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Director bonus Japanese tax

Regarding Bonus and Japanese tax

Assumed that Fiscal year of company XYZ is from 1st June 2019 to end of May 2020.

When company XYZ notifies tax agency in advance adequately and pays as same as notification, the bonus can be deductible expense..

If XYZ wants to pay bonus to director X, general meeting of shareholders etc decides amount of bonus and date of payment and notifies tax agency within one month after the decision.

So, if XYZ decides on 25th July 2019, it needs to notify tax agency by 25th August 2019.

And date of notification to tax agency should be within 4 months from date of commencement of business year of XYZ company.

So, XYZ company can not decide payment of bonus to director in October of 2019.

Because at the time of determination, four months have already passed.

In the case of newly established company, these one month, 4 months are not applied. It needs to submit notification within 2 months from establishment of company.

When you are operating a company and close to end of fiscal year, you may find out that there are enough profit in your company, you can not change amount of salary and bonus for director.

Even if your company to do so, it can not be included in deductible expense.

If XYZ company notifies tax agency that it will pay bonus of 100 yen and it pays 120 yen, entire of 120 yen can not be included in deductible expense.

As other option, there are system of profit-related pay, Retirement allowance, Stock option, Salary received as employee ( person who doubles director and employee ).

What is “Director=役員” ?

Even if a person is not registered as “director or auditor”, as far as she engages in management of company or she is major shareholder of the company and she is owner of the company substantially , she is deemed as “director”.

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