Tax and Accounting Law Fundamentals
This section covers tax and accounting law fundamentals. The exam tests corporate tax, consumption tax, withholding, tax procedure, and basic accounting recognition.
Core rules
- Corporate income tax is based on taxable income, which starts from accounting profit but adjusts for non-deductible expenses, reserves, and timing differences. Depreciation follows tax rules.
- Consumption tax is a multi-stage tax on sales; businesses credit input tax on purchases. Registration and invoice rules affect credits. Exports are generally zero-rated.
- Withholding applies to certain payments such as salaries, fees, and interest. Tax returns, payments, corrections, and administrative appeals follow the tax statutes.
- Accounting uses accrual, consistency, and prudence; revenue is recognized when control transfers or obligations are performed under applicable standards.
Worked example
A company sells goods for 1,100,000 yen including consumption tax and buys materials for 550,000 yen including tax. For consumption tax, it generally computes output tax on sales and deducts input tax on purchases, subject to invoice and record requirements. For corporate tax, it records revenue and expenses under accrual accounting, then adjusts for tax rules such as entertainment expenses.
Traps
Do not equate accounting profit with taxable income. Do not ignore invoice requirements for consumption tax credits. Do not overlook withholding obligations on cross-border payments. Do not mix tax payment deadlines with financial statement timing.