JAPAN Law and Practice Contributed by: Shinya Tago, Atsushi Fukasawa, Hiroshi Iida and Landry Guesdon, Iwata Godo Law Offices
Failure to File In case of failure to file a tax return, the extra tax is 15% of the principal amount of tax determined by the tax office or set out in a final or amended return if the final tax return was filed after the due date. Where the principal amount exceeds JPY500,000, the additional tax rate becomes 20% of the excess; for taxes for which returns are due on or after 1 January 2024 and where the principal amount exceeds JPY3 million, the additional tax rate becomes 30% of the excess. An extra 10% is added to those rates if extra tax for fail - ure to file or a heavy additional tax has been imposed within five years regarding the tax in question. Notwithstanding the general rule, where a taxpayer who has not been notified of the commencement of a tax audit files a tax return voluntarily after the due date, 5% additional tax is applied. If a taxpayer who has been notified of the commencement of a tax audit files a return voluntarily without any awareness of the possible correction or determination based on the audit, 10% additional tax is applied (15% to the excess of the principal tax over JPY500,000). Withholding Tax In case of failure to pay withholding tax, 10% of the unpaid amount of the principal tax is added in the case of payment notification after the deadline. How - ever, where a taxpayer voluntarily pays the tax after the due date, the extra tax rate is reduced to 5%. Tax Evasion In case of tax evasion, additional penalty tax applies at the rate of 35% for under-reporting tax and for fail - ure to pay withholding tax, and 40% for failing to file a tax return. An extra 10% is added to these rates if either an additional tax for failure to file or a heavy additional tax is imposed within five years regarding the same tax. In addition, a tax offender may be subject to imprison - ment of up to ten years and/or a fine. If the amount of corporation tax evaded exceeds an amount speci - fied under the relevant article (eg, Article 159 of the Corporation Tax Act), the fine may, depending on the circumstances, be reduced to an amount in excess of the specified amount but not more than the amount of corporation tax evaded.
Reporting In addition to the general self-assessment tax sys - tem, residents holding foreign assets above a certain threshold must submit a “Foreign Assets Statement”, and individuals with taxable income and assets above a certain threshold or residents holding assets above a certain threshold must submit a “Statement of Assets and Liabilities”. Obstruction In case of audit by the tax authorities, a taxpayer is punishable by imprisonment of up to one year or a fine of up to JPY500,000 if they do not answer, provide false answers or obstruct the audit. Corporate Duties A company may be liable to a criminal fine if an officer or employee is found guilty of a corporate income tax offence. 3.6 Financial Record-Keeping The Companies Act According to the CA and its implementing regulations, joint stock companies and limited liability membership companies must timely prepare accurate accounting books (Articles 432 and 615), and joint stock com - panies must publish their balance sheets and, where applicable, their profit and loss accounts (Article 440). In addition, a director (or other relevant person; the same hereafter) of a company who fails to prepare accounting books or balance sheets properly will be subject to a maximum administrative fine of JPY1 mil - lion (Article 976). When a director uses documents containing false statements about important matters when soliciting subscribers for shares of the company, they may be subject to imprisonment with labour for up to five years and/or a maximum fine of JPY5 mil - lion (Article 964). The Financial Instruments and Exchange Act According to the FIEA and its implementing regula - tions, a person who conducts a public offering of securities must prepare financial and accounting doc - umentation in accordance with the rules applicable to financial statements (Article 193). These documents must be submitted to the FSA as part of the securities registration statement at the time of a public offering,
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