Companies can save their taxes by paying a Business trip allowance （出張日当）to directors and employees.
This tax-saving method cannot be applied by an entrepreneur, so using this method is highly recommended after you set up a company.
On this page, I’ll show you how you can save your tax, an appropriate amount of allowance, and things you need to keep in mind when you introduce a Business trip allowance.
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Why can you save a tax by Business trip allowance?
A business trip is necessary to some extent when you engage in business.
In this, companies can pay a Business trip allowance based on the Travel Expense Regulations prepared by the company.
By preparing the regulation, you can pay the allowance to directors and employees in addition to the actual cost such as accommodations and transportation.
To tell the truth, a Business trip allowance is neither imposed taxes nor social insurance fees.
On the other hand, however, companies can deduct the allowance amount from the sale.
Therefore, they can reduce their profit which means less tax is imposed.
Of course, salary is taxable.
So you are advised that you pay directors and employees as a Business trip allowance as much as possible.
In addition, 10% of a Business trip allowance can be credited against the consumption tax you are required to pay.
But keep in mind that you must prepare the Travel Expense Regulation to enjoy this tax-saving measure.
And if you enforce the regulation, all directors and employees should be covered in the allowance.
You cannot pay the allowance only to directors.
How much is appropriate?
Tax auditors will not approve of a 1,000,000 yen allowance just because you go on a business trip.
It is difficult to decide how much allowance your company pays because there is no rule which says “This amount is fine.”
The amount of the Business trip allowance should be at the same level as other companies.
Generally speaking, a 5,000 yen daily allowance is considered to be an adequate amount.
Keep in mind that…
When you go on a business trip pay the Business trip allowance, you are highly advised to prepare the Business trip report, which covers the purpose of the visit, the destination, the minutes of the meeting, and so on.
In Japan, a tax declaration system is applied, where tax auditors put importance on Evidence to prove the existence of the transaction.
In the first place, nobody gives you receipts for your Business trip allowance.
So you are required to prepare objective evidence instead.
This objective evidence means the Business trip regulations and the report.
Without the evidence, tax auditors will not likely approve of the payment of the allowance even if you actually paid it.
On this page, I showed the outline and the merits of the Business trip allowance.
I am sure this is a great way to save your tax & social insurance fees.
As I mentioned, this method is only applicable to companies, not entrepreneurs.
I hope that those who own a company adopt this method as much as possible!
Having any concerns like these with your accountant?
Your tax accountant…
- changes every year
- suggests no tax-saving measures
- doesn’t give you financial statements in a timely manner
- doesn’t explain the contents of the statements
- is reluctant to use the cloud software
- rarely shows up to your office
- is always late to answer your questions
- is elderly and you’re worried about the near future
Lack of communication with tax accountants can cause incorrect accounting processing due to the mess of the contents of the bookkeeping.
As a result, it increases the risk of additional taxation of up to 40% through a tax audit which is conducted once every 3 to 5 years.
To prevent from paying additional taxes, it is important to share accounting processing and the business environment with tax accountants on a daily basis and to take measures to address additional taxation risks at an early stage.
We, Masa Tax Consulting, not only consult on accounting contents but also provide tax audit preparing measures and proposals for tax-saving measures that are optimal for customers as the most casual/friendly tax accountant in Japan.
We now offer a free initial consultation and a first-month-free policy.
We do not force you to make any contract, so please feel free to contact us.
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