The Journal The Authority on Global Business in Japan

People drive business. Without them, a business cannot succeed. While this has always been true on a local level, the combination of rapid growth in emerging markets and employee shortages in developed markets is creating the need to recruit from afar. In this world, the ability to manage global talent mobility is the difference between success and failure.

To help grow overseas business, Japanese manufacturers are sending hundreds of employees on short-term secondment to subsidiaries within the Asia–Pacific region to train and educate local staff. In some situations, these workers will be taxed by the local authorities. It is critical that businesses understand the tax impact of such moves.

For example, Indian companies operating in Japan must run multiple salary simulations for hundreds of employees to ensure that certain net amounts are guaranteed for their employees on assignment from India. These arrangements and simulations require what is often referred to as tax gross-up calculations.

When running tax gross-up calculations, it helps to think back to Calculus 101. If you did not rely too much on your scientific calculator, you will remember that convergence, in mathematical terms, is the property of approaching a limit more and more closely as a variable of the function increases or decreases. For example, the function y = 1/x converges to zero as x increases. Although no finite value of x will cause the value of y to actually become zero, the limiting value of y is zero because y can be made as small as desired by choosing a sufficiently large value for x.

Under tax equalization arrangements and contracts with guaranteed net amounts, an employer will pay an employee’s taxes. This becomes taxable income for the employee, which further increase the taxes to be paid by the employer. The result is a tax-on-tax computation that requires repeated runs with new values.

Tax-on-tax computations involved in tax gross-up, however, are unique in that certain value ranges for x can equal y to a finite value. This happens because, for income tax purposes, taxable income is rounded down to the nearest thousand and regular tax liability is rounded down to the nearest hundred.

For example, the Excel function y = ROUNDDOWN(1/x, -3) will result in zero when x is over 0.001 because any result under 1,000 is rounded down to zero. A macro that includes a well-designed mathematical formula and Excel function will allow for any tax gross-up to be processed in volume.

Actual calculation is complex due to the effect of inhabitant tax, which is based on the prior year’s income. In another word, this year’s income will determine how much inhabitant tax must be paid next year. Social security, which requires unique calculation, adds further complexity.


Tosh Kamii is a partner at Grant Thornton Japan’s Human Capital Services, providing payroll, compensation, and benefits solutions to foreign businesses. He is also a practice leader for
Global Mobility Services, providing income tax and social security solutions for international assignees and global businesses.

For more information, please contact your Grant Thornton representative at +81 (0)3 5770 8829 or email us at

Tosh Kamii is a partner at Human Capital Services, Grant Thornton Japan
A macro that includes a well-designed mathematical formula and Excel function will allow for any tax gross-up to be processed in volume.