How to Prepare the Financial Statements and Tax Certificates Required for a Subsidy Application

This article explains, from a practical standpoint, how to prepare these two core documents, the common pitfalls, and how to work with Japan's tax authorities.

The Logic Behind Preparing a Subsidy Financial Statement

What is a subsidy financial statement?

A subsidy financial statement (決算報告書) is not the statutory financial statement you file with the tax office; it is a project-specific financial report tied to a particular subsidy project. It must show how the subsidy funds were actually used, how well the business outcomes match the expenditures, and whether any funds were diverted to other purposes.

Here is a real example: a Chinese-owned manufacturing company applied for the Monozukuri Subsidy (ものづくり補助金, the manufacturing subsidy) and received JPY 5 million. The financial statement had to account for every use of that JPY 5 million line by line—for instance, JPY 3 million for machinery and equipment, JPY 800,000 for staff training, JPY 1.2 million for software development, and so on. Every single expenditure had to be backed by invoices, contracts, and payment records.

The basic structure of the financial statement

A standard subsidy financial statement typically includes the following sections:

1. Business overview section

• Project name and the expected outcomes stated at the time of application
• A description of what was actually achieved (quantitative data matters most)
• For example: if you promised a "20% increase in production efficiency" at application, the financial statement must provide a before-and-after comparison of capacity data

2. Income-and-expenditure statement

• Subsidy income received
• Other self-financed amounts
• An itemized breakdown of all expenditures
• A final statement of the surplus or deficit

3. Supporting documents for expenditures

• All invoices (請求書) organized in chronological order
• Bank transfer records (振込明細)
• Purchase contracts or order confirmations
• Proof of receipt of goods or completion certificates

4. Deliverables or acceptance documents

• Photos and lists of the equipment purchased
• Completed project deliverables
• Attendance sheets and certificates from staff training

Key steps for preparing the financial statement

Step 1: Categorize the accounting throughout the project period

Starting from the very first expenditure, set up a dedicated cost-center code for the subsidy project in your company's accounting system. Do not wait until it is time to file to organize everything—that is when things easily get missed or muddled.

We recommend a format like this:

• Subsidy number–project category–month
• For example: CX2024-001-Equipment-202401

Step 2: Collect and keep evidence every month

The foremost principle in a Japanese tax review is "documentation above all." Without original evidence, no matter how good the numbers look, they will not pass. Specifically, keep:

• Original invoices or copies (請求書 paired with 領収書)
• Detailed bank transfer information when paying (including the description/摘要欄 field)
• If paying in cash (strongly discouraged), at minimum a receipt plus a signed acknowledgment from the department that used the funds

Step 3: Prove the cause-and-effect link between expenditures and outcomes

This is the area reviewers scrutinize most. For example, if you spent JPY 500,000 to buy an inspection instrument, the financial statement must explain:

• Why you needed the instrument (the specific production problem it solves)
• How it was actually used after purchase (frequency of use, projects it was involved in)
• The quantified effect it produced (the good-product rate rose from 85% to 92%)

Step 4: Reconcile the amounts

Finally, have an accountant or Zeirishi check every item one by one:

• Whether total expenditures reconcile with the bank account transaction history
• Whether any expenditures outside the subsidy's scope have been mixed in
• Whether consumption tax is handled correctly (Japanese subsidies are usually based on the pre-tax amount)

Obtaining and Preparing Tax Certificates

Types of Japanese tax certificates

There are four types of tax certificate commonly required for a subsidy application:

1. Corporate income tax certificate (法人税納税証明書)

• Proves that your company duly paid corporate income tax in a given fiscal year as required
• Must be applied for from the National Tax Bureau (税務署); it cannot be generated internally
• Processing time: available within 1–2 weeks after applying
• Fee: JPY 330 per copy

2. Consumption tax certificate (消費税納税証明書)

• Proves your company's consumption tax payment status
• Also applied for from the National Tax Bureau
• For tax-exempt businesses or businesses in a refund period, this certificate is especially important (it proves your exemption eligibility)

3. Local tax certificate (道府県税 and 市町村税 certificates)

• Covers the payment status of residents' tax (住民税) and enterprise tax (事業税)
• Applied for from the tax department of the municipality where your company is located
• Companies in Tokyo apply to the "都税事務所"; companies in other regions apply to the "県税事務所"

4. Wage payment report (給与支払報告書)

• Proves your number of employees and wage-payment status
• Some subsidies (such as employment subsidies) specifically require it

The correct procedure for applying for tax certificates

Step 1: Confirm the correct point in time

Subsidy applications usually require the tax certificate corresponding to your "most recently completed fiscal-year financial statements." For example:

• Your accounting year runs from January to December
• The tax certificate corresponds to the financial statements completed on December 31, 2024
• At the time of application, the status must already be "assessed as paid," which usually means you can only apply after March 15 (the corporate income tax filing deadline is March 15)

Step 2: Choose your application channel

In Japan, there are three ways to obtain a tax certificate:

| Application channel | Time | Fee | Best for | |--------|------|------|--------| | Tax office counter (税務署窓口) | Immediate | JPY 330/copy | Can be obtained on the spot | | Mail application (郵送申请) | 1–2 weeks | Plus postage | Regional companies or when time is ample | | eLTAX electronic application | 3–4 days | JPY 320/copy | Requires registering an eLTAX account |

Recommended approach: For companies in major cities such as Tokyo, Osaka, or Nagoya, applying directly at the National Tax Bureau counter is fastest. Bring:

• The company seal
• The agent's ID (if the applicant is not the company representative)
• The application form (blank forms are available at the counter)

Step 3: Applying for the local tax certificate

This step is often overlooked by Chinese business owners. You need to apply simultaneously to the municipal tax department; the procedure is similar to that of the National Tax Bureau. For example:

• A company in Koto Ward, Tokyo applies to the "江東区税務部資産税課"
• A company in Osaka applies to the "大阪市北区の市税事務所"

Handling common problem scenarios with tax certificates

Scenario 1: The company has been established for less than a year and cannot submit a tax certificate

Solution:

• Submit the company's certified copy of the commercial register (法人謄本) to prove the date of establishment
• Submit a bank balance certificate for the most recent month (預金残高証明)
• Submit a statement to the subsidy administration explaining that "the company has been established for less than a year and therefore no tax certificate exists"—this is usually exempted

Scenario 2: There are unpaid taxes due to business difficulties

The subsidy application will usually be rejected, but there is a remedy:

• Immediately reach an installment-payment agreement with the tax office (納税猶予制度, the tax deferral system)
• Explain to the subsidy department the measures you have already taken
• Some subsidies that support startups have a tolerance policy for this

Scenario 3: Do I need something like a "non-filers may not apply" certificate?

No separate application is needed. Obtaining the tax certificate is itself proof that you have fully filed with the tax office. As long as you can obtain the tax certificate, it demonstrates there is no non-filing issue.

Coordinating the Financial Statement and the Tax Certificate

These two documents must match perfectly in their logic; otherwise, the reviewer will ask for supplementary explanations:

Key matching points

1. Consistency of profit figures

The project income and expenditures shown in the subsidy financial statement, once consolidated into the annual overall statement, should yield a profit identical to the profit reported to the tax office (with a margin of no more than 1%).

Example:

• The subsidy project shown separately: JPY 1 million in expenditures, JPY 1.5 million in income, JPY 500,000 in project profit
• But the annual overall profit is only JPY 300,000
• How does the JPY 200,000 difference arise? You need to explain it in the financial statement (for example, other losses outside the project)

2. Completeness of expenditure evidence

For every expenditure listed in the subsidy financial statement, the corresponding original evidence—invoices, contracts, and so on—must also appear in the company's statutory books and form part of the calculation of taxable income.

In other words, there can be no expenditure that "appears only in the subsidy financial statement but cannot be found in the tax books."

3. Handling of consumption tax

This is the most error-prone area. Subsidies are usually based on the 税抜き (pre-tax) price, while your company's books may record the 税込み (tax-inclusive) price.

For example:

• You buy equipment: price JPY 1 million + JPY 100,000 consumption tax = JPY 1.1 million
• The subsidy amount is JPY 1 million
• The self-financed portion needs to be JPY 100,000 plus other matching funds

The financial statement must clearly indicate which amounts are tax-inclusive and which are pre-tax; otherwise, the numbers will not add up.

Frequently Asked Questions (FAQ)

Q1: Is a financial statement mandatory in a subsidy application? When does it need to be submitted?

A: When the financial statement is due depends on the type of subsidy. For reimbursement-type subsidies (where you invest your own funds first and receive the subsidy only after completion), the financial statement is mandatory and must be submitted within a specified period after the project is completed—usually 1–3 months after completion.

For advance-payment-type subsidies (where part of the funds is disbursed up front), a complete financial statement is also required at the final payment stage to reconcile how the funds were used. In practice, almost all subsidies require a final financial reconciliation; the only difference is the timing.

We recommend building the framework for the financial statement from the very first day the project starts, rather than scrambling to put it together at the deadline. The benefit of doing so is that you can catch problems and correct deviations in time, avoiding delays in subsidy payment caused by incomplete data. Some companies have had their subsidy payment pushed back by half a year because their financial statement was submitted late.

Q2: My company's accountant has already prepared the financial statements—why do I still need a separate "subsidy financial statement"? What is the difference between the two?

A: This is a common question among business owners, but the two really are fundamentally different. The statutory company financial statement (決算書) is based on the entire company's operating data for the whole year and reflects the company's overall financial position. The subsidy financial statement (事業報告書), by contrast, focuses only on how the funds from that one subsidy, and the corresponding project, were used.

Here is an example: your company had a JPY 500,000 loss for the year, but the subsidy project itself was profitable. In the statutory financial statement, the company as a whole is at a loss; but in the subsidy financial statement, this project must be shown as profitable on its own—that way the subsidy administration can see the subsidy really was used for the right purpose and produced the expected results.

In addition, the statutory financial statement involves all of the company's operating information, which may include sensitive competitive information; the subsidy financial statement reflects only the parts related to that project, offering better privacy protection. That is why a Zeirishi will generally prepare two separate documents.

Q3: Do I need to submit the original tax certificate? Can I use a copy or an electronic file?

A: Regarding the original-document requirement, the policy has now been updated. Since Japan launched reforms under the Digital Agency (デジタル庁), many subsidy applications now accept electronic tax certificates. Specifically, these include:

• PDF electronic version: a PDF tax certificate downloaded from the tax office's online system, bearing an electronic signature, is equivalent to the original
• Certified copy of the original: a certified copy is also acceptable
• eLTAX electronic data: if the data was obtained through the electronic application system, you can simply attach it directly

But there is one important prerequisite: the subsidy administration's application system must clearly state which forms are accepted. We recommend first checking the subsidy's "募集要項" (application guidelines) or confirming with the administration. When in doubt, preparing the original is the safest bet—that way you cannot go wrong under any circumstances.

For particularly large subsidies (for example, over JPY 5 million), some departments require verification of the original. So if you have already applied for a tax certificate, it is worth keeping every copy.

Q4: My company was established in June, and it is now December—can I apply for a subsidy? What tax certificate should I submit?

A: You can apply, but you must be especially careful in preparing the tax certificate. A company established for less than a year runs into an awkward situation when submitting a tax certificate: the National Tax Bureau cannot issue a "tax certificate" for you because there has not yet been a complete filing period.

There are two solutions:

Option 1 (recommended): Prepare the following alternative materials to explain to the subsidy department

• A certified copy of the company's incorporation register (法人謄本)—to prove the date of establishment
• The most recent month's bank account statement—to show the flow of funds
• An "accounting report" (決算見込み報告書) issued by an accountant or Zeirishi
• A "confirmation letter" (確認書) verifying with the tax office that prepaid taxes have been made

Many subsidy administrations have special rules for newly established companies and will accept these alternative materials. The key is to communicate with them before applying.

Option 2: Wait. If your company was established in the previous year (say, last June), you may already be able to file for the first half of this year's taxes and thus obtain a partial tax certificate. In that case, you can simply explain the "partial-year tax certificate" to the subsidy department.

Q5: If I find during the financial statement that expenditure evidence is incomplete (for example, a certain expenditure has no original invoice), can I still apply for the subsidy? How do I remedy it?

A: This is a practical problem many companies face. Doing business in Japan, especially when dealing with small subcontractors or sole proprietors, you will sometimes find the other party unable to provide a standard tax invoice (請求書). This situation is difficult but not impossible to remedy.

Remedial steps:

1. Trace the evidence immediately: Contact the other party and ask them to reissue an invoice or provide an explanatory statement. Most counterparts will cooperate, since they also need the record for their books. If it was a cash payment, ask the other party to write a "補正請求書" (corrected invoice).

2. Prepare an alternative evidence chain: If you cannot obtain the original invoice, at minimum prepare the following "evidence chain":

   • Bank transfer records (confirming the counterpart's account, 相手方の口座を確認)
   • Email correspondence between the two parties (メール交換) or Line chat records
   • Identity confirmation of the transaction counterpart (身分確認)
   • A receipt or signed acknowledgment for the payment

3. Explain to the Zeirishi or the subsidy application body: In the "notes" or "special remarks" section of the financial statement, candidly explain why the expenditure lacks an original invoice, and attach the evidence you do have along with an explanation of the remedial measures.

4. Worst-case contingency plan: If you truly cannot make up the evidence, the expenditure may be disallowed by the subsidy department, thereby reducing the subsidy amount you can receive. This is exactly why we emphasize completeness of evidence from the very beginning.

An example: a Chinese-owned logistics company that engaged several small fleets on an ad-hoc basis had some transactions without formal invoices; in the end, that portion was deducted during the subsidy review, and the company received 15% less subsidy than expected. Had they noticed this issue from the start, spending a little extra time to make up the paperwork would have avoided this loss.

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Final Advice

The financial side of a subsidy application may look tedious, but at its core it follows one principle: transparent, complete, and traceable. Japan's tax authorities and subsidy departments have accumulated highly mature review expertise over many years, and they can quickly spot anomalies and problems through financial data. Rather than trying to "handle things cleverly," it is better to operate by the book from the very start.

For Chinese-owned businesses in Japan, we recommend:

1. Set up a dedicated accounting system from the moment the project launches—do not wait until completion to organize it
2. Communicate with your Zeirishi or accountant once every month to confirm there are no deviations
3. Consult the subsidy department 1–2 months in advance to learn whether they have any special requirements for your materials
4. Keep the original or clear copies of all evidence—do not leave it to chance

If you still have specific questions about preparing a subsidy financial statement or applying for a tax certificate—especially if they involve your company's special circumstances (such as industry particularities, international transactions, or multi-location operations)—you are welcome to consult our subsidy expert team for free. We have over 10 years of experience handling subsidy financial reviews for Chinese-owned businesses, and we can help you avoid risks and secure your subsidy payment smoothly.