This subject-review package covers the Income Tax Law (所得税法) component of Japan's zeirishi examination. It is organised around foundations, classification, calculation and applied professional judgment, with original worked scenarios and 20 multiple-choice knowledge/application questions. The 2024 examination schedule indicates a two-hour Income Tax Law examination slot and an applicable-law date of 5 April 2024; candidates should confirm current administration details, pass standards and any syllabus weighting with the National Tax Agency or the official examination announcement. This is a preview, not full syllabus coverage, and the MCQs are not a simulation of the examination. Prepare by mastering the statutory architecture shown in the Income Tax Basic Circular, then practise classifying receipts, computing category income, and justifying deductions from facts. The 2024 examination announcement confirms a two-hour Income Tax Law examination slot and the applicable-law date; it does not supply a pass mark, weighting, or question composition. This MCQ set checks supporting knowledge and is not a simulation of the examination.
1. Exam identity and boundaries
Use the official announcement for identity, date, and boundaries; do not infer unsupplied exam rules.
The 2024 tax accountant examination announcement lists Income Tax Law (所得税法) on 7 August 2024, 3:00-5:00 p.m. It states that the laws to apply are those in force on 5 April 2024. That confirms a scheduled two-hour subject and an applicable-law date. The announcement does not give a pass mark, domain weighting, question composition, or scoring formula; do not treat a rumoured threshold as official.
The Income Tax Basic Circular table of contents is a navigation aid. It shows a structure: general definitions and non-taxable income; attribution; resident taxation with income amounts, necessary expenses, asset losses, loss carryforward, income deductions, tax calculation, filing, and blue return; then nonresident and corporate taxpayer provisions; then withholding. Use it to locate topics, not as an operative rule.
The NTA anti-money-laundering questionnaire addresses customer due diligence, suspicious-transaction reporting, sanctions, and related governance for tax accountants. It is not proof of an Income Tax Law computation rule. Keep the components separate: national income tax on individuals; resident versus nonresident rules; comprehensive versus separately treated categories; and withholding as a collection mechanism, not an income category.
2. Tested skills and preparation priority
Prioritise classification and statutory location before arithmetic; then build computation and document discipline.
The examinable skill set is layered. First is issue recognition: identify the taxpayer, residence status, source, category, year, and transaction. Second is classification: decide whether a receipt is business, employment, retirement, capital, or another category, and whether it is comprehensive or separately treated. Third is computation: start from receipts, deduct only attributable necessary expenses, apportion mixed-use costs, and apply deductions or losses only after checking eligibility. Fourth is professional judgment: explain missing facts, evidence, and consequences without overclaiming.
A sensible priority order is foundations, classification, computation, then applied problems. Foundations prevent category errors; classification prevents computational answers to the wrong question; computation rewards clean arithmetic and documentation; applied problems test whether you can explain limits. In a constructed answer, use a short structure: issue; material facts; rule location; computation or analysis; conclusion; caveat. The rule location matters because a heading or remembered label is not a substitute for the operative provision.
The multiple-choice set below checks supporting knowledge. It is not a simulation of the examination. Open-task practice is essential: draft a two-page client memo from a fact pattern, prepare a computation schedule, and list the documents you would request before signing a return.
3. Residence, source and category map
Do not jump from receipt to rate; map the taxpayer and the income first.
A reliable opening map has four questions: who is the taxpayer; what is the residence status; what is the source of the income; and which category applies? A fifth question follows: is anything separately taxed or collected by withholding? This is deliberately fact-first. For example, Mika is a Japanese national living in Singapore and provides online design services to Japanese clients. The fee is paid into a Singapore bank account. The correct professional reflex is not 'taxable' or 'exempt'. It is to establish her residence status, the source of the service income, any remittance facts relevant to foreign-source income, treaty provisions, and withholding obligations.
Nonresident and nonpermanent-resident questions are especially fact-sensitive. The Basic Circular's table of contents separates resident taxation from nonresident and corporate taxpayer provisions, and it includes domestic-source income as a distinct topic. That structure signals that you must not merge the rules. If the facts do not state days, domicile, remittance, or treaty status, say so. A conclusion built on an assumed residence status is not a professional answer.
Attribution is a related discipline. Trace who performed the work, controlled the activity, and bore the economic risk. A bank-account name is evidence, not the whole analysis. This is also where family and payment-routing fact patterns belong: the examiner wants the reasoning trail, not a slogan.
4. Business income versus other categories
Scale, continuity, and profit intent usually decide whether an activity is business.
Kenta buys used bicycles at auction, repairs them, advertises weekly, keeps inventory, and resells repeatedly for profit. Those facts point to business income: the activity is organised, continuous, and carried on with profit intent. By contrast, Sara sells her own used sofa once, made no purchases for resale, did not advertise, and has no continuing activity. On those facts the sale is not business income; it is a private asset transaction. The category follows the activity, not the mere presence of cash.
Employment and office relationships are different again. A company director's monthly compensation for board service starts in the employment-income family because it is remuneration for services under an office or employment relationship. A lump-sum retirement payment raises a separate classification question: whether it belongs in retirement income with its own computation rules rather than ordinary employment income. The same person can receive more than one category; do not force all receipts into one bucket.
The classification trap is overgeneralising from a single fact. A one-off honorarium is not automatically business income; regular teaching may be. A director is not automatically an independent contractor. A sale is not automatically a capital gain or automatically business income. State the factors, apply them, and identify facts that would change the answer.
5. Computation mechanics: receipts, necessary expenses, private portions
Compute only attributable business amounts; exclude private costs and document apportionment.
For a business category, begin with gross receipts and subtract necessary expenses attributable to the activity. Mixed-use costs must be apportioned on a defensible basis. Suppose freelance receipts are 8,000,000; direct business expenses are 1,900,000; rent is 1,200,000 with 70% business use; and personal groceries are 400,000. The rent deduction is 1,200,000 × 70% = 840,000. Business income before other adjustments is 8,000,000 − 1,900,000 − 840,000 = 5,260,000. The groceries are not deducted merely because the home is also a workspace.
The same discipline applies to vehicles and utilities. If vehicle costs are 360,000 and business kilometres are 12,000 of 20,000 total, the business portion is 360,000 × 12,000 ÷ 20,000 = 216,000. Home-office costs of rent 240,000 plus utilities 60,000 at a 25% business ratio give 75,000. These are arithmetic illustrations, not statutory thresholds. The examiner is checking whether you can separate business from private use and show the basis.
Documentation is part of the computation. A ratio is only as good as the records behind it. If the file lacks a mileage log, floor plan, or utility basis, the answer should say what evidence is missing. Do not smuggle a private expense into business deductions by relabelling it.
6. Losses, carryforward and blue return
Current-year offset and carryforward are different questions; blue-return benefits are conditional.
A current-year business loss can affect the current computation, while carryforward affects later years. Keep the two steps separate. If other income is 4,000,000 and a current-year business loss is 1,500,000, the combined current net before other items is 2,500,000. That arithmetic does not by itself prove that any unused loss may be carried forward. Carryforward depends on the taxpayer's status, the type of loss, the year, and the required elections and records.
The Basic Circular structure places blue return and loss carryforward in separate but related parts. The blue-return framework is not automatic: the Income Tax Act and circular set approval and timing conditions, while the Basic Circular table of contents merely locates the blue-return heading and does not itself state those conditions. In an exam answer, identify the status, the election, the year, and the evidence. Do not write that every loss is carryforwardable, and do not write that a white-return filer receives the same treatment automatically.
Blue-return advice is also a professional-judgment topic. The adviser should explain the consequences of filing status, the need for timely action, and the records required. A promise of a carryforward without checking eligibility is a red flag in a client scenario.
7. Deductions, family payments and payment routing
Separate necessary expenses from income deductions, and test family payments for purpose, reasonableness and evidence.
Necessary expenses reduce a particular income category; income deductions reduce taxable income after category computation. They are not interchangeable. The table of contents places income deductions in a later section, which is a useful reminder to compute category income first. A medical-expense-type deduction also depends on statutory conditions and any floor; do not invent a current amount. Check the applicable law date and ask for receipts, insurance reimbursements, and the relationship facts.
Family payments require a business-purpose analysis. A business may pay a family member for actual administrative work at a reasonable rate, supported by time records and market evidence; that payment may be deductible if it is attributable and reasonable. It is not automatically disallowed merely because the recipient is family. Conversely, a payment is not deductible merely because it is labelled 'salary' if no work was performed or the amount is unreasonable.
Payment routing needs the same care. A consulting fee deposited into a spouse's account does not by itself make the spouse the earner. Start with who performed the services, controlled the work, and bore the risk, then apply the attribution rules. In family fact patterns, document the reality of the arrangement rather than relying on the account name.
8. Integrated practice task and self-check rubric
Use a single fact pattern to practise classification, computation, attribution, loss treatment and evidence requests.
Fact pattern: Yui is a sole proprietor translator. Her business receipts are 7,200,000, including a 1,000,000 translation fee that a client deposits into her spouse's bank account. Direct business costs are 1,100,000. Home-office rent is 960,000 and utilities are 240,000, with a 30% business-use ratio. She spends 300,000 on personal groceries. She sells a personal camera for 80,000; she did not buy it for resale and has no continuing camera business. Yui also has a prior-year business loss of 500,000, and the facts state that the blue-return carryforward requirements are satisfied.
Task: classify the receipts; compute current business income before loss carryforward; explain the camera sale; discuss the spouse-account deposit; state how the prior-year loss is treated if the stated conditions are met; and list documents to request. A model computation is: business expenses = 1,100,000 + (960,000 × 30%) + (240,000 × 30%) = 1,100,000 + 288,000 + 72,000 = 1,460,000. Business income before loss = 7,200,000 − 1,460,000 = 5,740,000. If the carryforward conditions are met, apply the 500,000 loss in the proper order, giving 5,240,000 before other items. The groceries are excluded. The camera is not business income on these facts. The translation fee is analysed by who earned it, not by the spouse's account name; here it is already included in receipts, so do not add it twice.
Self-check rubric: (1) Did you identify the taxpayer, activity and year? (2) Did you classify each receipt and explain why? (3) Did you deduct only attributable expenses and show apportionment? (4) Did you keep current-year loss and carryforward separate? (5) Did you address attribution without overclaiming? (6) Did you request missing records and state limitations? A strong answer earns its marks through visible reasoning, not a bare number.
9. Common errors and a practical study sequence
Audit your errors by type, then rehearse open tasks under time.
Common errors include mixing categories because a receipt looks similar; deducting private costs as business expenses; netting receipts without a legal basis; ignoring mixed-use apportionment; assuming a bank-account holder is the earner; treating blue-return carryforward as automatic; using a table-of-contents heading as the rule; and quoting an unsupported threshold, rate, or pass mark. A constructed answer can also fail by omitting the conclusion or by failing to flag missing facts.
A practical six-week sequence: in weeks 1-2, map the Act and Basic Circular structure and practise classification drills; in week 3, build computation schedules for receipts, necessary expenses, and apportionment; in week 4, study losses, carryforward, income deductions, and blue-return conditions; in week 5, work applied client scenarios with family and payment-routing facts; in week 6, complete timed open-task memos and review an error log by error type. Re-check the applicable law date before relying on any detail.
Use the MCQs as a diagnostic, not as a full paper. For each wrong answer, write the issue, the correct rule location, the fact you missed, and a one-line correction. Then redraft the integrated task without looking at the model. That cycle is more useful than memorising labels.
References and further reading
Use these references to explore the concepts and check the latest information from the relevant organizations.