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Possible to be an employee of a company & have your own biz to offset high taxes?

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  • Possible to be an employee of a company & have your own biz to offset high taxes?

    Is it possible to be a regular employee of a Japanese company and have your own business to offset the high income tax from the regular job?


    I don't think this is possible is it? You can't claim expenses from your private biz to offset the high taxes on your regular job can you?

    Any other workarounds?

  • #2
    If you have a job you cannot claim expenses against taxes under the c (self-employed) system. You'd probably have to form a kabushiki-gaisha (Ltd. Company), though I'm speculating, as I don't know the specifics.

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    • #3
      Originally posted by Effected After View Post
      If you have a job you cannot claim expenses against taxes under the c (self-employed) system. You'd probably have to form a kabushiki-gaisha (Ltd. Company), though I'm speculating, as I don't know the specifics.
      can you clarify things here for our better understanding?
      do you mean no tax claim on his regular job, or no tax claim on the new business, or either of them?

      actually i'm having similar thought myself. but in my case, its not realy to offset tax on my regular income but ensure that i can get deductible tax deducted from my side business.

      currently i'm employed in a japanese company, but planning a small startup. i dont plan to leave my job immediately untill the startup goes well - thus interested on this.
      Last edited by ddj50; 2012-08-08, 05:10 PM.

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      • #4
        Originally posted by ddj50 View Post
        can you clarify things here for our better understanding?
        do you mean no tax claim on his regular job, or no tax claim on the new business, or either of them?
        In Japan, you can register as being self-employed. If you do this, you are on a completely different tax system from employees. You can claim expenses against income. Employees are not eligible to register as self-employed however. My comments above were in reference to this system.

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        • #5
          Originally posted by Japan 9.0 View Post
          I don't think this is possible is it? You can't claim expenses from your private biz to offset the high taxes on your regular job can you?

          Any other workarounds?
          You can only claim the expenses if you actually spent the money to promote your business, eg met customers attended meetings and created sales. If you are teaching privates you can claim expenses, transport, text books, rent etc as business expenses. Simply making up numbers out of thin air without actually creating revenue is fraudulent.

          You have to think of you as being you the individual (employee) and you the company (business operator) which are completely separate. You can not claim expenses on one to lower the taxes on another (your employer may deduct against his taxes though as a company expense.

          As an employee you are charged higher taxes but effectively you can not reduce this tax rate simply by starting up a business.

          Comment


          • #6
            Originally posted by KansaiBen View Post
            You can only claim the expenses if you actually spent the money to promote your business, eg met customers attended meetings and created sales. If you are teaching privates you can claim expenses, transport, text books, rent etc as business expenses. Simply making up numbers out of thin air without actually creating revenue is fraudulent.
            I find this bit confusing and contradictory.

            The statement "You can only claim the expenses if you actually spent the money to promote your business, eg met customers attended meetings and created sales." is not correct. You can claim ALL expenses incurred by the business whether they are promotional expenses, running expenses, depreciation of capital equipment, consumables, utilities, land tax, rent or whatever else.

            This is supported by the next statement "If you are teaching privates you can claim expenses, transport, text books, rent etc as business expenses." which contradicts the previous sentence.

            However, the third statement, "Simply making up numbers out of thin air without actually creating revenue is fraudulent." muddies the waters again. It is not important that the expenditure "actually creates revenue". It is only necessary that it is a legitimate expense incurred by the business.

            It is correct to say that you need to keep receipts so you can show that the expenses were legitimate and actually incurred. I have found the tax office to be very accommodating insofar as the range of expenses that can be included is concerned. They do scrutinise and are not stupid though, so I agree that one shouldn't invent spurious expenses or exaggerate genuine ones.

            Comment


            • #7
              Originally posted by Brown Cow View Post
              I find this bit confusing and contradictory.
              Welcome to the world of KansaiBen. Do yourself a favor and just skip his input.

              Comment


              • #8
                Originally posted by Brown Cow View Post
                I find this bit confusing and contradictory.

                The statement "You can only claim the expenses if you actually spent the money to promote your business, eg met customers attended meetings and created sales." is not correct. You can claim ALL expenses incurred by the business whether they are promotional expenses, running expenses, depreciation of capital equipment, consumables, utilities, land tax, rent or whatever else.
                So effectively if you are self employed and spend money as a legitimate business expense then its claimable against tax. I was only using the example of someone teaching privates. If I have a room at home as an office I can legitimately deduct rent, capital costs, interest etc as a tax expense. I doesnt mean I can use it to reduce payroll taxes at my day job.


                However, the third statement, "Simply making up numbers out of thin air without actually creating revenue is fraudulent." muddies the waters again. It is not important that the expenditure "actually creates revenue". It is only necessary that it is a legitimate expense incurred by the business.

                The goal of most businesses is to make money and be profitable (which attracts taxation) . Most businesses try to deduct costs so they can reduce taxation on "profits". Legally you could be bleeding red ink charge all your expenses on your business and have zero revenue. Immigration will question if you are claiming you spent money on rent and inventory when you didnt. and have zero revenue on the income side.

                It is correct to say that you need to keep receipts so you can show that the expenses were legitimate and actually incurred. I have found the tax office to be very accommodating insofar as the range of expenses that can be included is concerned. They do scrutinise and are not stupid though, so I agree that one shouldn't invent spurious expenses or exaggerate genuine ones.
                Thats what I was getting at. Tax avoidance is legal. Tax evasion is NOT.
                Last edited by KansaiBen; 2012-08-08, 10:33 PM.

                Comment


                • #9
                  Originally posted by Shakes Spear View Post
                  Welcome to the world of KansaiBen. Do yourself a favor and just skip his input.

                  I have been a landlord for the last 15 years. I (or my accountant does) deduct all my legitimate expenses against rent and pay zero tax on my rental income. I can not use it to affect my teaching income/taxation as an employee. Tax office has to be satisfied the expense is a LEGITIMATE expense. Trips to Bali and erotic massages usually don't count.

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                  • #10
                    Originally posted by KansaiBen View Post
                    I have been a landlord for the last 15 years. I (or my accountant does) deduct all my legitimate expenses against rent and pay zero tax on my rental income. I can not use it to affect my teaching income/taxation as an employee. Tax office has to be satisfied the expense is a LEGITIMATE expense. Trips to Bali and erotic massages usually don't count.
                    Zero tax eh? Can't be much of an earner. The higher my tax bill is, the happier I am.

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                    • #11
                      Originally posted by Brown Cow View Post
                      Zero tax eh? Can't be much of an earner. The higher my tax bill is, the happier I am.
                      Cant be much of a business if you are actually paying tax on your profits. How do you think Mitt Romney only pays 14% tax while his secretary pays double that? He hasnt drawn a regular paycheck in 20 years.

                      Most people post a book loss so they dont have to pay out of pocket taxes, even if they are actually making money.

                      What expenses etc do is cancel out your tax liability on any profits you might make. Last year my rental income was about 20 grand.

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                      • #12
                        The only way you can get around ofsetting tax paid by the company is if you register your own company and then contract yourself out to them. You can prove this by invoicing them. Note, a friend of mine tried that and the company told him to F-Off and he ended up loosing his job. If you are in the teaching field, forget about it. You will blacklist yourself, the company will see you as a competitor trying to steal their customers.

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                        • #13
                          Originally posted by KansaiBen View Post
                          What expenses etc do is cancel out your tax liability on any profits you might make. Last year my rental income was about 20 grand.
                          I'm starting to see what Shake Spear meant. You seem to have profit and income confused. So, your gross income was 20,000 (Aus dollars? Shekels? Yen?) but your expenses were equal or almost equal to that so your profit was nil or almost nil so you didn't have to pay any tax on it.

                          If you set up a company and pay yourself a salary to avoid any corporate tax that is fine, but you still have to pay your income tax like any other employee.

                          The potential tax advantage of being self employed comes from the fact that as a business owner you can claim a much wider range of things as expenses but as you correctly noted earlier, it isn't legal or sensible to over egg the pudding too much. People like Mitt Romney have much more complex empires, battalions of lawyers and accountants plus a tax system designed to let the richest off. Ordinary folk and small businesses don't have any of that going for us. If you want to stay honest and you are making money then you will actually have to pay tax. That's how it works. You might not have to pay quite as much as an employee does earning the same salary as your profit but it is not a question of avoiding tax altogether.

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                          • #14
                            Originally posted by Brown Cow View Post
                            I'm starting to see what Shake Spear meant. You seem to have profit and income confused. So, your gross income was 20,000 (Aus dollars? Shekels? Yen?) but your expenses were equal or almost equal to that so your profit was nil or almost nil so you didn't have to pay any tax on it.
                            Its not actually called income but revenue.

                            iF you make $20,000 in revenue then the tax department will levy taxation on it. It doesnt mean you end up paying anything. If you clain depreciation, maintenance, legal and accountants fees as deductible expenses then you can minimise the tax you pay. If you claim a book loss you can actually get a refund.



                            If you set up a company and pay yourself a salary to avoid any corporate tax that is fine, but you still have to pay your income tax like any other employee.
                            If you set up a company you are not an employee you are a business owner. in most salaried jobs you are taxed first and live on whats left. In owning a business you pay all your expenses and are taxed on whats left. Try paying yourself an income first before paying all your outgoings and you will soon run your business into the ground.

                            If you want to stay honest and you are making money then you will actually have to pay tax. That's how it works. You might not have to pay quite as much as an employee does earning the same salary as your profit but it is not a question of avoiding tax altogether.
                            I havent paid a cent in income tax on my investments in the last fifteen years and its quite legal. In the meantime my propert appreciates in value. You can do that with real estate.

                            What Mitt Romney does is shift money around from his investments, launders it through different businesses and doesnt pay tax on any money he earns. the 14% on his income is only the income we know about. The stuff socked away in the Caymans and Switzerland does not attract taxation in the US.

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                            • #15
                              I fear you are very confused. I'll try one more time. If your allowable expenses are equal to your revenue/gross income (call it what you like) then yes you pay no income tax. The reason for that is that you haven't made any money. Everything you have received has gone back out again in expenses.

                              You might though be generating a capital gain because the value of the property is rising. In most countries that will attract capital gains tax when you realise the gain. It can still be a great earner and has been so in many countries until about 4 years ago. I hear Australia is an exception to that and property prices haven't collapsed as they have elsewhere.

                              There there is a difference between being self employed and the owner of a business on the one hand and being the owner of a registered company engaged in a business on the other. You can be either and if you choose the latter then you can pay yourself a salary and expenses commensurate with what the company can afford. Thus you can ensure the company has no taxable profit. There are other considerations but it is late ......

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