Japan Tax Guide for Beginners

Directors’ compensation cannot be determined freely in Japan


Question: Is it true that directors’ salary and bonus cannot be determined freely in Japanese company?

Answer: In principle, directors’ compensation is not deductible in the corporate tax law. The Law imposes restrictions on directors’ compensation, since it is possible for the company to manipulate the company’s profit easily by increasing or decreasing salaries paid to directors.

However, directors’ compensation under the following three conditions are deductible for corporate tax. It is common for SMEs to adopt (1) “Fixed amount periodical compensation” or (2) “Fixed compensation notified in advance”.

(1) Fixed amount periodical compensation

“Fixed amount periodical compensation” is salary which is regularly paid on a monthly basis with a fixed amount throughout a fiscal year. It is the most popular condition that a lot of companies adopts.

(2) Fixed compensation notified in advance

“Fixed compensation notified in advance” is salary which is fixed in the amount and timing of the payment for which an advance notification is filed with the tax office. It is used when a company prefer to pay bonuses to directors in the same manner as employees.

(3) Profit-based compensation

“Profit-based compensation” is salary which is calculated based on profits for the current year and applicable to public companies.

Please contact us, TOMA Consultants Group, if you have any questions.



Question: 日本の会社では、役員の報酬や賞与は自由に決められないって本当ですか?

Answer: 会社が役員に支払う報酬、賞与などは、原則として会社の損金にはなりません。役員に支払う報酬や賞与を増減させて、会社の利益を比較的容易に調整することが可能なことから、法人税法では役員報酬、役員賞与について損金算入に制限が設けられています。


(1) 定期同額給与



(2) 事前確定届出給与



(3) 利益連動給与