Where Is the Line for Expensing Travel? An Accountant Investigates

Where a mixed-purpose trip divides, in Japanover 50%Business use above half takes the spending out of the household-related category

This page describes the Japanese treatment. Whether travel costs are deductible turns on article 37(1) of the Income Tax Act and its test of expenses directly required to earn gross revenue. Spending that mixes private and business use is judged on whether the business part exceeds 50 per cent.

Even below that line, a part that can be clearly identified as business may still be deducted. Where a company pays for an overseas trip, the days actually spent on business are converted into a ratio and rounded to the nearest 10 per cent.

Check first: is this a trip that can be apportioned at all?

There is a concrete business purpose tied to revenue: a client visit, a factory tour, a trade fair, an international conference
You can write the itinerary out as days on business, days sightseeing and days travelling
The business days are evidenced by dated material: schedules, who you met, what came out of it
No costs for family or friends travelling with you are included
You can keep the books and documents for the retention period (seven years as a rule, for companies and for blue-return individuals)

Five out of five and there is room to apportion. When one is missing, the third is usually the one that goes: the payment record survives and nothing shows what was being done that day. Article 96 of the Income Tax Act Enforcement Order speaks, for blue-return filers, of the part “shown by the records of transactions and the like to have been directly necessary for carrying on the business”. A part with no record falls out on the wording itself.

An N700S shinkansen standing at a platform at Tokyo Station — A shinkansen platform at Tokyo Station. Whether the return fare comes out before the apportionment depends on the ratio. Photo: Syced / CC0 (Wikimedia Commons)

Five steps to the apportionment ratio

StepWhat it involves

STEP 1Sort the itinerary into fourInspection, sightseeing, travel days and other. Inspection covers factory and store visits, trade fairs and exhibitions, market and distribution research, attending international conferences, overseas seminars, and calls on trade bodies or government agencies. Private outings in free time, light sightseeing attached to a visit and courtesy calls are sightseeing.

STEP 2Count days in quartersA normal working day of roughly 8 daytime hours counts as 1.0 day, and the count is made in units of about 0.25 of a day according to what was done. Work done in the evening is added to inspection.

STEP 3Work out the business ratioInspection days divided by inspection days plus sightseeing days. Only those two categories enter the denominator; travel days and “other” (weekends, rest, packing to go home) enter neither.

STEP 4Round to 10 per centThe ratio is banded in 10 per cent steps, rounding fractions to the nearest band, to give the deductible proportion. At 90 per cent or more the whole cost goes in as travel expense; at 10 per cent or less, none of it does.

STEP 5Decide whether the return fare comes out firstOnly where the travel is accepted as directly necessary and the business ratio is 50 per cent or more may the return fare to the place of business be deducted in full, with the ratio applied to the other costs alone.

Those five steps are the procedure set out in the circular on the treatment of overseas travel expenses dated 11 October 2000 (Ka-ho 2-15, Ka-sho 4-24, Sa-cho 4-29). It was drawn up for trips where sightseeing is combined with an industry-body inspection tour, and it repealed the earlier circular of 21 August 1967.

Put numbers in. A six-day trip with five nights: two days travelling, two and a half on a factory visit and a trade fair, one and a half free. The business ratio is 2.5 divided by 2.5 plus 1.5, or 62.5 per cent, banded to 60. With a return fare of 100,000 yen and 120,000 yen of accommodation and local costs, the ratio is at least 50 per cent, so the 100,000 goes in whole and the 120,000 is multiplied by 60 per cent to give 72,000. Total travel expense: 172,000 yen.

Take the same itinerary and put the two travel days into the denominator and it becomes 2.5 divided by 6, or 41.7 per cent, banding to 40. The full-fare treatment is no longer available either, so 220,000 yen times 40 per cent gives 88,000. Almost half the deduction turns on nothing but the counting method.

The full picture: which provision applies to which position

PositionAuthorityThe testHow it is apportioned

Sole trader travelling on their own accountIncome Tax Act art. 37(1); Income Tax Basic Circular 37-16Directly necessary for carrying on the business, excluding anything of a household natureBy the ratio of periods (Circular 37-21). The return fare comes out first

Spending that mixes private and business useIncome Tax Act art. 45(1)(i); Enforcement Order art. 96; Circular 45-2Whether the business part exceeds 50 per centBelow 50 per cent, a clearly identifiable business part may still be deducted

Company paying an officer’s or employee’s overseas travelCorporation Tax Basic Circular 9-7-6 and 9-7-9Necessary for the business, and an amount regarded as ordinarily necessaryBy the ratio of necessary to unnecessary periods. The return fare comes out first

Industry-body inspection tour with sightseeing attachedCircular of 11 October 2000, Ka-ho 2-15The business ratioDeductible proportion in 10 per cent bands. 90 per cent or more is all of it; 10 per cent or less is none

Employee on a company recreation tripIncome Tax Basic Circular 36-30; circular Choku-ho 6-9 of 1988Whether it is of a kind generally accepted sociallyFour nights and five days or fewer, with participation of 50 per cent or more, is not taxed as a rule

Employee on a company training tripNTA Tax Answer No. 2603Directly necessary for conducting the company’s businessThe part that is not directly necessary is taxed as salary to the participant

Travel by a sole trader is dealt with directly in Income Tax Basic Circular 37-16. Where an individual carrying on a business travels abroad, the costs attributable to transport, accommodation and so on may be deducted “only where the travel is found to be directly necessary for carrying on that business”. The parenthesis excluding anything of a household nature is the point: the directly-necessary test and the apportionment of mixed spending are two separate gates.

The 50 per cent belongs to the second gate. Income Tax Basic Circular 45-2 reads the “principal part is necessary for carrying on the business” test in article 96(i) of the Enforcement Order as turning on whether the business part exceeds 50 per cent of the amount spent. The same circular then adds that even where the necessary part is 50 per cent or less, if it can be clearly identified, the amount corresponding to it may be deducted. Fifty per cent is not a cut-off; it is the line above which you are spared the work of identifying.

Where people trip up

“Up to 100,000 yen is tax free” appears nowhere in the tax agency’s material

The figure circulates widely, but what the National Tax Agency publishes is examples, not a threshold. Tax Answer No. 2603 carries three. Four days and three nights, 150,000 yen a head with 70,000 borne by the company, full participation: not taxed. Five days and four nights, 250,000 with 100,000 borne by the company, full participation: not taxed. Six days and five nights, 300,000 with 150,000 borne by the company, 50 per cent participation: taxed.

The reason given for the third is not the money but the length: a trip of five nights and six days or more is not regarded as one of the kind generally undertaken in society. It is not that 150,000 yen of company money was too much.

The one published case where the amount was the issue is a National Tax Tribunal decision of 26 January 1996 (Decisions Digest no. 51). On an overseas recreation trip costing 341,000, 454,411 and 520,000 yen per participant, the tribunal held that those amounts were substantial and that the trip could not be treated as a welfare event. Its formulation was that where the economic benefit is substantial, the basis for not taxing it falls away. That sets no ceiling; it records that this level did not hold.

A published case treated participation below 50 per cent as untaxed

The requirement of four nights and five days or fewer with participation of 50 per cent or more comes from circular Choku-ho 6-9 (Choku-sho 3-13) of 25 May 1988. In the question-and-answer section of the same Tax Answer, though, the agency addresses a trip of four days and three nights costing 150,000 yen a head, with 70,000 borne by the company and 38 per cent participation, and replies that even where participation is below 50 per cent the economic benefit need not be taxed.

The circular itself opens with “where all of the following requirements are met, it is acceptable as a rule not to tax” — not with a statement that failing them means tax. The judgement weighs the planning, the organiser, the purpose, the scale, the itinerary, the participation rate, the amount borne and the share borne, taken together. The requirements read better as an entrance that spares you the individual assessment than as a boundary.

What is spelled out, conversely, is what falls outside even when the requirements are met: trips for officers only, trips entertaining clients, anything substantively a private holiday, and trips offered as an alternative to cash. Those four are excluded regardless of length or participation.

Citing the 1988 circular for overseas travel expenses confuses two documents

Choku-ho 6-9 of 1988 is titled “on the application of Income Tax Basic Circular 36-30”, and its subject is staff trips. The four nights and the 50 per cent live there. Apportionment where sightseeing is mixed into an overseas inspection tour is governed by Ka-ho 2-15 of 11 October 2000, a different document. Treating them as one applies staff-trip requirements to a company inspection trip, and the day counting goes wrong from the start.

Income Tax Basic Circular 36-30 itself states neither a number of days nor a number of people. Its text carries only two things: that the event must be of a kind generally accepted socially, and that it excludes cases where cash is paid to those who do not attend and cases limited to officers.

What if the days cannot be separated, or someone came along

Corporation Tax Basic Circular 9-7-6 provides that the part exceeding what is regarded as ordinarily necessary is, as a rule, treated as salary to the officer or employee concerned. It is not merely non-deductible; it becomes taxable income in the recipient’s hands. For a sole trader, it drops out of expenses and the profit rises.

Costs for a companion are salary as a rule too (Circular 9-7-8). Only three exceptions are listed: an attendant for a person with a disability requiring constant assistance; a spouse whose presence is necessary for attendance at an international conference or similar; and a person fluent in the language or holding advanced specialist knowledge where nobody suitable exists inside the company. On the individual side, Income Tax Basic Circular 37-20 likewise treats a companion’s costs as not deductible as a rule.

Certain trips are defined as not necessary for the business at all: travel undertaken with permission granted for tourism, travel taken by signing up to a group tour run by a travel agency, and a group trip organised by an industry body that is found to be principally for sightseeing. Those three appear in identical terms in Corporation Tax Basic Circular 9-7-7 and Income Tax Basic Circular 37-19.

That is not the end of it, though. Circular 9-7-10 provides that even on a trip falling under 9-7-7, where the destination and the work done show something directly related to the company’s business, the costs directly required for that part of the trip are deductible. A day of negotiation buried inside a package tour survives as that one day.

The case that genuinely splits opinion is where business and sightseeing are mixed inside the same day and nothing records how the hours divided. That one is settled faster by showing the actual itinerary and the work product to the local tax office or a tax accountant. Since the counting runs in quarter-days, the argument is never about how many days; it is about what the afternoon was spent on.

Splitting the payments across several methods adds work later. Reconstructing three days spread over cash, a card and electronic money is harder to read back against an itinerary than a single statement in date order. Which card to carry for that is compared in our travel credit card round-up.

Common questions: family costs, cash for non-attenders, retention periods

Are the costs of taking family along deductible?

As a rule, no. Corporation Tax Basic Circular 9-7-8 treats the costs of a relative accompanying an officer as salary to that officer as a rule. The exceptions are limited to an attendant for a person with a disability requiring constant assistance, a spouse whose presence is necessary for an international conference or similar, and a person fluent in the language or with advanced specialist knowledge where nobody suitable exists in the company. Income Tax Basic Circular 37-20 takes the same line for sole traders.

What happens if cash is paid to staff who did not go on the trip?

Income Tax Basic Circular 36-30 puts the payment of cash in place of attendance outside the “acceptable not to tax” treatment. The note to Tax Answer No. 2603 goes further: where cash is paid to non-attenders, everyone — those who went as well as those who did not — is treated as having received salary equal to that amount. The tax reaches the people who went on the trip too.

How long do the books and receipts have to be kept?

Seven years from the starting date for a blue-return company (Corporation Tax Act Enforcement Regulation 59(1)). For books, that date is two months after the end of the business year containing the day the book was closed, which is the day after the filing deadline. A business year in which a loss arose on a blue return is ten years. Blue-return individuals are also seven years as a rule, though invoices, quotations, delivery notes and the like may be five. For white-return filers the authority is Income Tax Act Enforcement Regulation 102: seven years for the statutory books recording revenue and expenses, five for other books, financial statements, invoices and receipts.

Designing the itinerary is a separate exercise. The habit of separating business from sightseeing on a schedule is easiest to acquire by building one down to the hour, as in the two-day Fukuoka plan. The numbers on the other side of the desk, for someone taking leave as an employee, are in the five-day annual leave duty and its take-up rate.

SOURCES

NTA — Income Tax Basic Circular, overseas travel expenses, 37-16 to 37-21↗Checked on 2026-09-14
NTA — Income Tax Basic Circular 45-1 and 45-2 (household-related expenses)↗Checked on 2026-09-14
NTA — Corporation Tax Basic Circular 9-7-6 to 9-7-10 (overseas travel expenses)↗Checked on 2026-09-14
NTA — circular of 11 October 2000, Ka-ho 2-15, on the treatment of overseas travel expenses↗Checked on 2026-09-14
NTA — Tax Answer No. 2603, employee recreation and training trips (with Q&A)↗Checked on 2026-09-14
National Tax Tribunal — decision of 26 January 1996 (Decisions Digest no. 51, p. 346)↗Checked on 2026-09-14
NTA — Tax Answer No. 5930, retention periods for books and documents↗Checked on 2026-09-14

Source: the reference block above. A general account of the Japanese treatment; an individual case is for the competent tax office or a tax accountant / Photos: MaedaAkihiko and Syced (Wikimedia Commons) / Checked on 2026-09-14 / Featured image: Shixart1985, CC BY 2.0 (Wikimedia Commons)