Business income refers to income from sales activities, including wholesaling, retailing, manufacturing, services, and other operations where income is derived from business activities. This category also includes income earned by professionals such as doctors, lawyers, writers, actors, and those involved in fishing or similar enterprises.
Please note that income derived from leasing land, buildings, etc., is classified as “Real Estate Income.”
The amount of business income is calculated by subtracting necessary expenses from total earnings for the fiscal year, which runs from April 1 to March 31. Necessary expenses include the cost of sales, selling and general expenses, and other costs essential to generating the above income. Examples of such expenses are rent for buildings used for business purposes, utilities, and communication expenses required for business operations. Please note that supporting documents are required to include these expenses as necessary costs.
Tax on business income is calculated by combining it with other qualified income and applying a rate based on the total amount.
Q&A
Q: I’m from the UK and considered a non-resident for tax purposes in Japan. I run a B&B in Nagano, Japan, and have some employees there. Do I need to file a final individual tax report in Japan?
A: Non-residents with a Permanent Establishment (PE) who earn income from that PE are required to file a final tax report in Japan. Since you have employees and provide services to guests, such as breakfast, this income is classified as Business Income, not Real Estate Income.
Here is the link to the article about residency status.
If you have any questions, please feel free to reach out.
For more information about the prices of the services we offer, please refer to this article.
