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Kakutei Shinkoku | Final Income Tax Return in Japan

If you are a resident in Japan, working as a registered* self-employed operator or a freelancer, you are to receive a set of documents sent from Japanese national tax office that will arrive in late January. The set of documents is for Final Income Tax Return, to report the amount of income tax, due on total net income earned between January 1 and December 31 each year, and the filing process is called Kakutei-Shinkoku 確定申告 which is to be done between 16 of February and 15 of March.

If you are a company employee and your income is only the salary paid from the company you are work for, you don’t need to do Kakutei Shinkkoku as income tax is withheld from your monthly salary and your employer is supposed to make year-end adjustments for you. Therefore, the documents for Kakutei-Shinkoku are basically not sent to company employees.

* Self-employed individuals must file a notification when they start their business in Japan and the notification is called “Kaigyo Todoke 開業届” in Japanese.

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Filing Types for Kakutei-shinkoku (Final Tax Return)

Filing Types for Kakutei-shinkoku (Final Tax Return)
In Japan, there are two filing types for Kakutei-shinkoku; Aoiro-shinkoku 青色申告 (Blue Tax Return) and Shiroiro shinkoku 白色申告 (White Tax Return), that the self-employed operator can select when notifying the opening of business at the tax office. In most of the cases, Aoiro-shinkoku (Blue Tax Return) is selected as it gives benefits including special tax deduction. In the case that you once selected Shiroiro status when setting up business and want to change it later on, it is possible to make the change if you apply at the tax office. The application for changing the status from Shiroiro (White) to Aoiro (Blue) must be made by 15th of March on the year you wish to start with.

What is required to do for Aoiro-shinkoku?

The significant difference between Aoiro-shinkoku and Shiroiro-shinkoku is the documents to be required. For example, Balance Sheet B/S and Income Statement must be created for Aoiro-shinkoku. Also, regular bookkeeping is essential and you need basic knowledge about accounting. Even if you don’t have the knowledge, using a bookkeeping app will be of help. One of the most popular apps is Yayoi, that is available only in Japanese, unfortunately. In the first place, the set of documents for Kakutei shinkoku is all written in Japanese that is surely a problem... Hiring an English-speaking accountant will be a solution.

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