How are tax investigation conducted in Japan?
An investigation in which a tax agency checks a taxpayer’s declaration to see if it is correct and seeks correction if it is incorrect.
Tax investigation has two types such as voluntary investigation and forced investigation. Voluntary investigation shall be under taken by tax officer with the agreement of tax payer in accordance with General Law of National Taxes.On the other hand, when fraud or tax evasion are suspected, tax officer investigates without the agreement of tax payer.
The tax investigator undergoes proper investigation in accordance with certain processes. ; they investigate the tax payer’s office, their customers and bank transactions of tax payers. Through the tax investigation, they clarify the tax payer’s transactions in terms of cash flow, sales, stocks, and expenses. The targets of tax investigation are determined based on industry and financial performance. In response to the size of the company, the tax office tends to decide how many days (from a few days to several months) and how often (from every year to each few years) they investigate the company.
As a general rule, tax payers are bound to accept tax investigation. However, certified tax accountant is allowed to attend the investigation on behalf of the client. In case doubt or error are found on the tax return, tax payers have to file the revised tax return to tax office before the deadline or scheduled payment and settle the balance between the former tax and the revised tax with additional tax including penalty taxes.