Whether you’ve been working with an accountant in Japan or are planning on hiring one, make sure you understand this insight before you run into issues!
Let’s say you walk into a meeting with your accountant in Japan for the first time. You’re looking for insight on how to streamline your bookkeeping and file your taxes. Once your accountant hears about your business’ accounting policies, they may say something like this:
“In Japan, your taxes have to be filed a certain way. Since you need monthly financials based on your company policy, you [the client] will need to handle that. Additionally, we’ll need to record everything in a separate statutory accounting book to ensure that filings are handled properly. Also, because of this thing called JGAAP, your records will need to be kept in Japanese, so we’ll need to use Japanese software.”
This sounds reasonable to you. Japan has a different way of operating, so it makes sense that you’ll need to be compliant with Japanese ways. (Plus, you have no clue about JGAAP requirements).
But your accountant has lied to you. Twice. Did you catch the lies?
Here they are in detail – don’t fall into these traps!
Lie #1: You need to keep a separate statutory accounting book for the purpose of your tax return
You don’t need to maintain a separate accounting book for tax purposes. In fact, there’s no problem with you attaching your normal financials to the tax return and have your tax accountant make off-book adjustments at the end of the year for the tax calculations.
When companies agree to have a second accounting book, they wind up doing all of their accounting on their own, then paying a monthly fee to have their accounting done twice by their accountant in Japan. It’s a frivolous expense with zero benefits.
And to make matters worse, having a second accounting book can lead to problems.
The problem with having a separate accounting book is that you’ll wind up having a gap between what your company’s financials are and the financials that have been filed with the tax office.
Why? Because your accountant in Japan is focused on making sure that the financials are compliant for Japan tax purposes, and typically won’t think about the need to reconcile the financials with your company’s financials.
From the tax office’s perspective, your financials are only the financials attached to the tax return. When you’ve finally realized that there is a discrepancy, it could be years later. That means years of returns that don’t match the company books that you can’t tie back.
At that point, you can either refile for all of the previous years (a huge pain and not recommended unless absolutely necessary) or manage the gap between your tax financials and company financials, forever. That’s right, forever!
Lie #2: You need to use Japanese accounting software
Many accountants in Japan tell you that your accounting needs to be recorded in Japanese software, but this is not required. You don’t have to maintain your books in Japanese, which means you can take comfort in knowing that it’s perfectly fine to continue keeping your records in English.
Now, you do however need to attach your financials in Japanese to your tax return. But all you have to do is simply translate and reformat your documents. There’s no need to maintain your records separately on a monthly basis in Japanese; you can just do a translation of the year-end financial reports and make adjustments to align with the financials with the tax code at the end of the year.
Wait…but how come accountants in Japan mislead people? Why would they do that?
Well, the reason is pretty innocent, actually. Many accountants learn that these are the ways to handle accounting in general, so they assume that it must be done in this way for people who handle their accounting in English. Many have no clue that a separate accounting book and using Japanese software is not required.
Plus, Japan is a culture known for people following procedures to a T. So, they might not think to consider if their procedure is the most effective for your situation.
Accounting services that actually are accounting services
Here’s how we at weConnect have designed a solution to be perfect for you, that’s compliant, and that actually provides you with real services for the money you invest:
We will do your full accounting (bookkeeping, payments, and reporting) on a monthly basis according to your company policies, closing requirements and consolidation schedule. We’ll do it in English, and use the accounting systems that make sense for your business.
We’ll actively communicate with you on a monthly basis to ensure that all records are updated properly for a smooth transition to doing the tax filings. We do your tax adjustments. And at the end of the year, we use your accounting books as the basis for the Japanese financials attached to the tax return.
That means you’ll never have discrepancies between two books (because there’s only one!), and you can keep track of your accounting in English while still ensuring full compliance. Ready to make your accounting process as smooth as butter? Contact us here to learn more!