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Tax rates in Japan

Tax Rates

Consumption Taxes

Nature of the Tax
Shouhizei (Consumption Tax)
Tax Rate
10% (7.8% national tax and 2.2% local tax)
Reduced Tax Rate
Supplies of food and drinks (excluding alcoholic beverages and dining out) and subscriptions to newspapers (limited to those issued at least twice a week and featuring information on general topics such as politics, economics, society, and culture) are subject to a reduced tax rate of 8%, comprising 6.24% for national tax and 1.76% for local tax.
Other Consumption Taxes
Excise taxes are imposed on gasoline, aviation fuel, tobacco, and liquor.
Stamp duties of JPY 200 to JPY 600,000 are imposed on the execution of taxable documents.
Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.
Vehicle taxes are applied locally.

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Corporate Taxes

Company Tax
23.2%
Tax Rate For Foreign Companies
Resident companies are taxed on their worldwide income whereas non-resident companies are taxed only on Japanese-source income at standard corporate rates. A foreign corporation with a permanent establishment in Japan is liable for corporate income taxes only on the income attributable to such permanent establishment.
Branch profits are subject to taxation similar to corporate profits. However, the family corporation tax does not apply to branches of foreign corporations. Moreover, there is no withholding tax levied on the repatriation of branch profits to the home office.
Capital Gains Taxation
Capital gains and losses are treated as ordinary income and losses, respectively.
Gains from the sale of stock are taxed at a total rate of 20.315%, comprising 15.315% for national taxes and 5% for local taxes. Gains from the sale of real property are taxed at a total rate of up to 39.63%, which includes 30.63% for national taxes and 9% for local taxes, depending on various factors.
In specific situations, such as qualified reinvestments or property exchanges, the taxes typically imposed on capital gains can be deferred, known as rollover relief, provided certain conditions are satisfied. Special relief is available when real property is expropriated by the national or local government. Additionally, the recognition of capital gains or losses from transferring certain assets between group companies is deferred until the asset is transferred to a company outside the group.
Main Allowable Deductions and Tax Credits
In order to file for tax privileges - including deductions for business expenditure, tax loss carryforwards and accelerated depreciation - companies must apply for a "blue form" tax return at the beginning of a fiscal year.
Reserves for doubtful receivables and returns of goods not sold are deductible for corporate tax purposes. Deductions are also available for charitable contributions (up to certain limits). Start-up expenses are allowed to be amortised on a voluntary basis. Interest expenses are generally deductible in the calculation of taxable income but interest payments to related parties within the corporate group may be disallowed in certain cases..
Generally, entertainment expenses are not deductible for tax purposes. However, SMEs, defined as companies with paid-in capital of JPY 100 million or less (excluding those wholly owned by a company with paid-in capital of JPY 500 million or more), can take a tax deduction up to the lesser of the actual entertainment expense or JPY 8 million. Additionally, expenses for eating and drinking are deductible as long as they do not exceed JPY 5,000 per person (excluding expenditures for internal purposes), since these do not classify as entertainment expenses for tax purposes.
The remuneration paid to directors is deductible only in specific cases. Enterprise tax and business premises tax are deductible in the calculation of the taxable income.
Only 50% of a company’s taxable income may be offset by net operating losses (NOLs). SMEs with share capital of no more than JPY 100 million are exempt from this NOL restriction, unless they are owned by a large company. NOL carryforwards may face further restrictions in certain situations, such as a change in ownership of more than 50% in connection with the discontinuance of an old business and the commencement of a new one. The NOL carryforward period is 10 years for losses incurred during fiscal years starting on or after 1 April 2018. SMEs are allowed to carry back losses for one year.
95% of dividends received by a company from a foreign company in which it has held at least one-fourth of the outstanding shares for an uninterrupted period of at least six months can be excluded from the company’s taxable income.
Various tax credits are available, including a research and development (R&D) credit and a carbon neutral credit. Tax incentives are also offered for increasing wages and salaries for fiscal years starting between 1 April 2022 and 31 March 2024. However, the R&D credit and certain other tax incentives are not available to large companies that do not meet specific conditions for fiscal years starting between 1 April 2018 and 31 March 2024.

For further information on tax incentives, consult the website of JETRO (Japanese External Trade Organization).
Other Corporate Taxes
Stamp duty ranging from JPY 200 to JPY 600,000 is imposed on the execution of taxable documents.

An annual fixed assets tax is levied by local tax authorities on real property and depreciable fixed assets used for business purposes. Real property is taxed at 1.7% of its value, as appraised by the local tax authorities. The tax on depreciable fixed assets is assessed at 1.4% of the cost after statutory depreciation. For certain fixed assets acquired by 31 March 2025 under an accredited plan, the taxable basis for small and medium-sized enterprises will be reduced by one-half or one-third.

A prefectural real estate acquisitions tax of 3% to 4% (generally reduced to 1.5% to 2% through 31 March 2024) is applied to the assessed value when land or buildings are acquired. Additionally, a real estate registration tax is imposed on the assessed value of real property at rates ranging from 0.4% to 2%, depending on the type of transfer.

Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.

Business premises tax is levied and designated by certain cities in Japan, including Tokyo, Osaka, Nagoya, Fukuoka, and other cities with populations exceeding 300,000. Corporations using business premises larger than 1,000 square meters and/or employing more than 100 people in a designated city are required to pay this tax. The tax is based on the physical footprint of the business (JPY 600 per square meter) and the gross payroll (0.25% of gross payroll).

Social security contributions paid by the employer amount to a maximum of 16.23%.

If an individual shareholder, along with family members, holds over 50% of a Japanese corporation's total issued shares or voting rights, whether directly or indirectly, the corporation is categorized as a family corporation, except for those with paid-in capital of JPY 100 million or less, and is subject to both corporation tax and family corporation tax. The family corporation tax is applied to the corporation's undistributed current earnings exceeding specified limits, calculated by deducting 40% of income, JPY 20 million, or 25% of the year-end capital amount minus capital reserves, from the undistributed current earnings. The tax rates are 10% for the first JPY 30 million of undistributed earnings annually, 15% for the next JPY 70 million, and 20% for amounts exceeding JPY 100 million annually.

Other Domestic Resources
National Tax Agency

Country Comparison For Corporate Taxation

  Japan OECD United States Germany
Number of Payments of Taxes per Year 19.0 10.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 128.5 163.6 175.0 218.0
Total Share of Taxes (% of Profit) 46.7 41.6 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Taxable Income Rate
Less than JPY 1.95 million 5%
 From JPY 1.95 to 3.3 million 10% + JPY 97,500
From JPY 3.3 to 6.95 million 20% + JPY 232,500
From JPY 6.95 to 9 million 23% + JPY 962,500
From JPY 9 to 18 million 33% + JPY 1,434,000
From JPY 18 to 40 million 40% + JPY 4,404,000
More than JPY 40 million 45% + JPY 13,204,000
Special Tax for Reconstruction Assistance will be applied from 2013 to 2037 (to help with Tohoku earthquake disaster recovery) 2.1% of income tax
Local Inhabitant’s Tax 10%, levied on a taxpayer’s prior year income.
The standard annual amount is JPY 5,000.
Non-residents' Employment Income Flat 20.42% national income tax on gross compensation (including the 2.1% surtax; no deductions available)
plus
10% local inhabitant’s tax (if registered as a resident as of 1 January of the current year).
Allowable Deductions and Tax Credits
Deductions include: personal allowances with additional allowances for dependents, casualty losses, medical expenses and contributions to government authorities.
Charitable contributions approved by Japan's Ministry of Finance are eligible for tax deductions, with specific restrictions (typically limited to charities within Japan). Qualified contributions or donations totaling over JPY 2,000 are deductible for national tax purposes, capped at 40% of income, minus JPY 2,000. However, the criteria for qualifying contributions are highly stringent. Life insurance (or private pension) premiums paid to a Japanese agency in local currency are deductible to a limited extent in computing national and local taxes. Earthquake insurance premiums are also deductible for the purpose of both national and local taxes to a limited extent.
Employees can claim an earned income deduction according to their level of income (capped at JPY 1.95 million; minimum JPY 550,000 or gross employment income, whichever is lower).
Personal exemptions are allowed for the individual (up to JPY 480,000 for the national tax and JPY 430,000 for local inhabitant tax, for an income below JPY 24 million), a non-dependent spouse (but only by individuals with an income below JPY 10 million), and children aged 16 or older (provided that their income does not exceed JPY 480,000/year). 
A self-employed taxpayer is allowed to claim business expenses against income if he can prove that the expenses were necessary.
Special Expatriate Tax Regime
Resident individuals are taxed on their worldwide income. Non-permanent residents are taxed on their Japanese-source income and on foreign-source income paid in or remitted into Japan. Non-residents are taxed on their Japanese-source income.
A rate of 20.42% applies to non-residents' employment income, which includes the 2.1% surtax. A non-resident taxpayer may be subject to the local inhabitant’s tax (10%) if they are registered as a resident as of 1 January of the relevant year.

Foreign tax credits are provided for resident taxpayers on foreign-source income, though generally limited to the lesser of foreign income tax paid or the Japanese tax payable on the income base.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of Japan's tax conventions
Withholding Taxes
Dividends: a standard withholding tax of 20% applies to dividends paid to both residents and nonresidents. However, dividends paid by a listed company to nonresident companies are taxed at a reduced rate of 15%. Similarly, dividends paid by a listed company to a resident or nonresident individual holding less than 3% ownership in the company incur a 15% tax rate (plus a 5% local inhabitants tax for resident individuals). With a 2.1% surtax, the effective rates become 20.42% and 15.315%, respectively. These rates may be further reduced under relevant tax treaties.
Interest: typically, no withholding tax is levied on loan interest paid to a resident company. However, interest on loans from resident individuals and nonresidents is generally subject to a 20% withholding tax. Interest on deposits and bonds is taxed at a rate of 15% for both residents and nonresidents. Certain interest payments on government bonds to specific nonresident trust companies and financial institutions are exempt from withholding tax. With a 2.1% surtax, the effective rates become 20.42% and 15.315%, respectively. These rates may be lowered under applicable tax treaties.
Royalties: if paid to a resident company, royalties are not subject to withholding tax, while those paid to nonresidents face a 20% withholding tax, with a 2.1% surtax increasing the effective rate to 20.42%. However, this rate may be lowered under relevant tax treaties. Royalties paid to resident individuals are subject to a 10% withholding tax (10.21% including surtax) on amounts up to JPY 1 million, and 20% (20.42%) on amounts exceeding JPY 1 million.
Rates may be lowered under a tax treaty.

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Sources of Fiscal Information

Tax Authorities
National Tax Agency
Other Domestic Resources
National Tax Agency - Tax information

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Latest Update: April 2024