Specified Expense Deduction
1. What is specified expense deduction?
Employment income earners, so called business-persons, seem to be forced to have a certain amount of expenditures in the course of their work. Under the Japanese Income Tax Law, these expenditures are deductible as ‘employment income deduction’ when calculating the tax base of individual income tax. The ‘employment income deduction’ is a standard amount of deduction estimating employees’ approximate expenditures of the year.
‘Specified expense deduction’ is a rule allowing an additional deduction if the amount of specified expenses of the year exceeds 1/2 of employment income deduction (the qualified base amount).
2. Requirements for specified expense deduction
(1) The amount of specified expenses
If the amount of specified expenses exceeds 1/2 of employment income deduction (the qualified base amount), the excess amount is deductible in addition to the employment income deduction.
The amount of employment income deduction is as follows:
As for 2015, in the case of employment income exceeding JPY15,000,000, the qualified base amount is a flat amount of JPY1,250,000.
(2)Limitation to work-related expenses
All specified expenses should be limited to ‘work-related’ expenses. For application of this rule, you are required to attach evidence such as receipts, documents or the salary-payer’s certificates to your income tax returns and other related documents.
3. Items of specified expenses
Specified expenses are as follows:
① Certain expenses for commuting
② Certain expenses for transfer such as train fare, hotel charge,
transportation cost of household goods
③ Certain expenses for training directly necessary for business
④ Certain expenses for obtaining qualifications directly necessary for business
⑤ Certain expenses for going back home for employees living apart from
family for business
⑥ Work-related expenses such as book purchase costs, clothing costs,
entertainment and other related expenses (JPY650,000, the maximum
(1) Commuting expenses
Q. I use my car for commuting. Are the below expenditures qualified as specified
-Automobile inspection cost
-Purchase of car-navigation system
A. Reasonably necessary commuting expenses as typical commuters are qualified
as specified expenses. Thus, gasoline, expressway tolls, and automobile
inspection costs are included into specified expenses. On the other hand,
irregular costs such as motor vehicle weight tax, mandatory automobile liability
insurance premiums, revenue stamps, and car navigation system upgrading the
quality of automobiles, are not included. Also, parking fees are not included into
specified expenses because they are not means of transportation.
(2) Expenses obtaining qualifications
Q. I go to a technical school to obtain some qualifications necessary for business. I
recently took a qualification exam, but unfortunately I could not pass it. In this
case, how are the fees for the technical school treated?
A. Passing qualification exams is not a prerequisite for specified expenses. So if the
salary-payer gives you a certificate that the qualification is directly necessary
for business, such school tuitions are qualified as specified expenses.
(3) Necessary expenses for work・Book purchase costs
Q. I subscribe a digital newspaper. Is it qualified as specified expenses?
A. Book purchase costs qualified for specified expenses are books, newspapers,
magazines, and other periodicals certified as directly necessary for business by
the salary-payer. Thus, if your employer certifies the digital subscription is
necessary for your business, it is qualified as specified expenses.
(4)Necessary expenses for work・Clothing costs
Q. There is no dress-code in my company, so I wear my casual clothes at work. In
this case, how are my shirts and jeans I wear at work treated?
A. The clothing costs qualified as specified expenses are uniforms, office wears, or
any other wears certified as directly necessary for business by the salary-payer.
Purchases of shirts and jeans do not seem to be necessarily required on
business and so they are not qualified as specified expenses.
(5) Necessary expenses for work・Entertainment expenses and others
Q. What exactly are entertainment expenses qualified as specified expenses?
A. Entertainment expenses qualified as specified expenses are entertainment
expenses, social expenses, and any other related expenses certified as directly
necessary for business by the salary-payer.
(Note) If an employee spends some money on business entertainment, he/she usually requests his/her company to reimburse it, and it turs out to be his/her company’s expense. So it is rare that the salary-payer certifies additional entertainment expenses as specified expenses for his/her employees.
Please note that this News only introduces general outlines of the content and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
●The National Tax Agency (Information) Overview of Special Treatment of Employment Income Earners’ Specified Expense Deduction in Individual Income Tax on or after 2013
Accessed on February 15, 2016