Is it true that
"sonkin and necessary expenses mean the same thing"?

“In the end, sonkin and necessary expenses are the same thing, right?” Whether you are a sole proprietor or the person in charge of a company’s finances, have you heard something like this?

Four tax terms, explained first

Here are plain-language explanations of the terms used in this article.

• Sonkin (deductible costs and losses) = the costs and losses subtracted from sales when calculating a company’s profit. A term used in the Corporation Tax Act.
• Necessary expenses (hitsuyō keihi) = the costs subtracted from revenue when calculating an individual’s income. A term used in the Income Tax Act.
• Ekikin (taxable revenue) = money that increases a company’s profit, such as its sales. A term used in the Corporation Tax Act.
• Total revenue (sō shūnyū kingaku) = the total of money that increases an individual’s income, such as sales. A term used in the Income Tax Act.

Conclusion

A company’s “sonkin” is defined by the Corporation Tax Act

The tax on a company’s profit is corporation tax. Article 22 of the Corporation Tax Act defines a company’s income as “the amount of ekikin less the amount of sonkin.”

内国法人の各事業年度の所得の金額は、当該事業年度の益金の額から当該事業年度の損金の額を控除した金額とする。

Reference translation (unofficial): The amount of income of a domestic corporation for each business year is the amount of ekikin for that business year less the amount of sonkin for that business year.

The wording is a little stiff, so here it is in plain terms: a company's profit is calculated by subtracting sonkin (costs and losses) from ekikin, such as its sales. [［1］](#ref-1)

Paragraph 3 of the same Article 22 also sets out what money counts as sonkin.

内国法人の各事業年度の所得の金額の計算上当該事業年度の損金の額に算入すべき金額は、別段の定めがあるものを除き、次に掲げる額とする。 一　当該事業年度の収益に係る売上原価、完成工事原価その他これらに準ずる原価の額 二　前号に掲げるもののほか、当該事業年度の販売費、一般管理費その他の費用（償却費以外の費用で当該事業年度終了の日までに債務の確定しないものを除く。）の額 三　当該事業年度の損失の額で資本等取引以外の取引に係るもの

Reference translation (unofficial): Except as otherwise provided, the amounts to be included in sonkin for a business year in calculating the income of a domestic corporation for that business year are the following: (i) the cost of sales, cost of completed construction, and other similar costs relating to the revenue of that business year; (ii) in addition to those in the preceding item, the amount of selling expenses, general administrative expenses and other expenses for that business year (excluding expenses other than depreciation for which the obligation has not become fixed by the last day of that business year); (iii) the amount of losses for that business year arising from transactions other than capital transactions, etc.

In plain terms: sonkin consists of costs such as purchases that correspond to sales, expenses such as selling and general administrative expenses, and losses arising from the company's transactions. However, the text says "except as otherwise provided," so anything that another provision says "cannot be subtracted" cannot be subtracted. [［1］](#ref-1)

Paragraph 4 of Article 22 also sets out how the amounts are calculated.

第二項に規定する当該事業年度の収益の額及び前項各号に掲げる額は、別段の定めがあるものを除き、一般に公正妥当と認められる会計処理の基準に従つて計算されるものとする。

Reference translation (unofficial): Except as otherwise provided, the amount of revenue for that business year referred to in paragraph 2 and the amounts listed in the items of the preceding paragraph are to be calculated in accordance with generally accepted fair and appropriate accounting standards.

In plain terms: the amounts of ekikin and sonkin are calculated in accordance with generally accepted fair and appropriate accounting standards (the rules of accounting). You cannot decide the amounts as you please. [［1］](#ref-1)

An individual’s “necessary expenses” are defined by the Income Tax Act

The tax on the income of individuals such as sole proprietors is income tax. Article 37 of the Income Tax Act defines necessary expenses as follows.

その年分の不動産所得の金額、事業所得の金額又は雑所得の金額（事業所得の金額及び雑所得の金額のうち山林の伐採又は譲渡に係るもの並びに雑所得の金額のうち第三十五条第三項（公的年金等の定義）に規定する公的年金等に係るものを除く。）の計算上必要経費に算入すべき金額は、別段の定めがあるものを除き、これらの所得の総収入金額に係る売上原価その他当該総収入金額を得るため直接に要した費用の額及びその年における販売費、一般管理費その他これらの所得を生ずべき業務について生じた費用（償却費以外の費用でその年において債務の確定しないものを除く。）の額とする。

Reference translation (unofficial): Except as otherwise provided, the amounts to be included in necessary expenses in calculating the amount of real property income, business income or miscellaneous income for a year (excluding business income and miscellaneous income relating to the felling or transfer of timber, and miscellaneous income relating to public pensions, etc. prescribed in Article 35, paragraph 3 (Definition of Public Pensions, etc.)) are the cost of sales relating to the total revenue of that income and other expenses directly incurred to obtain that total revenue, and the selling expenses, general administrative expenses and other expenses incurred in that year for the business that generates that income (excluding expenses other than depreciation for which the obligation has not become fixed in that year).

In plain terms: for an individual's business income and similar income, necessary expenses include the cost of sales, costs directly incurred to earn the sales, and business expenses such as selling and general administrative expenses. This provision also says "except as otherwise provided," and the Income Tax Act sets what can be subtracted. [［2］](#ref-2)

As you can see, Article 22, paragraph 3 of the Corporation Tax Act and Article 37, paragraph 1 of the Income Tax Act list very similar types of costs that can be subtracted (cost of sales, selling expenses, general administrative expenses and so on). The texts themselves show that the underlying idea is the same.

Pitfalls in telling them apart

There are three more points to watch.

The first is that sonkin is a tax term and is not the same as an accounting term. Financial statements show “expenses” and “losses,” and some of them do not become sonkin as they are. When filing the return, the differences between accounting and tax are adjusted.

The second is that, even for the same kind of expense, whether it can be subtracted is decided by separate rules. Both Article 22, paragraph 3 and Article 37, paragraph 1 begin with “except as otherwise provided.” For example, the rule that entertainment expenses are not included in sonkin (Article 61-4 of the Act on Special Measures Concerning Taxation) applies only to corporations. There is no equivalent cap on a sole proprietor’s necessary expenses. ［3］

The third is separating household costs from business costs. Household-related expenses, such as household expenses, specified in Article 45, paragraph 1, item 1 of the Income Tax Act cannot be included in necessary expenses. It is important to separate in your books how much is a business cost. ［4］

What to do

Summary

The rumor that “sonkin and necessary expenses are the same” is half true. The idea of subtracting costs from sales to arrive at profit is the same. However, sonkin is a term of the Corporation Tax Act and necessary expenses is a term of the Income Tax Act, and each law sets what can be subtracted. Using the terms correctly makes both your books and your tax return easier to read.

Sources

• ［1］Corporation Tax Act, Article 22 (e-Gov Law Search, Japanese)　Checked: 2026-10-11
• ［2］Income Tax Act, Article 37 (Necessary Expenses) — e-Gov Law Search (Japanese)　Checked: 2026-10-11
• ［3］Act on Special Measures Concerning Taxation, Article 61-4 (e-Gov Law Search, Japanese)　Checked: 2026-10-11
• ［4］Income Tax Act, Article 45, paragraph 1 (e-Gov Law Search, Japanese)　Checked: 2026-10-11

Note: This article is based on laws and official information as of October 11, 2026. It is a translation of the Japanese original; if the two differ, the Japanese version prevails. Quotations from laws and official sources are given in the original Japanese, followed by unofficial reference translations. Sources are based on laws (e-Gov) and official materials of the NTA, all in Japanese. If a correction is needed after publication, a correction record will be added at the end of this article (Correction policy).