Spring Newsletter (No. 33) as of



Japan’s Modified International Standards

On June 30, 2015, the Accounting Standards Board of Japan (ASBJ) announced Japan’s modified international standards (JMIS) in response to Japanese companies which had difficulty implementing International Financial Reporting Standards (IFRS) as is. Currently, there are four accounting standards which are permitted in the Japanese capital market: Japanese GAAP, US GAAP, IFRS and JMIS.

On April 11, 2017, ASBJ announced amendments to JMIS. In this round, the ASBJ undertook an endorsement process on the Standards issued by the International Accounting Standards Board (IASB) from January 1, 2014 to September 30, 2016, which go into effect by December 31, 2017. There were no items which were superseded or amended through this endorsement process. The amended JMIS are effective from the consolidated fiscal year beginning on or after April 11, 2017.

As of May 2017, the number of listed companies who have implemented and/or decided to implement IFRS increased to 144, but there are no listed companies who have implemented or have announced implementation of JMIS yet.


2017 Tax Reform

Spousal deduction

The cap of spouse’s annual salary for a taxpayer to claim a spousal deduction will increase from 1.03 million yen to 1.5 million yen from 2018. The deductible amount will gradually decrease if a taxpayer earns an annual salary of more than 11.2 million yen. A taxpayer who earns an annual salary of more than 12.2 million yen will not qualify for any spousal deductions.

Directors’ compensation

The scope as to what can be considered deductible director’s compensation will expand as follows:

(1) Net pay salary
Net pay after withholding taxes and social insurance premiums will also be considered as fixed monthly salary.

(2) Pre-determined compensation
Compensation on which a pre-determined number of shares or stock options are issued during a designatedperiod will be added to the scope. However, certain restricted stock plans for which the number of cancelled shares is based on profit or certain relative indicators will not be deductible.

(3) Performance-linked compensation
Compensation based on revenue, stock market prices or other indicators covering multiple years will be deductible. Compensation paid by a family-owned company which is in a fully controlled relationship with an unrelated company will be treated as deductible compensation.

(4) Profit-linked severance payment
For profit-linked severance payments that do not satisfy the deduction requirements, the entire amount will be considered non-deductible.

(1) and (3) above will be effective for resolutions for payment or issue on or after April 1, 2017, and (2) and (4) will be effective for resolutions for payment or issue on or after October 1, 2017.

Transfer Pricing Documentation

Under the 2016 tax reform, a member of a multinational enterprise with consolidated revenue of 100 billion yen or more, is required to submit (i) Report by Country (Country-by-Country report) and (ii) Statement of Business (Master file). In addition, a Notification for Ultimate Parent Entity is required to be submitted to the national tax authorities via the online tax filing system “e-Tax” by the last day of the ultimate parent entity’s fiscal year.

Use of e-Tax and eLTAX

The Japanese National Tax Agency and local tax offices highly recommend implementation of e-Tax and eLTAX to accelerate the procedures for national and local tax affairs. These paperless online systems enable more efficient tax fillings, timelier payments and submissions of various notifications. We will start to implementation of e-Tax and eLTAX for your tax filings gradually. Your in-charge will provide details at the appropriate time.


Update on Social Insurance Rates

Effective March/April 2017, some of the insurance rates have changed and the current rates are summarized as follows:

Employer Employee
Before Current Before Current
The Health Insurance Association
Health Insurance 4.980% 4.955% 4.980% 4.955%
Care Insurance 0.790% 0.825% 0.790% 0.825%
The Health Insurance Association
Health Insurance 4.985% 4.965% 4.985% 4.965%
Care Insurance 0.790% 0.825% 0.790% 0.825%
The Foreign Transportation Finance
Health Insurance Association
Health Insurance 3.900% 3.900% 3.900% 3.900%
Care Insurance 0.490% 0.500% 0.490% 0.500%
Welfare Pension Insurance 9.091% 9.091% 9.091% 9.091%
Children Welfare Contribution 0.20% 0.23%
Workers’ Compensation Insurance 0.30% 0.30%
Employment Insurance 0.70% 0.60% 0.40% 0.30%
Asbestos Fund 0.02% 0.02%


Social Insurance Enrollment Conditions for Part-Time Employees

From October 2016, part-time employees working at large companies with more than 500 employees are required to participate in the social insurance program when all of the following conditions are satisfied:

(i) Working hours exceeds 20 hours/week
(ii) Monthly gross wage is 88,000 yen or more
(iii) Employment term is expected to be longer than one year
(iv) Not a student

In addition, from April 1, 2017, part-time employees working at companies with 500 employees or less are eligible to enroll in the social insurance program if there is an agreement between the employer and a majority of the employees.

Shorter terms for Japanese Pension

From August 2017, individuals may be eligible for Japanese pension if they have 10 years or more of valid coverage periods, instead of 25 years. The valid coverage period includes the period contributions were made to the Japanese public pension system, the period as a member of mutual aid systems, and the period residing outside of Japan for Japanese nationality.

Also, it is possible to combine the home and visiting country pension systems if the countries signed a social security totalization agreement. Application for pension and/or confirmations of the pension period is available from outside of Japan. For details, please access the Japanese pension system website.

Japan Pension Service Leaflet (PDF)

The Amended Act on the Protection of Personal Information

The Amended Act on the Protection of Personal Information has become fully effective May 30, 2017. This is the first amendment in over 10 years since the Act was implemented.

The Act included a de minimis exemption for small companies (handling 5,000 personal information or less), but the Amended Act removed the de minimis exemption.

Companies will need to review their internal policies and procedures as they may need revisions. Also you must:

(i) specify as precise as possible the purpose of use of the information before you acquire the personal information.
(ii) not use the personal information other than the purpose stated.
(iii) must manage the acquired personal information securely.
(iv) must obtain a consent from the person if you provide the personal information to third parties.
(v) must disclose the personal information to the person if he/she requests to disclose the personal information.

Please refer to our website below for our “Basic Policy on Proper Handling of Personal Information.” The English version will be ready by the end of June.

OC & Associates Privacy Policy

Excessive Overtime and Mental Health

Recently, there has been a lot of media on some high profile companies for its employees working long hours and not getting paid overtime. The government announced an increased number of suicides due to physical disorders related to work. On January 20th, 2017, “Employer Guideline on work hours” was released by the Japanese Ministry of Health, Labour and Welfare. Some of the key points are as follows:

(1) Monitoring working hours

Employers have an obligation to record and monitor work time for all employees on a daily basis. Work hours can be logged by a time card or chip card, or even based on the operating time of personal computers.

(2) 36 agreements (Labor Standards Law, Chapter 36)

On occasion, if the employees are expected to work more than 40 hours (statutory limit) per week, “36”agreements should be executed between the employees and management and submitted to the relevant Labor Standards Supervision Office. The reasons for overtime or work on holidays, scope of work, number or employees, amount of overtime hours in a day, overtime hours for a certain period of time, and which holidays should be described in detail. Although these agreements can be easily renewed, a document to claim there were no objections from the employees (or employee representative) must be filed annually.

(3) “Stresschecks”

Starting December 2015, annual “Stresschecks” are now required for companies with 50 full-time employees or more employed. Employers should have a means for employees to obtain consulting, training and information to promote mental well being. Employers with fewer than 50 employees should also make efforts in the above.

OC & Associates HR Co.

We are happy to announce the establishment of OC & Associates HR Co., a professional corporation formed by our certified social insurance and labor consultant. This is to allow more timely and efficient electronic social insurance procedures and to deal with a diverse and increasingly complex HR matters. Hiroko Hanato is the founding partner.

We will need to amend our engagement letter to include OC & Associates HR Co. as a contracting party for clients we are providing payroll outsourcing services. Our engagement partner or director will be approaching such companies within the coming months. Your understanding is appreciated.


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. or OC & Associates Tax Co.