(Uploaded:2025/8/22)

Tax Matters Regarding Company Dissolution and Liquidation

1. Introduction

Just as new companies are established, others cease to exist. If a company does not proceed in the imagined direction, dissolving the company must be considered as an option. The dissolution and liquidation of a company are legal procedures required to cease business operations. This process involves special tax treatment. Please note that the dissolution and liquidation of a company usually also require the support of a judicial scrivener, and the tax and legal procedures proceed simultaneously. This article provides an easy-to-understand explanation of key points regarding the tax matters of company dissolution and liquidation.

2. Explanation of Terms

First, let’s organize the important terms for understanding the company dissolution and liquidation procedures.

Dissolution: As a necessary procedure for the dissolution and liquidation of a company, dissolution is performed first. The company dissolves by a resolution of a shareholders’ meeting, etc., and by filing a registration of dissolution with the Legal Affairs Bureau, the company ceases business activities and transitions to the liquidation process. This is a legal procedure, not a tax procedure, but it will also affect tax procedures.

Finalization of Residual Assets: The assets that remain after selling the company’s property and finalizing the company’s debts are called “residual assets.” A dissolved company will finalize its residual assets.

Completion of Liquidation: After the residual assets are finalized and distributed, the registration for the completion of liquidation is filed. With this, the company ceases to exist.

3. Fiscal Year

The concept of the fiscal year also changes with the dissolution and liquidation of a company.

In the case of Kabushiki Kaisha

Dissolution Fiscal Year: The fiscal year that includes the date of dissolution will be from the start of the regular fiscal year (stated in the articles of incorporation) to the date of dissolution.

Liquidation Fiscal Year: The liquidation fiscal year is divided into one-year periods from the day after the dissolution. However, if the residual assets are finalized, the fiscal year will be until the date they were finalized.

In the case of Godo Kaisha

The dissolution fiscal year is the same, but the liquidation fiscal year will be from the day after the dissolution until the end of the regular fiscal year (stated in the articles of incorporation). Note that if the residual assets are finalized, the fiscal year will be until the date they were finalized, which is the same as for Kabushiki Kaisha.

4. Tax Procedures

The dissolution and liquidation of a company involve the following tax procedures.

Notification of Dissolution: Once the dissolution registration is complete, a “notification of change” stating the dissolution should be promptly submitted to the tax office, prefectural tax office, and municipal office.

Tax Return at Dissolution: A corporate tax return for the dissolution fiscal year will be filed.

Tax Return During Liquidation: A tax return is filed for each liquidation fiscal year.

Notification of Completion of Liquidation: Once the registration for the completion of liquidation is complete, a “notification of change” stating the completion of liquidation should be promptly submitted to the tax office, prefectural tax office, and municipal office.

5. Summary

The dissolution and liquidation of a company are complex processes that require legal and tax procedures. This article has provided an overview of how to proceed with the tax procedures smoothly. Regarding tax matters, this article does not explain it, but different rules from the norm apply to the calculation method of income, and therefore, specialized knowledge is required.

By properly carrying out these procedures, you can smoothly end the company’s business and avoid future problems. If you have any questions, it is recommended that you consult a professional such as a tax accountant.