Importance of understanding the tax law in oversea trading

Overseas trading has two kinds – foreign trade based in Japan and doing business itself based in foreign countries.

When doing overseas trading based in Japan, there are following three types.

Trading such as import, using rights in the overseas, or buying services and products like overseas incentive trip or business trip abroad

② Japan to overseas

Trading such as export, selling products and services (including the ownership rights) to overseas

③ Overseas to overseas

Trading that is selling the products and services of foreign to other foreign countries.

In case of the company based in Japan, taxation is completed by corporate tax in Japan even if the company earns a lot in overseas trading.

However, if it is treated as income acquired in overseas, taxation in that area will occur.

Although Tax Treatment of each transaction depends on the tax treaty and country, we have set the handling for each type of income in the OECD Model Convention.

As high-frequency, real estate rental income, real estate sales income, dividend income, interest income, and royalty income are the subject of separate tax.

In those tax treatments applied to overseas trading, for the adjustment of foreign tax law and domestic law, tax treaties have been concluded in some cases.

It is possible that by grasping those knowledge in advance, companies can prevent the excessive payments to overseas or thin income from overseas.

We offer tax outsourcing service and advice on overseas trading as well for companies doing international trade.

If you need consultation about the tax treatment of transactions with foreign countries, please feel free to contact us.