Things to be checked at the time of tax investigations in Japan [Timing of recording sales/purchasing expenses, whether there are some period lags]

Normally, the fiscal years subject to tax investigations are the most recent three years.

The schedule is 2 days.

On the day of the tax investigation, they begin with a hearing about the company’s general situation, and then check the books and documents that are the basis for the bookkeeping, such as contracts, invoices, and pay slips.

I have experience in handling various tax investigations, and there are certain points that must be checked in every investigation.

This time, I will write about the things that are always checked during a tax investigation.

Timing of recording sales/purchasing expenses, whether there are some period lags

What are always checked during tax investigations are the timing of recording sales and purchasing expenses.

Regarding sales,

・Time when the product is delivered

・For services, the time when the provision of the service is completed

Sales shoukd be recorded in these timing above.

・Sales payment timing

・When the sales invoice is created

These cases are not alwas match the timing of recording sales.
(Although it may coincide with the recording period above)

Even if the amount is not determined at the time when sales should be recorded, the estimated amount must be recorded.
(The amount will be revised in the period when the amount will be determined)

Also, regarding purchasing expenses,

・Time when the product was delivered
(For items that are not sold immediately after purchase, they are recorded as inventory assets and become expenses when they are sold or disposed of)

・When the provision of the service is completed

We should record purchasing expenses in these timing above.

・When the deposit or advance payment are paid

・When the product/service price is paid

These cases are not alwas match the timing of recording expenses.
(Although it may coincide with the recording period above)

In tax investigations, they particularly check whether sales and purchase expenses before and after the fiscal year-end of each business year are recorded at the appropriate time.
(Even if there is a monthly lag in the timing of recording during the fiscal year, it will not be given as much importance as at the end of the fiscal year because there will be no change in caluculating income amount over the entire business year

Particularly if the sales or purchase amount is large around the end of the period, you need to be careful about the timing of recording.

In conclusion

This time, I have written about things that are always checked during tax investigations.

The standards for recording sales and purchasing expenses are not necessarily following timing such as

・Sales when payment is received

・Purchase expenses after payment

It is important to note that timing of recording them does not match the cash standard.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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