Corporate Finance Hacks 2026: Per Diems and Used Cars

1. Daily allowances under travel expense regulations: moving money from the company to you, tax-free

Among corporate hacks, the most efficient and fully legal one is the "daily allowance (travel per diem)" paid under a company's travel expense regulations. If a company establishes travel expense regulations and pays a daily allowance that is reasonable by generally accepted social standards each time an employee travels for business, three things happen simultaneously (Income Tax Act Article 9; Income Tax Basic Circular 9-3).

In other words, paying the same amount as salary would trigger income tax, resident tax, and social insurance premiums, but a daily allowance lets you move cash from the company to an individual with no tax and no social insurance attached. Even a one-person company with no employees is fine as long as the regulations state clearly that "all officers and employees are covered" — it does not matter that, in practice, only the president is covered.

This technique assumes you already have a corporation. The break-even point for a sole proprietor considering incorporation is covered in the timing of incorporation.

2. "100% first-year depreciation" on a 4-year-old used car — but it's a "deferral," not a saving

A long-standing move for when a fiscal year closes with a large profit is buying a 4-year-old used car. A new (standard-size) car has a statutory useful life of 6 years, but used assets have their useful life recalculated under a "simplified method" (NTA Tax Answer No. 5404).

For the basics of depreciation, see Basics of depreciation; for the expanded special provision letting you expense assets under ¥400,000 in one go, see the special provision for small-sum depreciable assets (¥400,000).

3. Short-term prepaid expenses: compress this year's profit by paying a year in advance

When you have cash to spare, a deferral tactic is the "special treatment for short-term prepaid expenses." Recurring service costs such as rent, insurance premiums, server fees, and subscriptions are ordinarily expensed month by month over the period used. However, if you pay in a lump sum for a service you will receive within one year of the payment date and continue to apply the same treatment going forward, you may expense the entire amount in the fiscal year you pay it (Corporation Tax Basic Circular 2-2-14).

If you make a lump-sum, one-year advance payment of rent, insurance premiums, or subscriptions in your closing month, you compress this year's profit by that amount. The requirements are: (1) the service must be received within one year, (2) the same treatment must continue every year (applying it only in profitable years is not allowed), and (3) the service must be uniform in quality and quantity, like rent. Costs that should be matched against revenue (such as interest expense on funds channeled into investment) are excluded.

4. The "¥10,000 rule" for entertainment expenses: meals with outside parties are fully deductible up to ¥10,000 per person

An everyday deduction that is easy to overlook is the reform that took effect in April 2024. Meal expenses with people outside the company can be classified as "meeting expenses" and fully deducted — rather than as "entertainment expenses" for tax purposes — as long as the cost is ¥10,000 or less per person, even if the purpose is client entertainment (the previous threshold was ¥5,000; this applies to expenditure from April 1, 2024 under the Act on Special Measures Concerning Taxation). Because this is a separate allowance from the SME entertainment-expense deduction cap (up to ¥8 million a year, or 50% of meal-related entertainment costs), the total amount you can effectively expense has expanded.

5. Watch for the "countermeasure": going too far always gets shut down

Once a legal hack spreads widely, the government eventually amends the law to shut down excessive tax avoidance. A symbolic case is the Business Safety Mutual Aid (Small Enterprise Mutual Relief System for the Prevention of Bankruptcies). Because premiums are fully deductible and 100% of them is refunded if you cancel after 40 months or more, a deferral loop of "cancel and offset it against a large expense, then immediately re-enroll" had become widespread.

In response, for cancellations on or after October 1, 2024, premiums paid within two years of the cancellation date can no longer be deducted as a loss or a necessary expense (Small and Medium Enterprise Agency). It is a clear rejection of pure tax-deferral loops. The proper use of the system is explained in the Business Safety Mutual Aid.

Summary

• Daily allowances under travel expense regulations are fully deductible for the company, tax-free for the recipient, and excluded from the social insurance premium base.
• The regulations must cover all directors and employees; paying only directors or extreme differences in amounts is treated as directors' bonuses.
• A 4-year-old used car has a 2-year useful life, so buying it at the start of the year expenses it all that year, but it is a deferral taxed when you sell.
• Short-term prepaid expenses require paying annually for services within one year and continuing every year, and a large amount of cash leaves your hands.
• Meals with outside parties of ¥10,000 or less per person are fully deductible as meeting expenses, and for the Business Safety Net Mutual Aid cancelled on or after October 1, 2024, 2 years of premiums are not deductible.