Understanding Commuting Allowance
The delivered rules for processing commuting allowance satisfy Japanese statutory and basic business process requirements. This section reviews some of the requirements and discusses in general terms how the rules satisfy them. A later section describes the individual elements of the rules.
This section discusses:
Frequency of commuting allowance.
Cash and non-cash commuting allowance.
Commuting allowance input methods.
Taxable and nontaxable commuting allowance.
Commuting allowance for multiple jobs.
Delivered commuting allowance earnings.
Frequency of Commuting Allowance
Global Payroll for Japan supports payment of commuting allowance in pay cycle frequencies of one day, one month, three months, and six months.
If the frequency is one day, the system calculates the monthly commuting allowance payment as the daily amount multiplied by the number of days worked.
If the frequency is one month, the system uses the amount as the monthly commuting allowance.
If the frequency is three months or six months, the actual payment is made only once for the three- or six-month period, but the system prorates and tracks the monthly value of cash and non-cash commuting allowance for monthly remuneration calculations.
Payment frequency depends on the data input method. For the total amount method, all components of an employee's commuting allowance must be paid on the same frequency. For the route method, each commuting route can be paid according to its own frequency.
Cash and Non-cash Commuting Allowance
PeopleSoft provides a page on which you enter the values for the following components of an employee's commuting allowance:
The array CM AR COMM ALLOW assigns these values to the appropriate variables.
The system uses the non-cash values that you enter only for purposes of income tax and monthly remuneration calculations. The non-cash amounts are not added to pay as an earning.
Commuting Allowance Input Methods
Global Payroll for Japan enables you to record commuting allowances by total amount or by commuting route. The system enables you to enter an employee's commuting allowance either as one total commuting amount based on pay cycle (the total amount method), or as separate commuting amounts based on route (the commuting route method).
The input method affects payment cycle and tax calculations. Employees opting for the amount method select one pay cycle in which all allowances are paid.
Employees opting for the commuting route method select one pay cycle for each route.
Taxable and Nontaxable Commuting Allowance
You must track the amount of taxable and nontaxable commuting allowance for income tax calculations. The statutory nontaxable amount (limit of the tax exemption) for the total commuting allowance (fare and toll) is the same for all employees. The amount is contained in variable CM VR NTAX ALW MX.
If the pay frequency is three or six months, the system calculates the maximum nontaxable amounts for the full term and applies those limits to the commuting allowance amounts for the full term.
Total Amount Input Method
The maximum nontaxable toll compensation varies by employee. You enter the value on the Commuting Allowance JPN page.
Global Payroll for Japan separately tracks amounts for fare and toll. The system first calculates the nontaxable toll amount by applying the individual limit. It then uses that figure to derive the total amounts of taxable and nontaxable commuting allowance compensation.
Route Input Method
When the commuting allowance input method of route is used, the system assumes that all allowances are nontaxable. It is your responsibility to determine whether the monthly totals are nontaxable. If an employee's commuting allowance nears the monthly nontaxable limit, or contains taxable commuting allowances such as first class passes, you should use the amount input method.
Commuting Allowance for Multiple Jobs
Global Payroll for Japan supports multiple jobs functionality. For employees with multiple jobs, the commuting allowance is calculated for each job, not for each employee. Likewise, the monthly nontaxable limit is applied for each job, not for each employee, as is described in the following examples.
A commuting allowance of 140,000 JPY is paid for employee Yuko Yoneda, who has one employment record number. The system will apply the monthly nontaxable limit to the employment record number and deduce that 100,000 JPY is nontaxable and 40,000 JPY is taxable.
Multiple Jobs Example
Kimi Kubota has two employment records, 1 and 2. A commuting allowance of 60,000 JPY is paid for employment record number 1. A commuting allowance of 80,000 JPY is paid for employment record number 2. The system will apply the monthly nontaxable limit to each employment record number and deduce that allowances are nontaxable. Notice that Kimi Kubota receives the same commuting allowance as Yuko Toneda in the preceding example. Kimi Kubota's allowances are nontaxable because each individual payment never exceeds the nontaxable limit.
Delivered Commuting Allowance Earnings
CM TAX ALW
Taxable commuting allowance.
CM NTAX ALW
Nontaxable commuting allowance.
CM TAX ADJ
Taxable commuting allowance adjustment.
CM NTAX ADJ
Nontaxable commuting allowance adjustment.
The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Japan. Instructions for running the query are provided in the PeopleSoft Global Payroll.