Penalties for Underreporting Tax in Japan
YamaguchiYoshioShare
Even if you filed your tax return on time, you may later find that the tax you reported was too low, for example because some sales were left out or expenses were claimed incorrectly. In that case, you either file an amended return (shusei shinkoku), or the tax office corrects your tax by issuing a reassessment (kousei).
In addition to the extra tax you owe, two main charges are added:
- Underreporting penalty (kashou shinkoku kasanzei): an administrative penalty for reporting too little tax
- Delinquency tax (entaizei): an interest-like charge based on how many days the payment is late
Rates of the Underreporting Penalty
The penalty is calculated by multiplying the additional tax due from the amended return or reassessment by a set rate.
| Timing of the correction | Standard portion | Surcharged portion (*) |
|---|---|---|
| ① Voluntary amended return before receiving advance notice of a tax audit | 0% | 0% |
| ② Amended return after advance notice of an audit, but before the issue is identified in the audit | 5% | 10% |
| ③ Amended return after the issue is identified in an audit, or a reassessment by the tax office | 10% | 15% |
* The surcharged portion is the part of the additional tax that exceeds the greater of the tax originally reported or ¥500,000.
Example (case ③)
If the tax originally reported was ¥400,000 and the additional tax is ¥1,000,000:
- The threshold is the greater of ¥400,000 and ¥500,000, which is ¥500,000.
- Portion up to ¥500,000: ¥500,000 × 10% = ¥50,000
- Portion over ¥500,000: ¥500,000 × 15% = ¥75,000
- Total underreporting penalty: ¥125,000
① Voluntary correction before audit notice (0%)
If you find the error yourself and file an amended return before the tax office notifies you of an audit, no underreporting penalty is imposed. Delinquency tax still applies.
② Correction after audit notice but before the issue is identified (5% and 10%)
Even after receiving advance notice of an audit, filing an amended return before the audit identifies the error results in lower rates than in ③.
③ Correction after the issue is identified, or a reassessment (10% and 15%)
The highest rates apply if you file an amended return after an audit identifies the error, or if the tax office issues a reassessment to correct your tax.
When the Underreporting Penalty Does Not Apply
No penalty is imposed on any portion for which there was a "justifiable reason" for the underreporting, such as following incorrect guidance from the tax office on how to interpret the law. Simple lack of knowledge or calculation errors are not considered justifiable reasons.
Cases Where the Rate Increases (Surcharges)
If books are not presented or submitted during a tax audit, or the records are seriously inadequate, the underreporting penalty rate is increased by 5% or 10%. This applies to taxes whose statutory filing deadline falls on or after January 1, 2024.
Delinquency Tax
Additional tax paid with an amended return is subject to delinquency tax. It is charged for each day from the day after the statutory payment deadline until the day you actually pay.
| Period | Rate for 2026 |
|---|---|
| Up to two months after the day following the filing of the amended return | 2.8% per year |
| After that | 9.1% per year |
However, if the original return was filed on time, the period from the day after one year has passed since the statutory filing deadline until the day the amended return is filed is excluded from the calculation. As a result, even when you amend a return from several years ago, delinquency tax is generally limited to roughly one year plus a short additional period. This exception does not apply in cases involving deception or fraud.
Heavy Additional Tax
If income was deliberately concealed or disguised, for example by hiding sales, a 35% heavy additional tax (juukasanzei) is imposed instead of the underreporting penalty. If a heavy additional tax or a penalty for failure to file was imposed within the past five years, the rate increases to 45%.
If You Reported Too Much Tax
If you find that you reported too much tax, you file a request for correction (kousei no seikyuu) instead of an amended return. As a general rule, a request for correction can be filed within five years of the statutory filing deadline.
Summary
As with failure to file, you can avoid the underreporting penalty entirely by correcting the error yourself before the tax office contacts you. If you find a mistake in your return, file an amended return and pay the additional tax as soon as possible.
