(Uploaded: 2024/7/5)

What is Shataku (company-provided housing)?

“Shataku(社宅)” means company-provided housing, a welfare benefit system where a company provides housing to its directors and employees. There are two types of company-provided housing: “company-owned housing,” where the company owns the building, and “leased housing,” where the company rents the property and sublets it to employees. This system offers benefits for both the directors/employees and the company. This article will focus on the more common “leased housing”.

Benefits for the Company

1. Tax Savings from Increased Expenses: The company can record the rent for company-provided housing as an expense, reducing its corporate tax burden. Although the directors or employees usually bear the rent, the company can expense it by covering the cost. Some might think it’s a loss for the company to pay the rent, but this will be explained with examples later.

2. Reduction in Social Insurance Premiums: As will be explained later with examples, the company’s burden of social insurance premiums can decrease (depending on how salaries are set).

3. Employee Recruitment and Retention: Enhancing welfare benefits contributes to recruitment efforts and improves employee retention rates.

Benefits for Directors and Employees

1. Reduction in Tax and Social Insurance Premiums: The economic benefit of having the company cover the cost of company-provided housing is not taxed as income, thus reducing the burden of income tax, resident tax, and social insurance premiums. As a result, the take-home income increases.

Points to Note

1. Collecting a Certain Amount of Rent: The company needs to collect at least 50% of “the equivalent rent” from directors or employees. “The equivalent rent” is not necessarily the actual rent, and detailed calculations are required, but under tax rules, a safe percentage is 50%. In many cases, the percentage will be lower with detailed calculations (about 10-30%).

2. Contract Rules: The company must contract the housing. Directors or employees planning to live there cannot make the contract.

3. Limitation on Housing Selection: The housing is limited to properties prepared and contracted by the company. Employees cannot freely choose their rooms.

4. Burden Beyond Rent: Utility costs, such as water and electricity, are borne by the directors or employees living there.

5. Establishing Internal Regulations: Without rules, arbitrary use of the company-provided housing system can cause issues. Therefore, internal regulations (社内規定) should be established.

Example

For example, if the company pays a monthly rent of 120,000 yen and collects 50,000 yen from the employee (deducted from the employee’s salary), 70,000 yen becomes the company’s expense. Increased expenses reduce the company’s corporate income tax. Additionally, instead of the company bearing this extra 70,000 yen, the employee’s salary is reduced by 70,000 yen. If the salary was 500,000 yen monthly, it is reduced to 430,000 yen. Consequently, compared to the previous 500,000 yen, social insurance premiums and income tax/resident tax on the 430,000 yen are reduced. In conclusion, considering the 70,000 yen rent covered by the company, the employee’s take-home amount increases compared to when the salary was 500,000 yen. This is because the 70,000 yen paid by the company is not subject to social insurance premiums, income tax, and resident tax. Additionally, since the company shares the burden of social insurance premiums, the premiums also decrease.

Summary

When properly operated, the company-provided housing system can offer tax and social insurance premium reduction benefits for both the company and employees. However, introducing the system requires careful consideration, such as collecting an appropriate percentage of the rent. It is important to design and operate the system according to the company’s actual situation. Considering the company-provided housing system as a means to enhance employee welfare while reducing the company’s tax burden could be beneficial.