Preparing books of account in English may seem convenient for self-employed foreign companies operating in Japan and primarily using English. However, several important points must be considered when filing taxes and performing day-to-day accounting tasks. This article will discuss whether it is possible to prepare books of account in English, the language requirements for tax reporting, and how to operate efficiently.
Language Requirements for Official Documents
Legally, it is possible to prepare accounting documents in English, as there is no set language.
However, official documents to be submitted to the Japanese tax office (e.g., tax returns and financial statements) must, in principle, be prepared in Japanese. Alternatively, they must be translated and submitted as necessary. This requirement is to make it easier for the tax office to examine the documents, and in this sense, English-only submissions are not permitted. Therefore, it is important to understand that official submission documents must be prepared approximately in Japanese.
Even though the law does not strictly stipulate it, when communicating with the tax authorities, you will be asked to submit materials translated into Japanese for non-Japanese texts.
It is quite a hassle for sole proprietors and small to medium-sized enterprises to do this step-by-step translation work. It would be more straightforward to prepare the documents in Japanese from the beginning.
Unification of tax and accounting documents
In Japan, it is common practice to maintain tax reporting documents and accounting documents in a unified manner.
Internal business management documents are not included in this scope since they are not submitted to the tax office. However, it is common practice to prepare books of account according to tax regulations rather than accounting rules.
This may be a different policy from that of other countries.
Separating Accounting books from tax ones is prohibited. Duplicate books of accounts should be avoided, and you need a single set of books. Even if the figures are the same, the misleading treatment of double ledgers is inefficient, as it requires more time and effort to manage and translate.
Cost and efficiency of verbatim translation
The reason for unifying the accounts in Japanese is that the accounts are defined in Japanese.
Even if one were to assume that the final accounts would be corrected into Japanese, it would be time-consuming and costly to translate every entry into Japanese from the books of accounts prepared in English. In particular, hiring a professional translator to provide accurate translations for submission to the tax office may be necessary. If this piles up, the overall cost of accounting operations may increase. Therefore, preparing books of accounts in Japanese is more cost-effective and efficient in the long run.
Utilizing Web Translation
One way to keep costs down while still being able to translate as needed is to utilize web-based translation tools. These tools allow quicker turnaround and lower costs when translations are urgently needed.
Freee, which we use at our firm, is a web-based software, so it can be shown via Google Translate, etc.
Sometimes, we are told that this makes it difficult to see. In this case, we also provide a service to translate accounts’ financial statements into Google Spreadsheets or something similar. This is only a supplementary service.
Translation provided as needed.
Financial statements with translated accounts may be provided as needed for companies with international operations, foreign investors, etc. Such a response will provide sufficient information to English-speaking stakeholders, but this is only a supplementary response, and the basic rule is that all official tax-related submissions should be in Japanese.
Summary
While books of account can be prepared in English, official tax filings must be made in Japanese. Tax and accounting documents should be maintained in a unified manner, and consistent books of accounts in Japanese are more efficient to avoid double bookkeeping.
Considering the reduction of translation costs and improvement of operational efficiency, it is recommended to respond in the form of providing English translations as necessary to meet international.
