CPA and 4IR
The Fourth Industrial Revolution is bringing great opportunities and challenges to many business sectors, including accounting and auditing. This requires employees to be more knowledgeable about their area of expertise and proficient in languages, as well as to develop soft skills. Here are some key things that certified public accountants (CPAs) need to know to thrive in the years to come.
What accountants need to know to thrive during the Fourth Industrial Revolution
The term Fourth Industrial Revolution (4IR) was first used in English in 2016 by Klaus Schwab, the founder of the World Economic Forum, inspired by the German “Industrie 4.0,” coined in 2011 at Hannover Messe by Professor Wolfgang Wahlster, director and CEO of the German Research Center for Artificial Intelligence (AI). In his book of the same name, Schwab describes how the 4IR is being ushered in by shifts and trends. These include AI, Big Data, the Internet of Things, blockchain, and machine learning—all of which allow us to automate and gain greater insight from many traditional processes.
The 4IR is bringing great opportunities and challenges to many business sectors, including accounting and auditing. This requires employees to be more knowledgeable about their area of expertise and proficient in languages, as well as to develop soft skills. Here are some key things that certified public accountants (CPAs) need to know to thrive in the years to come.
How is 4IR changing accounting and auditing?
Instead of manually dealing with traditional bookkeeping and auditing tasks, CPAs are learning to use new software and technologies. The benefits are numerous and could improve relationships with clients by:
- Reducing repetitive tasks, leaving more time for other work and interaction with clients
- Allowing files to be accessed, edited, and controlled from anywhere via cloud-based systems
- Providing greater ease, speed, and accuracy when managing client data
- Greatly enhancing security and compliance
- Equipping CPAs to answer client questions, provide feedback, or give advice instantly
- Bringing greater transparency to a client’s financial insights
How might the professions change?
Accountants may leave bookkeeping and stewardship to become strategic business partners. As automation increases, CPAs will need the ability to analyze, interpret, and use the output generated by these technologies to make strategic and operational decisions.
Auditors won’t be left behind in the 4IR. Instead, technology will not only assist in improving the quality of audit performance and data analysis, but also in giving clients better value-added feedback and superior recommendations.
How can CPAs adapt to the change?
1. Keep learning
Rapid changes in accounting and auditing practices, as well as in technology, require that individuals continuously learn. As a result, they can achieve their career goals, contribute to the organization, and provide value to clients.
As an international auditing firm, Grant Thornton is taking the lead in utilizing new technology to enhance audit quality and efficiency. Grant Thornton also annually provides training programs to help employees update their knowledge of tax regulations, financial reporting standards, auditing best practices, relevant laws and regulations, and technology.
In my opinion, the 4IR will bring more opportunities for accountants and auditors with international qualifications. Certificates such as those from the Association of Chartered Certified Accountants, CPA Australia, and the American Institute of Certified Public Accountants allow accountants and auditors to maximize their abilities and improve the competitiveness of human resources in the field of accounting and auditing.
2. Think radically
As professionals, we need to be open to profound changes. Research shows that humans and computers working together produce better results than computers alone. Moreover, we need to think about how we are going to take advantage of technology to maximize traits such as skepticism, leadership, teamwork, personal relations, and creativity that are beneficial to auditing and accounting careers.
3. Be adaptable
To remain relevant in an ever-evolving digital world, we must embrace these changes. Therefore, adaptability and agility are considered the most important soft skills for accountants and auditors. These skills play a vital role in ensuring that accountants and auditors can adapt to a changing working environment and to the challenges emerging from evolving business models.
To become a future-proof professional, we need to be flexible and embrace innovation.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
It’s a New World for JCT
Beginning in October 2023, major changes to the laws governing Japan’s consumption tax system will likely impact a wide variety of businesses. Consumers need not worry—there is no rate hike included in these changes—but companies doing business in or with Japan will have more to consider. Companies will have to register, pay any output JCT collected to the tax authorities, and issue a qualified invoice (with certain required items stated correctly) in order for their customers to claim input JCT credits on their purchases.
How will changes to Japan’s consumption tax rules affect your business?
Presented in partnership with PwC
Beginning in October 2023, major changes to the laws governing Japan’s consumption tax system will likely impact a wide variety of businesses. Consumers need not worry—there is no rate hike included in these changes—but companies doing business in or with Japan will have more to consider.
Japanese consumption tax (JCT) is Japan’s version of a value-added tax (VAT) or sales tax. The current rate of 10 percent (up from eight percent as of October 2019) is generally applied to goods and services provided in Japan. There are some major differences between JCT and other VAT systems around the world, however, particularly concerning a company’s ability to claim input JCT credits on purchases or expenses.
In a nutshell, the current system:
- Allows purchasers to claim an input JCT credit even if the credit relates to goods or services from companies not registered for JCT purposes
- Permits companies, not registered for JCT purposes, technically not to be required to pay the output JCT they collect to the tax authorities
- Has no strict invoicing requirements, and businesses can rely on their accounting records in some circumstances
In 2023, all the above will change. Companies will have to register, pay any output JCT collected to the tax authorities, and issue a qualified invoice (with certain required items stated correctly) in order for their customers to claim input JCT credits on their purchases.
Real-world Impact
What does this mean for companies doing business in Japan? First, it is important to note that these changes will impact not only businesses with a physical presence in Japan but also those providing certain digital services to Japanese customers. (In some cases, digital services may be taxable for JCT purposes in Japan, even if the provider is located overseas.)
While at a high level many of the changes may be operational in nature, there are some more nuanced impacts that should be considered. As a first step, companies should begin to think about whether they are going to apply for the new registration.
While the application itself is not overly complex, the decision to register may be a difficult one for those businesses that are not otherwise obliged to remit the output JCT they collect to the tax authorities.
If businesses choose not to register, they will need to consider the resulting impact on their relationship with customers, who will lose the ability to claim an input JCT credit.
Next, companies may need to reexamine certain administrative processes to ensure that they can accommodate the changes. The new rules will bring additional bookkeeping and record-keeping requirements, so companies should make sure their enterprise resource planning systems are set up to handle them. The needs may include alignment of accounting systems with invoicing systems, alteration of electronic data interchange systems, and more. This may also be a good time for companies to consider whether their systems and processes are compliant with Japanese e-storage rules if accounting records are being maintained in soft, rather than hard, copy.
More Things to Consider
Apart from the need for registration and to make changes to the content of a qualified invoice, complying with the new invoicing system is likely to be easier for sellers than purchasers. More changes will be required on the purchase/expense side, as receiving and maintaining appropriate invoices will be mandatory to claim input JCT credits.
Under the new system, companies will need to reconsider the adequacy of their internal procedures—including those for employee expense reimbursements—as the system will require invoices to be maintained in cases where there was no such requirement previously.
In addition, businesses will also have to check the invoices actually received from vendors, registered or non-registered, to confirm all necessary content is included, e.g., the vendor’s registration number. This review process may already be a regular procedure in other VAT jurisdictions, but it is not currently so in Japan.
Further, the legal changes may impact the preparation of JCT returns, as the new system will require some decision-making around how the final JCT liability will be calculated.
While the qualified invoice system itself will go live in October 2023, the tax authorities began accepting applications for registration by vendors on October 1 of this year. As the tax authorities will also begin to publish information about registered companies on a dedicated website, the expectation is that many will opt for this early registration. For companies that wish to be compliant with the new system by October 2023, the application should be submitted by the end of March 2023 at the latest.
The new rules will have a pervasive influence over operations and systems. Given that businesses are likely to need professional support to prepare for all the changes, and with the application window for vendor registration having opened on October 1, now would be a good time to begin preparation.
Be on Time
How often do we hear people say, “Sorry for being late”? How about, “I’m sorry I’m late, the traffic was so bad”? Does this sound like us? Many studies have shown why some people just can’t get somewhere on time. Several causes have been identified, but there is one common trait running through the behavior of chronically late individuals that may be the universal reason for their perpetual tardiness. Do we need to be on time for our appointments and meetings? Have we given thought to why punctuality is important?
Why punctuality matters and how to ensure it
How often do we hear people say, “Sorry for being late”? How about, “I’m sorry I’m late, the traffic was so bad”? Does this sound like us? Many studies have shown why some people just can’t get somewhere on time. Several causes have been identified, but there is one common trait running through the behavior of chronically late individuals that may be the universal reason for their perpetual tardiness.
Do we need to be on time for our appointments and meetings? Have we given thought to why punctuality is important?
Nick Saban, head football coach of the University of Alabama Crimson Tide, is renowned for teaching teamwork and responsibility. He says, “Be on time because it shows we care.” His teams’ success demonstrates why it matters.
Being on time shows others that we:
- Respect their time
- Are reliable and trustworthy
When we are punctual, we show others that we respect them and are thinking not only of ourselves but also their lives, roles, and responsibilities. We’re actively considering how our actions will affect them.
Arriving on schedule should not be a one-time event. To set a strong foundation of trust—and to make the most of our personal and professional relationships—we should always arrive on time.
As a secondee to the Tokyo office of Grant Thornton Japan for more than a year—and having worked for more than six years as an audit manager handling many Japanese clients in Indonesia—I am well aware of how important punctuality is in Japan. These days, more Japanese people have become relaxed about this, but being on time remains important in Japanese society, where shinrai (trust) is key.
How to Be Punctual
Here are three ways to break a pattern of tardiness:
1. Set alarms
This might not be an easy thing to do if we are not organized, but the more we use alarms to get things done—and stick to the process—the more reliable this approach will become.
2. Write it down
Some of us need to physically record things to remember them. Note conversations and plans on your smartphone calendar and stick to them.
3. Anticipate delays
Think ahead and plan for the unexpected:
- Check the traffic and weather before leaving
- Make sure you have enough gas the night before
- Ensure that your commuter pass has adequate fare
- Have breakfast at home instead of along the way
- Leave earlier to avoid crowded roads or trains
- Always have a Plan B
- For online meetings, make sure that you are in front of the computer at least 10 minutes early
Sometimes, delays are unavoidable. What should you do when you are late?
1. Apologize
The first and most crucial thing to do is to apologize to your boss and colleagues. When we can’t arrive on time, someone else may have to cover our work. Our absence might have caused a huge problem for our colleagues, therefore the most important thing is to show them respect and apologize.
2. Explain
It is considered good manners in Japan to explain why we are late for work. But we need to be careful of what reason we give and avoid those which are too personal.
3. Update
While still in transit, it is important to state exactly what time we expect to arrive, as this will affect the efficiency of the workplace. Giving our superiors enough information is also a way to show our sincerity and that we care about the work. Upon arrival at the office, we should apologize directly to our superiors and again explain the reason for our tardiness. It is also advisable to apologize once again prior to leaving to show that we care about having inconvenienced others. By doing so, we can leave a good impression and build a better relationship with our superiors.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
Investing in Kochi Prefecture
For most, investing brings to mind index funds, real estate investment trusts, or property. But what about investing in the growth of your local community via beer, tourism, or fitness? In Kochi, on the island of Shikoku, three families are looking beyond plain profit as they seek to revitalize and secure the future of their communities in unexpected ways.
How three expat families are making a difference in rural Japan
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For most, investing brings to mind index funds, real estate investment trusts, or property. But what about investing in the growth of your local community via beer, tourism, or fitness? In Kochi, on the island of Shikoku, three families are looking beyond plain profit as they seek to revitalize and secure the future of their communities in unexpected ways.
Fitness Fans
Violet and Carlo Pacileo decided to move to Otoyo to help Violet’s mother restore the family’s land. But the enterprising duo decided they could do more.
“Aging populations, businesses dying out, houses being abandoned … these are issues all of Japan’s rural communities are facing. But seeing the impact firsthand in Otoyo was heartbreaking,” Violet explained.
Having spent her career analyzing businesses and investment potential, Violet quickly understood that the community needed an injection of private capital. “After years working for large financial institutions, this is my chance to give back to the community.”
The Pacileos recently received approval to start building a CrossFit box, in other words a barebones gym. While the idea is unconventional, they have done their research. “Shikoku doesn’t have a box yet and the weightlifting association in Kochi told us there are only two facilities where they can drop weights—and both are in public high schools,” Violet said. “I knew then that there would be a market, and that we had to get in while the fitness industry here is still in its infancy.” She expects their new business not only to bring fitness-loving visitors to Otoyo, but also to help improve health issues in the community.
Beer Brewers
Former California residents Kenneth and Masako Mukai moved to Niyodogawa-cho to start a brewery, which opened in November 2020. Although this may seem an odd thing to do in a village of 5,000 people, the Blue Brew Taproom is already a hit.
Kenneth explained that the brewery is having multiple positive effects on the local economy. “Our local post office gets more business from us shipping our products, and the local government receives tax funds from people buying our beer through the furusato nozei program. Sales at restaurants and hotels around us have gotten a boost, as our customers often stay nearby.”
The Mukais buy locally produced items such as tea, ginger, and Satsuma-imo (sweet potatoes), which they use as flavoring, and collaborate with six farmers to grow hops, creating a new market in the community.
They have many supporters among the owners of established businesses in the area, and their positive example has also brought about changes in the village government’s perception of investment from outside. “The chiiki-okoshi kyoryoku-tai program used to be closed to non-Japanese applicants, but, in April, the first American member was accepted and moved here with his family!” Kenneth said.
Hospitality Queen and Organic Farmer
Australian Rosie Moloney and her husband, Tsuyoshi, live in the 1,481-person village of Mihara. They know well the importance of leading by example and engaging with the community.
“When I first presented my plan to start a guesthouse, many locals asked, ‘Who would want to come here?!’” Rosie explained. “People can’t see the value of what they have, and it can take someone from outside to open their eyes and show them the opportunities outside the infamous box.”
Clearly, her guests agree. Rosie now runs two highly rated guesthouses in the Shimanto area, while also engaging in permaculture and helping with Tsuyoshi’s organic rice fields.
“I see such beauty, value, and potential here,” she said. “I started guesthouses to encourage the tourism industry and create new job opportunities.”
Many of Rosie’s guests—Japanese and those from abroad—stay for several days and contribute to the village economy through visits to restaurants and shops, as well as by booking outdoor activities. According to her, “Guests often say that the fondest memories of their trip are [those of] interacting with locals.”
Learn more about Kochi: visitkochijapan.com/en
Covid-related Financial Relief
As relief from economic and financial distress caused by the coronavirus pandemic, you may have received subsidies or grants from the national and/or local government. You may be wondering if you must declare this assistance on your income tax return. Here is a summary of tax treatment and revenue recognition timing published by the National Tax Agency of Japan.
What tax liabilities come with coronavirus help?
As relief from economic and financial distress caused by the coronavirus pandemic, you may have received subsidies or grants from the national and/or local government. You may be wondering if you must declare this assistance on your income tax return. Here is a summary of tax treatment and revenue recognition timing published by the National Tax Agency of Japan.
Non-Taxable
Payments received from the support fund set up in response to the new coronavirus (article 7 of the temporary special provisions of employment insurance)
Funds received from the allowance set up to support leave taken in response to the new coronavirus (article 7 of the temporary special provisions of the employment insurance law)
Special Fixed Amount Cash Payout (tentative name) of ¥100,000 per household member (article 4, paragraph 1 of the special measures concerning taxation regarding the coronavirus)
Special Cash Payout for Families with Children in Year 2020 (article 4, paragraph 2 of the act regarding coronavirus-related special taxation measures)
Emergency handouts to help support students (Article 9, Paragraph 1, Item 15 of the Income Tax Act
Temporary Special Cash Payout for Low Income, Single-Parent Households (Article 9, Paragraph 1, Item 17 of the Income Tax Act)
Provider Relief Fund related to the coronavirus (Article 9, Paragraph 1, Item 17 of the Income Tax Act)
Discount coupons provided as Support for Users of Company-Sponsored Babysitters (Article 9, Paragraph 1, Item 17 of the Income Tax Act)
Subsidy under the Babysitter Support Project of Tokyo (Article 9, Paragraph 1, Item 17 of the Income Tax Act)
Taxable
Treated as business revenue. Based on:
Payment decisions
- Covid-19 subsidies (for those who are self-employed and sole proprietors)
- Tokyo Metropolis Infection Spread Prevention Support Fund
Payment decision or expense incurment regarding:
- Employment adjustment subsidies
- Elementary school closure support
- Rent support
- Sustaining subsidies for small businesses
- Business continuity subsidies for agriculture, forestry, and fishing enterprises
- Subsidies for medical institutions and pharmacies helping to prevent coronavirus spread
Expenses incurred in connection with:
- Relief provided under the coronavirus-related supplementary aid to offset interest payments
Treated as Occasional Income
Occasional income (revenue–expenses, maximum ¥500,000 special deduction). Based on revenue recognition timing.
Covid-19 subsidies (for employment income earners)
- Payment decision
Go To Travel Campaign
- At end of travel or on use of coupon tickets
Go To Eat Campaign
- On use of meal tickets
Go To Event Campaign
- On use of event tickets
Treated as Miscellaneous Income
Based on revenue recognition timing.
Covid-19 subsidy (for miscellaneous income earners)
- Payment decision
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en