Tax Issues Relating to Go To Travel Campaign
Go To Travel is a discount campaign by the Japanese government that revives tourism demand and brings business back to tourism and other related enterprises in local regions. It also aims to promote the “safe and secure way of travel” in the age of COVID-19.
The details of this campaign are as follows.
・ Subsidies of up to 50% of domestic travel expenses for overnight trips (or one-day excursions) are provided by the Japanese government.
・ Of the discount, 70% is subsidized for travel expenses such as transportation and accommodation costs, and the remaining 30% is distributed in the form of common coupon tickets to be used at travel destinations.
・ The upper limit is ￥20,000 per person for overnight trips. (￥10,000 for one-day excursions)
・ Stays of up to seven nights per trip can be covered.
The travel from and to Tokyo is also eligible for the campaign, which is expected to boost the number of travelers despite concerns over the spread of coronavirus infection. In this News, we will mention tax issues relating to Japan’s Go To Travel campaign.
2. Go To Travel for business trips
(＊ Business trips booked on November 6 or later are not eligible for the campaign.)
Where employees apply the Go To Travel campaign to their business trips, there are two ways of settling their travel expenses: settling the actual cost after being discounted by the campaign, and settling the cost before being discounted by the campaign (the total travel cost).
① Consumption tax treatment
In either case mentioned above, the total travel cost is treated as domestic taxable purchase and deductible when filing consumption tax returns.
② Income tax treatment
Where companies pay the total travel cost to employees, there is an issue whether the difference between the total cost and the discounted cost (the actual cost) might be treated as taxable income for employees and subject to individual income tax. In such cases, the company needs to make sure whether the total travel cost is within the range of “normally necessary” expenses under the company’s expense policy.
3. Individual income taxation relating to Go To Travel
In cases where individuals use Go To Travel campaign, the difference between the total travel cost and the discounted cost is treated as occasional income and subject to individual income tax. However, due to the special deduction of ￥500,000 provided for occasional income, individuals are less likely to be taxed on the use of Go To Travel.
Although the use of Go To Travel for business trips are restricted on or after November 6, accounting administrators should be careful of the tax treatments of travel expenses before November 6 as mentioned above and keep an eye on the updated news about the campaign.
Ministry of Land, Infrastructure, Transport, and Tourism “Summary of Go To Travel Program”
Accessed on November 30, 2020
Ministry of Land, Infrastructure, Transport, and Tourism “Go To Travel Program Q&A (as of November 27, 2020)”
Accessed on November 30, 2020
Zeimutsushin No.3624 Tax Trend “Go To Travel Consumption tax issues: The total travel cost is treated as domestic taxable purchase.”
Zeimutsushin No.3629 Tax Trend “Go To Travel Income tax treatment: The payback of the total travel cost is not taxed as employment income.”