Allowance - Commuting, housing, family and lunch.

If you hired worker after you set up business in Japan, you might noticed unfamiliar customs in payment. Many kinds of allowance were common in Japan. Its origin may be speculated in history. When companies decided to make payroll systems, many referred with the Government Officials Act and allowance was written there in detail.
Since most of workers are subjected to be taxed as withholding at source, allowance exempt from taxation is favored. You could pay more legally and employee could receive an extra without paying tax.

commuting with a bullet trainCommuting - Commuter pass for trains and buses are tax-free unless it exceeds 100,000 yen a month. Most Japanese companies pay it for their employees and workers expect it is free. To be surprised, some of Japanese are taking advantage of it and taking Shinkansen, a bullet train, weekday. For example, Mishima is a city located in east Shizuoka prefecture, about 100km west of Tokyo but it takes only 44 minutes to Tokyo station with the train. They can afford a house with a garden and enjoy good consumer price that is relatively cheaper with average time spent in commuting. Some says it is even better because they can take a sheet in the train that is very difficult in rush hours when they take a train in suburban area.

Business trip - Travel expense is tax-free in most country and Japan too. Tickets for transportation and hotel charges are easy to understand that it is exemption but how about meals? The low says "Something usually necessary for the purpose". You would take meals even you didn't take a business trip. That means if a company pays for you, it is income subjected to taxation. Salarymen are cleverer and invites customers for lunch and dinner. Then it becomes social expense. ( in certain amount. )
If the company have rules of employment and trip allowance is defined with reasonable amount, it can be processed not income for workers but expense in law. In this case, officials think one would not go out for supper and have it at home if he or she did not take the business trip. Many companies uses that rule to reduce calculating trip expenses for business trips.

Housing - Although there is some limitation, a part of housing allowance is also tax-free. If your employee pays more than 50% of law set housing cost, the rest of fee is tax exempt. You should discuss with your tax accountant in detail but it may be a good beneficial for your company.

Lunch and meal - Small amount but there exist tax-free lunch allowance as well. Surprisingly, an expense of a meal for over time is fully tax exempt.

Executives may not be interested in allowance. Having well established rules of employment is a good index of company reputation. After your Japanese subsidiary becomes a certain size, you should check it to raise motivation of average workers.

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