the visibility requirements represented by the truthfulness and retrieval methods were quite strict. However, a review of the system has resulted in relaxed requirements for the storage of electronic transaction data in accordance with the actual conditions of the taxpayer’s IT environment.
Please refer to the flowchart (Exhibit-2) illustrated below to determine the best method of how to store electronic transaction data under the EDPA according to your IT environment.
HLS has customized a flowchart published by the National Agency in July 2023. This flowchart can help to determine how to store electronic transaction data according to the taxpayer’s IT environment.
Please refer to the flowchart (Exhibit-2) below. If your company is not determined to be storing electronic transaction data in accordance with the principle rules, you need to take appropriate measures as soon as possible.
It is necessary to establish an IT environment that satisfies the “Truthfulness Requirement” and the “Visibility Requirement” as described below.
■Truthfulness Requirements (Falsification Prevention Measures)
By taking one of the following measures for electronic data, it must be possible to operate in such a way that any data correction history remains and cannot be deleted.
■Visibility Requirements
The data should be able to be searched and displayed in the event of a tax audit. Except for the search requirements, the system should have the ability to be handled with a computer and user manuals.
Specific requirements are as follows:
（*1）”Promptly” is generally defined as within seven business days here, or within two months and seven business days if there are Time-Stamping rules in place.
（*2）If electronic transaction data can be downloaded and given to Tax Examiners upon their request during a Tax Audit, ② and ③ are not required.
HLS can provide you with advice on the requirements for electronic storage of electronic transaction data, tailored to your IT environment. If you would like a more detailed explanation, please do not hesitate to contact us.
5 Whether the Deferral Methods (Permanent Measures) are Applicable or Not this grace period is permanent. The details of the grace period and its application are as follows:
（*1）“Reasonable cause” should be determined on a case-by-case basis, but it may include, for example, lack of time to develop an IT environment, lack of funds to develop an IT environment, or unfamiliarity with IT operations.
Other measures are also available to mitigate the electronic storage requirements depending on the taxpayer’s situation.
If you would like a more detailed explanation, please do not hesitate to contact us.
1. Improvement in company car taxation of electric vehicles planned from 2024.
2. BFH decision on non-cash benefits from company car hire.
3. Loss from the sale of significant shares of GmbH.
4. BFH ruled on the legal situation related to GmbH insolvency.
5. Treatment under income tax related to subsequent payment of social security contributions by means of a summation notice.
In addition to the legal changes already presented as part of the Growth Opportunities Act, the German government is planning further improvements to the taxation of company cars.
According to the government draft, this involves the following:
In the case of private use of a company car that is purely an electric vehicle, only a quarter of the gross list price is used to calculate the non-cash benefit.
If the Logbook rule (A method in which the company car users record the mileage of the car driven for private and business use respectively, and non-cash benefit is calculated by the divided amount based on the mileage of private use portion) is applied, only a quarter of the acquisition costs are recognized under current law. However, this rule is applicable only if the gross list price of the vehicle does not exceed € 60,000.
The German government wants to increase demand, promote sustainable mobility, and reflect the increased purchase costs of such vehicles in a practical manner.
For this reason, the existing maximum amount for the reduced taxation of the non-cash benefits when the company car is provided for the first time after 31 December 2023 is to be increased from €60,000 to €80,000.
Depreciation for private garage may not be offset.
If employers provide their employees with a company car for private use, this non-cash benefit must be taxed by using either the 1% method or the logbook method as wages. However, if the employee pays a fee to the employer for the use of this vehicle outside of work (e.g., monthly flat rate, mileage allowance, assumption of leasing installments), this personal contribution reduces the taxable monetary benefit, since the employee is not being enriched in this respect. The employee’s assumption of individual vehicle costs (e.g., for fuel) may also be offset in this case.
The Federal Fiscal Court or Bundesfinanzhof (BFH) has now decided that the costs of an employee’s private garage may not be considered to reduce the benefits if the employee had no legal obligation to park the vehicle there.
A lawsuit was filed by an employee with a company car who wanted to claim the depreciation of his private garage as business expenses. The employer only stipulated that company vehicles had to be treated with care and there was no obligation to park them in the garage. The BFH explained that usage fees may only be deducted to reduce the benefits if they must be paid for the provision and commissioning of the company car. This did not apply to the garage depreciation. There was no legal obligation on the part of the employee to park the vehicle in a specific garage. There was also no assumption of individual usage-dependent costs, as the costs for the garage were not dependent on the use of the company car.
It is not uncommon for a significant GmbH share to be used to deliberately cause a loss.
Since 31 July 2019, this is no longer so easy. For the period prior to this, a judgement by the Federal Fiscal Court or Bundesfinanzhof (BFH) stipulates that all income from the entire shareholding and not an individual share must be considered for the necessary intention to make a profit.
Background
If a share in a corporation in which you have held at least 1 % within the last five years is sold, this leads to commercial income (Section 17 (1) of the German Income Tax Act (EStG)). However, in the case of loss-making disposals in particular, the question arises as to whether the intention to realize a profit is generally required or not.
Facts of the case
The single shareholder of a GmbH with a share capital of €25,000 divided into 25,000 shares of €1 each and decided to increase its capital by €1,000 shortly after its formation (November 2015) in December 2015. The 25,001 company shares with a nominal value of €1,000 were created for this purpose. In addition to this nominal amount, a premium of €500,000 was paid into the GmbH as capital reserves.
At the end of 2015, the single shareholder sold 300 shares worth €1 together with the new share to her husband for a purchase price of €26,300, which was in principle reasonable. In her income tax return for 2015, she claimed a capital loss of €475,000 (purchase price of €26,300 less acquisition costs of €1,300 and a premium of €500,000).
The Federal Fiscal Court or Bundesfinanzhof (BFH) ruled that shareholder of a GmbH can claim guarantee loss for tax purposes. A GmbH shareholder left a guarantee in a certain crisis and was able to claim the loss from the worthlessness of his recourse claims as negative investment income. Because the intention to generate income was positive in an overall assessment of all income from the investment, the BFH ruled on the legal situation until 2019.
If the social security authorities require the employer to pay social security contributions in arrears due to recording errors via a summary assessment, this does not result in the accrual of wages for individual employees. The Federal Fiscal Court or Bundesfinanzhof (BFH) has thus confirmed a tax court judgement from 2020.
Disclaimer: All views expressed in this article are solely for informational purposes and should not be construed as legal advice. This information is for reference only and is bound to change in case of any amendments or changes to applicable laws. We do not assume any responsibility or liability for any errors or omissions in the content of this article, and do not make any warranties about the completeness, reliability and accuracy of the information expressed in this article.
1. CECLの概要
2016年、米国財務会計基準審議会（FASB）は、金融資産（預金、受取手形、売掛金、貸付金、等）の減損の認識に関連して、（予想損失モデル（Current Expected Credit Loss – CECL）に関する新しい基準（ASU 2016-13）を公表しました（FASBから正式に米国会計基準についての改訂等があった場合には、Accounting Standard Update (“ASU”)という形で公表されます）。
(more…)
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