Deemed Director Issue (corporate tax)

The company cannot increase/decrease monthly salary to the director. It can be changed once a year when annual shareholder meeting is held.

We must be care that person can be deemed as director for JP corporate tax purpose even if the person is not registered as a director. 

There are two aspects to consider this issue. Tax law state the persons are deemed as directors if they are actually engaged into company management considering their “Position” and “What you actually do” in the company.

<Position>

Position is important first of all. Tax office see, for instance, Managing Director is almost as same as registered director as a first impression in our current experience. But we can avoid deemed director if we can explain the Managing Director is not engaged into company management in my current experience.  (“CEO” was deemed as a director on the other hand.)   

<What you actually do>

Secondly, what your actually do is more important. Tax office consider whether the person is engaged into management or not from comprehensive aspect. In our experience, the person is deemed as directors if the person is engaged into any of following.

• Frequently meeting with registered directors
• Decide company management policy
• Finally authorize the fee/price
• Authorize cash financing (bank loan / loan from others when cash is needed)
• Finally authorize to hire and promote employee
• Finally authorize compensation to employees