Spring Newsletter (No. 39) as of



COVID-19 Related Rent Concessions

The International Accounting Standards Board (IASB) issued an amendment to IFRS 16 “Leases” on May 28, 2020. This amendment provides temporary relief to lessees who were granted rent concessions as a result of COVID-19, by exempting the lessees from assessing whether the COVID-19 related rent concession is a lease modification under IFRS16. The exemption is applicable to lessees only. Lessors would continue to be required to apply the existing IFRS 16 requirements.

In March 2019, Accounting Standards Board of Japan (ASBJ) decided to commence the development of an accounting standard for leases under which lessees should recognize assets and liabilities for all lease transactions, but a timeframe remained undetermined. In addition, the ASBJ has put this discussion on hold until the end of May 2020 due to the COVID-19 pandemic.


COVID-19 Special Tax Measures

The government emergency economic package including specific tax measures in response to COVID-19 went into effect on April 30, 2020. Special measures which may be of concern to our clients are as follows:

Deferral of tax payments

Considering numerous businesses are suffering a substantial decline in revenues, a special measure permitting tax payment deferrals without penalties and collateral for one year was announced.
1. Applicable businesses
This measure will apply to companies where both conditions below are satisfied:
(1) Taxpayer’s revenue decreased by 20% or more from February 2020 compared to the same period last year.
(2) Taxpayer has financial hardship in paying taxes.
2. Applicable taxes
National and local taxes payable between February 1, 2020 and January 31, 2021
3. Application procedures
Submission of an application form is preferred, but a taxpayer who has a difficulty can apply by simply making a call to the relevant tax office.
If you would like more information on this application, please approach your in-charge. We would be happy to assist you free of charge.

Extension of tax filings

Companies that are unable to file the tax returns or make payments of national taxes due to reasons related to COVID-19 can extend their deadlines through an easy application procedure.
1. Reasons
Circumstances such as: the company’s directors or employees have been infected with COVID-19; difficulty in closing the annual books timely as a result of teleworking are considered valid reasons.
2. Applicable taxes
National tax returns, applications and notifications for corporate income taxes, consumption tax and withholding income taxes
3. Application procedures
An application is not required to be completed in advance. A notation of “Application for extension of tax filing deadlines due to COVID-19” on the tax returns, applications, or notifications is sufficient.

Tax loss carry-backs

Under the current rule, a small-sized company with a capital of 100 million yen or less can carry back tax losses. This has now been expanded to include medium-sized companies with capital between 100 million yen and one billion yen*. The tax losses should arise in the fiscal years ending between February 1, 2020 and January 31, 2022.

* excludes subsidiaries of large companies with capital exceeding one billion yen

Telework investment incentives

Small and medium sized enterprises that made qualified telework-related investments can expense when incurred or claim a tax credit of 7% of the related investments (10% for companies with capital of 30 million yen or less).

Consumption Tax Return Filing Extensions

As a result of the 2020 tax reform, a corporation, which has been granted under approval the special measure for the extension of the corporate income tax return filing due date and has submitted a consumption tax extension notification, is permitted to extend the consumption tax return filing due date for one month. This is effective for companies with fiscal years ending on or after March 31, 2021.

Paper Invoices and Receipts

Unless the conditions listed below are satisfied, paper based invoices or receipts will still need to be kept in storage for at least seven years to comply with Japanese tax law requirements (maximum ten years to comply with Japan Company Law).

<Paper Invoices and receipts>

Many companies now scan vendor invoices and receipts.  If companies prefer to discard the paper invoices and receipts, an application to the tax office is required in addition to satisfying the primary conditions below: (1) invoices can be accepted/logged under the government specified ‘time stamp’ format; (2) each document can be ‘searched’ by using various parameters (e.g. date, amount, vendor name); (3) comply with deadlines as to the last day such documents can be converted to pdf; and (4) implementation of relevant internal controls.

Although some relaxation of these rules is anticipated in the future, currently it is difficult for SMEs to move completely away from paper.

<Invoices issued in pdf format>

When vendors issue invoices in pdf format, either one of the following conditions must be satisfied if the company wants to avoid storing paper invoices: (1) invoices can be accepted/logged under the government specified ‘time stamp’ format and cannot be further modified; (2) implementing internal regulations/procedures for the handling digital invoices; or (3) a cloud-based system which can prevent data modifications.

Payroll/Statutory Benefits

Social Insurance Rates

Effective March 2020, some of the Health and Nursing Care Insurance rates have changed. The current rates can be summarized as follows (The child benefits contribution rate has changed effective April 2020):

Employer Employee
Previous Current Previous Current
The Health Insurance Association
Health Insurance 4.950% 4.935% 4.950% 4.935%
Nursing Care Insurance 0.865% 0.895% 0.865% 0.895%
The Health Insurance Association
Health Insurance 4.955% 4.965% 4.955% 4.965%
Nursing Care Insurance 0.865% 0.895% 0.865% 0.895%
The Foreign Transportation & Finance Health Insurance Association Health Insurance 4.000% 4.100% 4.000% 4.100%
Nursing Care Insurance 0.560% 0.720% 0.560% 0.720%
Child Benefits Contribution 0.34% 0.36%


Leave of Absences

When an employee is infected by COVID-19 or the company suspends its business due to legal requirements or a request from the prefectural governors, the employer is not obligated to pay the absent worker a leave of absence because it is not considered as absence due to employer reasons under the Labor Standards Act, Article 26.

However, when an employer requests an employee to stay home until the disease name is confirmed for safety reasons, it is considered as absence due to employer reasons, and the employer is obligated to pay a leave allowance (60% or more of the average wage).

Can we reduce salaries if we are impacted by COVID-19?

Mr. Ichiro Otsuka, Attorney-at-Law
Tokyo Roppongi Law & Patent Offices

Recently, to reduce operating costs, employers have been asking employees to take temporary leave of absences and to accept pay reductions. However, can employers legally demand that their employees accept cuts their salary because of financial hardships resulting from the spread of COVID-19? Many lawyers have been approached about this topic.

In principle, employees ‘salaries cannot be reduced without the consent of the employee. The amount of salary is specified in the labor contract (i.e. employment contract) with the employee. Any reduction in compensation changes the labor contract. Therefore, a reduction cannot be made without the employee’s consent.

An employer usually proposes salary reduction and remunerations applicable to all employees, often including a higher reduction rate for officers and directors, in order to get a consensus among the employees.

Work rules also apply with regard to terms and conditions of employment. If the work rules include provisions regarding situations where a salary reduction is permitted, it will be possible to reduce the salary in accordance with the provisions. However, in actuality, there are few cases in which the work rules include such provisions.

Then the next question would be – is it possible to modify the work rules now to include these salary reduction provisions? In order to change the work rules, the employer needs to conduct a hearing and seek the opinions of the employees. However, the employees’ consent is unnecessary. Therefore, legally speaking, it is possible to change the work rules and reduce salary amounts.

However, employee work rule changes which are considered disadvantageous toward the employees may be invalidated under the Labor Contracts Act unless the changes are reasonable. A change is considered ‘reasonable’ if the employer informs the employees of the change in the work rules, and if the change in the work rules appear reasonable in light of the change in the working environment, the appropriateness of the changed contents, the status of negotiations with a labor union or the like, or any other circumstances which might pertain when work rules are modified. Therefore, changes to the work rules may not always be considered be valid.

In conclusion, it is safer to seek the consent of the employees before taking any action on reducing salaries.

Appointing an Employment & Labor Officer

An employer must take certain steps in accordance with the “Guidance for an employer to take an appropriate action regarding improvement, etc. in the management of foreign workers” (the “Guidance”). A company must appoint an “Employment and Labor Officer” to manage affairs regarding the improvement in the employment environment in accordance with the Guidance when a company employs ten or more foreigners.

There is an article about employment of foreigners under the News & Events section of our website (it can also be viewed through Administrator menu of the EPS). Please visit this article for related information.

Extension on Claims for Unpaid Wages

Effective April 1, 2020, the period to claim for unpaid wages has been extended to 3 years from the current two year period. As a result, the period to retroactively claim for overtime pay was also extended.

This period is to be reviewed five years after the enforcement and may be extended to five years to unify with claims other than unpaid wages claims after April 1, 2025.

OCA Invoices to Go Digital

Effective from our June 2020 sales invoices, we will be issuing our sales invoices in pdf format. The invoices will be emailed to our primary contact generally on the last working day of the month. If you prefer we send it to a different email address or require paper based invoices, please notify your in-charge as soon as possible. Please refer to an earlier section titled <invoices issued in pdf format> in “Paper Invoices and Receipts” for storage requirements.

Supporting COVID-19 Relief Efforts

To assist in the COVID-19 relief efforts, OCA donated a total of 1.9 million yen to the following organizations: Japanese Red Cross Society, Japanese Nursing Association, Tokyo Nursing Association, Peace Winds Japan.

OC & Associates K.K.
OC & Associates Tax Co.
OC & Associates HR Co.
Kioicho Building 17F
3-12 Kioicho Chiyoda-ku, Tokyo 102-0094
TEL +81-3 (5276) 0900


This newsletter is for private circulation only. Although care has been taken in the preparation of this document, contents have been highly summarized and it may contain errors and/or ambiguities for which we cannot be held responsible. If you are concerned about a specific issue, we recommend you seek professional advice. The material contained in this newsletter may not be reproduced in whole or in part by any means, without the permission of OC & Associates K.K., OC & Associates Tax Co. or OC & Associates HR Co.