For corporate tax, corporations are divided into two categories: domestic corporations and foreign corporations. Domestic corporations are defined as all corporations that have their head offices in Japan. Also, subsidiaries of foreign corporations established in Japan are regarded as domestic corporations. Foreign corporations are those, which are not considered domestic, as well as branch offices or manufacturing plants set up in Japan by foreign corporations
[Japan Federation of Certified Public Tax Accountants' Associations, Guide to Japanese Taxes, 2018].
The tax base for determining corporate taxes stems from the income generated in the business year. The main types of corporate income tax in Japan are as follows:
- Corporation tax (national)
- Local corporate Tax
- Corporate inhabitant tax (prefectural)
- Corporate inhabitant tax (municipal)
- Enterprise tax (local)
- Special local corporate tax (national, but filings/payments are made to local governments with Enterprise tax)*
* JETRO, Taxes in Japan: Overview of Japanese Corporate Tax System for Investment in Japan
Effective Tax rates
On the basis of standard tax rates (Last update: May 2022)
|
|
|
Non-SMEs | ||
|
Business year base period |
Taxable income < 4 mln JPY |
Taxable income 4<>8 mln JPY |
Taxable income >8 mln JPY |
|
|
After April 1, 2021 to March 2025 |
21.37% |
21.37% |
33.58% |
29.74% |
|
April 1, 2025 |
25.84% |
27.55% |
33.58% |
29.74% |
Tax Burden on corporate income*
(April 2021-March 2025)
|
Taxable income |
< 4 mln JPY |
4<>8 mln JPY |
>8 mln JPY |
|
Corporate tax |
15.00% |
15.00% |
23.20% |
|
Local corporate tax |
1.55% |
1.55% |
2.39% |
|
Corporate Inhabitant taxes 1. Prefectural |
0.15% |
0.15% |
0.23% |
|
Corporate Inhabitant taxes 2. Municipal |
0.90% |
0.90% |
1.39% |
|
Enterprise tax |
3.50% |
5.30% |
7.00% |
|
Special local corporate tax |
1.30% |
1.96% |
2.59% |
|
Total tax rate |
22.40% |
24.86% |
36.80% |
*Based upon local rates applied in Tokyo as an example
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This is a national tax levied against profit after subtracting expenses (they will not be levied when loss is incurred) and through self-assessment. Due to the economic situation of Japan, the government has modified the fiscal legislation several times the past few years. Lowering the corporate... |
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Local Corporate Residential Tax Separately from the national corporate tax, companies registered in Japan are also subject to a local corporate residential tax payable to the local tax office where the company is registered as taxpayer. A combination of this tax and the municipal tax might result in a minimum of 2.6% up to a... |
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Even though Japan is know as a highly centralized state, local administrations have some discretion in setting their own taxation system. However, Japanese Law does not give broad possibilities of taxation for the local governments, they are only able to set a rate between a minimum and a maximum... |
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Enterprise taxes must be paid by individuals engaged in certain types of business that are specified in local tax law. Taxable income is normally calculated according to the provisions for income tax purposes, except where special stipulations apply. Returns must be submitted by the 15th March... |
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Prefectural and municipal per capita tax Inhabitant taxesInhabitant taxes are local prefectural and municipal taxes. These taxes are computed as a percentage of the national Corporation tax before tax credits. Each prefecture and municipality may select an Inhabitants Tax rate within the range shown below: Prefecture5% to 6% of the... |
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Foreign companies operating in Japan are liable for corporate income taxes only for that income which is coming from sources within Japan. In contrast, Japanese corporations are liable for corporate tax both on their Japanese source income and their foreign source income. [1] Tax notification... |
