Question

What are the effective corporate tax rates in Japan?

Answer

The Japanese government has adopted a policy to lower the effective corporate tax rates in the coming years. For FY 2015 corporate tax rates were lowered from 34,62% to 32,11%. In FY 2016 they will decrease further to 29.97%.

For SMEs, i.e. companies capitalized at less than 100 million yen, special treatment exists. The government currently employs a special tax benefitis program, where corporate taxation is lowered to 15% from the usual 19%. This program is extended for another two years from April 2015 onwards, until March 2017

Sources: Ernst & Young Tax. Co., Japan tax Newsletter: 2016 Tax reform outline (February 2016), Ministry of Finance, Heisei 28 nendo zeisei kaisei (An) (February 2016) (Japanese)

Question

How do I avoid double taxation?

Answer

If your income is taxable in Japan and you wish to prevent being tax for your income in Japan again, or vice-versa you will need to notify the tax authorities. One of the first things you need to do is to check whether your country of residence has concluded a tax treaty with the other country. For a list of EU countries that have concluded tax treaties with Japan can be found here.

You wish to be taxed on your Japanese income in your country:

- You will have to notify the Japanese tax authority that you are a resident in your country, please consult with your local tax office.

You wish to be taxed on your Japanese income in Japan:

- You will have to notify the tax authority in your country that you are a resident there. You can apply for a document certifying that you are a resident of Japan, using this form at the tax office for the area that you live.

Question

What is the Consumption Tax rate in Japan?

Answer

The Consumption Tax rate in Japan. Is 8% at the moment. An increase of this rate to 10% and the introduction of a diversified tax rate for daily essentials were scheduled for April 2017, but were postponed for a second time  by the government over worries of an economic downturn. The increase is now scheduled for October 2019. 

Question

What are the rules regarding travel and commuting allowances and taxation in Japan?

Answer

Allowances and income tax

The allowances paid to employees are usually regarded as part of their income and therefore taxable. However, normal expenses to a certain amount for business-travel and commuting are usually non-taxable.

Nontaxable allowances are:

  • Commuting allowances up to a certain amount:
    • Public transportation: Using the most economical route, to a maximum of 150.000 JPY per month. (Upper class costs for Shinkansen (green cars) not included)
    • Private transportation: The total of expenses up to 150.000 JPY per month for
      • The amount for regular monthly commuter tickets when using public transport
      • The maximum amounts paid for one-way distance for travelling to work by private means

One way commuting distance

Maximum monthly amount

Less than 2 kilometers

Fully taxable

2-10 kilometers.

4,200JPY

10-15 kilometers

7,100 JPY

15-25 kilometers

12,900 JPY

25-35 kilometers

18,700 JPY

35-45 kilometers

24,400 JPY

45-55 kilometers

28,000 JPY

More than 55 kilometers

31,600 JPY

Source: NTA

  • Travel costs for business trips or job transfers, which have been designated as normally necessary costs
  • Allowances for night or day duties up to a certain amount.

Commuting and business travel allowances and VAT

Normal domestic travel expenses, hotel costs and daily allowances paid to cover employees costs are taxable for VAT. However expenses made for business travel abroad are not taxable.

Expenses made for commuting within the normal range are also VAT taxable for the whole amount.

Source: NTA

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