News Details
2025.01.31
Handling of Losses Due to Credit Card Fraud under Corporate Tax Law
1. Introduction
In recent years, credit card fraud has been on the rise, affecting not only individuals but also corporations. For corporations, there are various cases of fraudulent use, such as employees misusing company credit cards or external third parties making unauthorized transactions. This article examines the handling of losses due to fraudulent use by external third parties under corporate tax law.
2. Tax Treatment / Considerations
Under corporate tax law, fraudulent usage amounts can be recorded as a deductible expense ('損金算入') at the time of occurrence. However, at the same time, since a right to claim compensation is also recognized, the same amount must be recorded as taxable income ('益金算入'). This is known as the 'simultaneous dual recognition approach' (同時両建説).
Later, if the claim cannot be collected, it can be recorded as a bad debt loss and deducted as a business expense.
Alternatively, instead of recognizing the claim at the time of fraud occurrence, taxable income may be recognized only when compensation is actually received. This is known as the 'deferred recognition approach' (異時両建説).
3. Measures to Prevent Fraudulent Use
To prevent fraudulent use, corporations should implement the following measures:
• Establish Internal Policies: Create clear policies regarding credit card usage.
• Employee Education: Ensure employees understand the policies and prevent improper use.
• Set Usage Limits: Define the purpose and spending limits for corporate credit cards.
• Monitor Transactions: Regularly review transaction details to detect suspicious activities.
• Enhance Security: Strengthen security measures to prevent credit card information leaks.
4. Conclusion
This article provided an overview of how losses due to credit card fraud are handled under corporate tax law. Please note that this explanation is a general summary and does not constitute professional advice. We strongly recommend consulting a professional before making any decisions based on this information.
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References
National Tax Agency Website
(Accessed: January 29, Reiwa 7)
(Accessed: January 29, Reiwa 7)
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