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Why Grant Thornton
Whether you’re growing in one market or many, looking to operate more effectively, managing risk and regulation, or realising stakeholder value, our firms can help.
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Culture and experience
Grant Thornton’s culture is one of our most valuable assets and has steered us in the right direction for more than 100 years.
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Global scale and capability
Beyond global scale, we embrace what makes each market unique, local understanding on a global scale.
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Join our network
In a world that wants more options for high quality services, we differentiate in the market to grow sustainably in today’s rapidly changing environment.
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Leadership governance and quality
Grant Thornton International Ltd acts as the coordinating entity for member firms in the network with a focus on areas such as strategy, risk, quality monitoring and brand.
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Africa
24 member firms supporting your business.
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Americas
31 member firms, covering 44 markets and over 20,000 people.
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Asia-Pacific
19 member firms with nearly 25,000 people to support you.
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Europe
53 member firms supporting your business.
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Middle East
8 member firms supporting your business.
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Business consulting services
Our business consulting services can help you improve your operational performance and productivity, adding value throughout your growth life cycle.
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Business process solutions
We can help you identify, understand and manage potential risks to safeguard your business and comply with regulatory requirements.
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Business risk services
The relationship between a company and its auditor has changed. Organisations must understand and manage risk and seek an appropriate balance between risk and opportunities.
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Cybersecurity
As organisations become increasingly dependent on digital technology, the opportunities for cyber criminals continue to grow.
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Forensic and investigation services
At Grant Thornton, we have a wealth of knowledge in forensic services and can support you with issues such as dispute resolution, fraud and insurance claims.
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Mergers and acquisitions
We work with entrepreneurial businesses in the mid-market to help them assess the true commercial potential of their planned acquisition and understand how the purchase might serve their longer-term strategic goals.
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Recovery and reorganisation
Workable solutions to maximise your value and deliver sustainable recovery.
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Transactional advisory services
We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
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Valuations
We provide a wide range of services to recovery and reorganisation professionals, companies and their stakeholders.
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IFRS
At Grant Thornton, our IFRS advisers can help you navigate the complexity of financial reporting from IFRS 1 to IFRS 17 and IAS 1 to IAS 41.
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Audit quality monitoring
Having a robust process of quality control is one of the most effective ways to guarantee we deliver high-quality services to our clients.
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Global audit technology
We apply our global audit methodology through an integrated set of software tools known as the Voyager suite.
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Corporate and business tax
Our trusted teams can prepare corporate tax files and ruling requests, support you with deferrals, accounting procedures and legitimate tax benefits.
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Direct international tax
Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
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Global mobility services
Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties.
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Indirect international tax
Using our finely tuned local knowledge, teams from our global organisation of member firms help you understand and comply with often complex and time-consuming regulations.
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Transfer pricing
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
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Outsourcing Changes to the Outsourcing legislation, specifically when offshoringSignificant changes to the dynamic of the financial services sector in recent years have shifted the paradigms in how we work. The increased digitisation of the workforce, changes in business models, globalisation, and remote working capabilities have led to a new approach to the delivery of services.
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Banking Holding banking to account: the real diversity and inclusion pictureWe explore how the banking sector can continue to attract, retain and nurture women to build a more diverse and inclusive future.
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Sustainability From voluntary to mandatory ESG: How banks can future-proof their operationsAs we move from voluntary ESG initiatives to mandatory legislation, we explore what the banking sector needs to prioritise.
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IFRS IFRS 9 - Audit of Expected Credit LossesGPPC releases The Auditor’s response to the risks of material misstatement posed by estimates of expected credit losses under IFRS 9
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growthiQ Steering your company to long-term successHistory has something important to tell us about the difficulties of steering a business to long-term success – through seismic shifts in technology, consumer demands and product development. With that in mind it’s unsurprising that over half the world’s largest companies in the early 1900s had shut their doors by the late 1990s. Some, however, have endured.
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Infographic Grow workforce loyalty during the Great ResignationEmployers must work harder than ever to grow workforce loyalty and meet the increasing demands for a purpose-led organisation.
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Article Climate change: planning for mandatory TCFD reportingTFCD reporting requirements are becoming mandatory. Here’s how retailers can get ready for reporting on climate change.
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Women in Business The power of diversity: can life sciences maintain their lead?Our Women in Business 2022 report shows that life sciences companies – in line with other mid-market businesses – are taking deliberate, necessary action to create more inclusive working practices and giving female talent access to senior positions in greater numbers than ever before.
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Women in Business The power of diversity: can life sciences maintain their lead?Our Women in Business 2022 report shows that life sciences companies – in line with other mid-market businesses – are taking deliberate, necessary action to create more inclusive working practices and giving female talent access to senior positions in greater numbers than ever before.
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Financial reporting advisory The rise of the Special Purpose Acquisition Company (SPAC)While we are seeing a rise in activity for Special Purpose Acquisition Companies, what is a SPAC and what do you need to consider before entering into one?
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Private equity firms Private equity in the mid-market: reshaping strategies for 2021When the global COVID-19 pandemic stormed across the globe in early 2020, the private equity sector was hit hard but deals are coming back to the market.
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Article Time to review funding and financing arrangements?What does the funding landscape look like for public sector organisations in 2022?
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Article PSR report aims to make digital payments accessibleThe PSR aims to reduce barriers to digital payments but many remain hesitant. How can payment services move forward?
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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Technology, media & telecommunications Why it’s time for a 5G reality checkFigures suggest the mobile sector is maturing. While data usage continues to soar, mobile revenues are expected to flatten out over the next few years.
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Employees on an international assignment to Japan will be subject to comprehensive tax rules, social security registration obligations and employment visa requirements. Grant Thornton Japan’s Global Mobility Services team helps international assignees and their employers to deal with Japanese tax, social security, and employment visa matters.
In particular, Grant Thornton Japan, can help international assignees and their employers to identify Japanese tax planning opportunities, review tax equalisation policies; as well as providing compliance services regarding Japanese tax filing requirements.
Click on each of the areas below to expand for more information:
It is important that the international assignee’s assignment letter and benefits package are structured in a tax-efficient manner before entering Japan.
To quicken the visa process, prior to submitting their visa application, the employer or sponsor should obtain in advance a certificate of eligibility to enter Japan from the Immigration Bureau.
If an international assignee’s spouse and/or dependents relocate to Japan they will require dependent visas. If the international assignee’s spouse also intends to work in Japan, they also must obtain the appropriate visa.
The tax year in Japan for individual taxpayers is from 1 January to 31 December.
Tax returns and payments must be made by 15 March the following year (if 15 March falls on a weekend or a holiday, then the first business day following). Extensions are not available.
The following progressive income tax rates apply to the annual taxable income:
National income tax rates | Tax rate | Deductions in ¥ |
1 – 1,950,000 | 5% | - |
1,950,000 – 3,300,000 | 10% | 97,500 |
3,300,000 – 6,950,000 | 20% | 427,500 |
6,950,000 – 9,000,000 | 23% | 636,000 |
9,000,000 – 18,000,000 | 33% | 1,536,000 |
18,000,000 – 40,000,000 | 40% | 2,796,000 |
Over 40,000,000 | 45% | 4,796,000 |
In addition to the above National Income Tax, a surtax to fund for the reconstruction of Japan’s northeast region devastated by the 11 March 2011 earthquake and tsunami will be imposed at 2.1% on the National Income Tax amount calculated by the above table from 2013 to 2037. Per capita levy of Local Inhabitant Tax will be also increased by JPY 1,000 from 2013 to 2022.
In addition to National Income Tax, Japan’s Local Inhabitant Tax for a given tax year is levied on individuals who reside in Japan as of January 1 of the following year. The tax rate is a flat 10% of the taxable income amount as reported on the tax return. Per capita levy of JPY 5,000 is also imposed.
Income | Year 2021 in ¥ |
Employment earnings before | 28,592,111 |
Deduction | |
Standard deduction | (1,950,000) |
Employment income | 26,642,111 |
Total taxable income | 26,642,111 |
Deductions | |
Spouse deduction | 0 |
Dependent deduction | 380,000 |
Basic deduction | 480,000 |
Total deduction from income | 760,000 |
Net taxable income | 25,782,000 |
National Income Tax due | 7,516,800 |
Special income tax | 157,852 |
Local Inhabitant Tax due | 2,583,200 |
A permanent resident of Japan will be required to submit a report of overseas assets to the tax office by 15 March every year (or the next business day if 15 March falls on a weekend or a holiday) if such assets are worth over JPY50M on the last day of the previous year. Those who do not file or file a false report may face imprisonment of up to one year. Further, if the reporting is not made and income generated from such overseas assets are not reported on the tax return, an additional 5% penalty is assessed on the non-reported income.
The scope of an international assignee’s income subject to Japan income tax depends on the individual’s tax residency status. A permanent resident, generally an individual who has lived in Japan for five or more of the past ten years, is subject to income tax at marginal rates on worldwide income. A non-permanent resident is subject to income tax at marginal rates on all Japan source income, and on any foreign source income brought, paid, or remitted into Japan. A non-resident is taxed on Japan source income and any income effectively connected with a permanent establishment in Japan.
In Japan, all individuals fall within one of the following three categories of taxpayers: non-resident, non-permanent resident, or permanent resident.
A resident is any individual who has a domicile in Japan, has maintained a residence continuously in Japan for one year or more, or intends to reside in Japan for one year or more as evidenced by international assignment letter or expected assignment duration in Japan based on nature of work. Otherwise, the individual is generally considered a non-resident.
A permanent resident taxpayer is a resident who is either (a) a Japan national, or (b) a foreign national who has lived in Japan for more than five of the previous ten years. A resident foreign national who has not lived in Japan for more than five of the past ten years is considered a non-permanent resident.
Salary paid by an employer based on services performed in Japan is considered Japan source income, even if the salary is paid abroad. Therefore, non-residents are also subject to Japanese income tax on this type of salary and will generally have an obligation to file a tax return.
Bonuses paid in cash should be declared as employment income as of the date received. Most fringe benefits are treated as compensation and included in taxable income. Fringe benefits paid by a Japan corporation or a branch or office in Japan are subject to withholding income tax at source. Fringe benefits paid by a foreign corporation or office are generally out of the scope of the withholding obligation and therefore must be declared on the tax return.
Japanese income tax arises on employment income derived from duties performed in Japan. Tax is assessed on all employment income, including all salaries and wages, bonuses, overtime pay, gratuities, stock awards, and benefits.
Currently employees earning over JPY 10 million are entitled to a capped deduction from income equal to JPY 1,950,000.
Generally, benefits in kind or allowances paid to the employee for tax, utility expenses, medical expenses, car expenses, etc., are treated the same as salary income. However, Japan’s income tax law specifies beneficial tax treatment of the following benefits providing certain conditions are met. International assignment letter properly structured with respect to these benefits can result in significant tax savings: residential accommodation, school fees, loans to employees or directors, language lessons, and insurance.
Certain payments received upon leaving an employer are considered as ‘retirement income’ and are taxed separately from bonuses and normal employment income. The taxation of retirement income is as follows:
Taxable income = (retirement income received – retirement income deduction) x 50%
The retirement income deduction is JPY 400,000 for each year of service up to 20 years and JPY 700,000 for each year of service over 20 years. This income is then taxed at progressive rates separately from other income.
However, directors who have fewer than five years' service will not receive the 50% reduction and the income will be calculated as:
Taxable income = (retirement income received – retirement income deduction)
There are no specific tax concessions for expatriates; however, the correct structuring of housing and other benefits as part of the compensation package can result in significant tax savings.
Where the same income has been subject to tax in both Japan and a foreign jurisdiction, relief from double taxation may be available. In certain cases, Japan’s domestic law allows a foreign tax credit only if the taxpayer is a tax resident of Japan both when the foreign source income was earned and also when the foreign tax on the income was paid.
In addition to a personal deduction amount of JPY 480,000 which will phase out for individuals with a total income exceeding JPY 24M effective 1 January 2020, income deductions may be available to individuals for the following:
- casualty loss (due to disasters or theft)
- medical expenses exceeding JPY 100,000 in a calendar year (including those paid outside Japan) or self-medication expenses exceeding JPY 12,000 for preventive purposes
- donations above JPY 2,000 to qualified charities in Japan
- life insurance premiums paid in Japan
- earthquake insurance premiums paid in Japan
- Japan’s social insurance premiums
- spousal deduction
- dependent deduction (for dependents 16 years old)
- allowance for a widow or widower.
Gains on sales of stocks and real property are taxed separately from other income. As noted below, taxpayers who are resident in Japan for tax purposes are subject to a slightly higher rate due to a Local Inhabitant Tax component.
Capital gains on real property held for more than five years as of 1 January of the year of the sale are taxed at the long term rate of 20% (15% National Income Tax, 5% Local Inhabitant Tax). Gains on real property held for a shorter period are taxed at 39% (30% national, 9% local). Additional 2.1% surtax will be applied on the amount of National Income Tax.
Capital losses from the sale of real property can be deducted only from capital gains on real property. Capital losses on the taxpayer’s principal residence can be carried forward three years. Otherwise, there is generally no carry forward of capital losses on real property for individuals.
Taxation of capital gains from the sale of foreign listed shares
The tax rate on capital gains from the sale of shares is 20% (15% National Income Tax, 5% Local Income Tax). Additional 2.1% surtax will be applied on the amount of National Income Tax
Capital loss from the sale of listed shares
A capital loss from the sale of listed shares can be offset against capital gains from the sale of listed shares in the same calendar year. If after offsetting a capital loss still remains, it generally cannot be offset against other types of income. For example, you are not allowed to offset capital loss on the sale of listed shares from salary income. However, if the loss contains a capital loss from the sale of listed shares sold through a securities company registered in Japan, this portion can be deducted from dividend income paid by listed companies if the ‘Separate Taxation System’ on dividends has been selected.
If a capital loss from the sale of listed shares through a securities company registered in Japan remains after making the offset mentioned in the previous paragraph, this excess loss can be carried forward to the following three years by filing a tax return. The carried forward loss will be deducted from capital gains arising from the sale of shares and dividend income paid by listed companies for the next three years. Please note that you need to file a tax return every year in order to apply this carry forward, even if you have no obligation to do so.
Inheritance tax for non-Japanese nationals
Japan’s inheritance tax (IHT) is based on the residence status of the beneficiary and/or the location of the assets inherited. Beneficiaries domiciled in Japan are subject to IHT on the property they receive, while beneficiaries not domiciled in Japan are only subject to IHT on assets inherited that are located in Japan. IHT is levied at progressive rates on the fair market value of the property inherited, less related expenses. Further deductions are allowed, depending on the status of the heir. A specific spousal allowance is also available. The net value of the inheritance is taxed as follows:
Value of inherited assets | Tax rate | Deduction ¥ |
Up to 10m | 10% | - |
10m to 30m | 15% | 500,000 |
30m to 50m | 20% | 2,000,000 |
50m to 100m | 30% | 7,000,000 |
100m to 200m | 40% | 17,000,000 |
200m to 300m | 45$ | 27,000,000 |
300m to 600m | 50% | 42,000,000 |
Over 600m | 55% | 72,000,000 |
Gift tax
Japan’s gift tax is an obligation for the recipient of the gift. The basic deduction is ¥1.1m every year
Taxable income after basic deduction |
Tax rate | Deduction ¥ |
Under 2m | 10% | - |
Under 3m | 15% | 100,000 |
Under 4m | 20% | 250,000 |
Under 6m | 30% | 650,000 |
Under 10m | 40% | 1,250,000 |
Under 15m | 45% | 1,750,000 |
Under 30m | 50% | 2,500,000 |
Under 45m | 55% | 4,000,000 |
Over 45m |
A person who receives investment income in the form of interest, dividends, or royalties, is subject to withholding income tax at source if it is paid in Japan. Applicable tax rates differ depending on the tax resident status of the recipient, or the existence of a tax treaty between Japan and the investor’s home jurisdiction. Generally, a tax rate of 20% applies unless a more beneficial tax rate is available under an applicable tax treaty.
Fixed asset tax and city planning tax are levied by municipalities on land, buildings, and other depreciable property located in the municipality. The annual tax rates are respectively 1.4 and 0.3% of the assessed value of fixed assets.
An employer (either a corporate entity, Japan branch of a foreign corporation or a sole proprietorship with five or more employees) with a Japan payroll is required to join Japan’s social security plan, which is comprised of insurance components for health (and nursing care for employees aged 40 and above), welfare pension, employment, and workers’ accident compensation. Both the employer and employee are required to contribute except for workers’ accident compensation insurance which is contributed fully by the employer. Withholding rates for employees (employers) are, approximately, as follows:
Health insurance = 4.92% (4.92%)
Welfare pension insurance = 9.15% (9.15%)
Nursing care insurance (aged 40~65) = 0.900% (0.900%)
Employment insurance = 0.30% (0.60%)
Workers’ accident compensation insurance = N/A (0.3%)
Stock options granted to an international assignee during Japan assignment will be subject to tax in Japan.
Non-qualified stock options are taxed as regular salary income at the date of exercise on the difference between the exercise price and the fair market value of the stock at exercise. Tax on capital gains made upon the sale of the stock will be levied on the difference between sales proceed and fair market value at exercise.
Qualified stock options (generally applicable to stock of Japanese companies) are taxable only upon sale, with capital gains tax being levied on the difference between sales proceed and exercise price.
There is no wealth tax in Japan.
Permanent residents in Japan are taxed on their worldwide income. Non-permanent residents are taxed on their Japan source income in addition to any foreign source income remitted (or brought or paid) into Japan. This means that for non-permanent resident taxpayers, cash remitted into Japan may be taxed at Japan’s marginal income tax rates if the taxpayer has any foreign source income in the same calendar year. Taxpayers with income from non-Japan sources should be aware of the tax implications when remitting any funds into the country.
Working outside Japan
An offshore compensation package is an important tax planning tool for non-permanent resident taxpayers who spend part of the year on work assignments outside Japan. Having salary paid offshore allows the non-permanent taxpayer to exclude the income related to the periods spent abroad on business from Japan tax.
However, Japan’s income tax law specifies beneficial tax treatment of the following benefits providing certain conditions are met.
An employment agreement properly structured with respect to certain benefits in kind, such as residential accommodation or children’s school fees, can result in significant tax savings.
Other issues that should be considered are the tax implications of offshore or onshore compensation arrangements, the timing of compensation benefits and taxes, and special issues related to directors or senior officers, foreign entertainers, and athletes.
Grant Thornton Japan’s Global Mobility Services team can advise international assignees and their employers on these and related opportunities.
For further information on expatriate tax services in Japan please contact:
Tosh Kamii
E tosh.kamii@jp.gt.com
Takehiko Hara
E takehiko.hara@jp.gt.com
Masako Endo
E masako.endo@jp.gt.com