Taxes in Japan

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Many of you may think that the tax you pay is high.

But you might not recognize what kind of taxes you are imposed.

In this page, you will figure out what they are in general.

Please be noted that the taxes stated below are for SMEs (Small & Medium sized Entities).

Corporate tax(法人税)

Corporate tax is imposed on taxable income of a company at the following tax rates;

  • Taxable income up to 8 Million JPY in a year : 15.0%
  • Taxable income in excess of 8 Million JPY in a year : 23.4%※

※It will be reduced to 23.2% for FY beginning on or after April 2018.

Local corporate tax(地方法人税)

Local corporate tax is collected as national tax and is allocated to local governments in order to decrease the gap in tax revenue between urban and rural areas.

This tax is 4.4% of the basic Corporate tax amount (slated to increase to 10.3% for FY beginning on or after October 2019).

Local inhabitant tax(法人住民税)

Local governments impose the Local inhabitant tax for services rendered for residents.

The tax consists of two elements;

  • an income tax calculated based on the Corporate tax(法人税割)
    ⇒This tax is 12.9% of the basic Corporate tax amount (slated to decrease to 7.0% for FY beginning on or after October 2019).
  • a per capita tax(均等割)
    ⇒The amount of the Per capita tax is determined based on Capital amount and the number of employees.
Number of employees Capital amount
10 Million JPY or less over 10 Million JPY
  50 or less 70,000 JPY 180,000 JPY~
  over 50 140,000JPY 200,000 JPY~

Business tax(事業税)

Business tax is imposed on the taxable income of a company.

Taxable income Standard tax rates
In excess of Up to Present FY beginning on
or after Oct. 2019
4 Million JPY 3.4% 5.0%
4 Million JPY 8 Million JPY 5.1% 7.3%
8 Million JPY 6.7% 9.6%

Special local corporate tax(地方特別法人税)

Special local corporate tax is collected as national tax and is allocated to local governments in order to decrease the gap in tax revenue between urban and rural areas.

This tax is 43.2% of the basic Business tax amount (slated to be abolished in October 2019).

Consumption tax(消費税

Whether or not you need to pay the Consumption tax is basically depending on the taxable sales in the base period,which generally means the FY 2 years prior to the current FY for a company.

You are a taxable entity when the taxable sales in the base period exceed 10 Million JPY.

Therefore, Companies in their first and second FY are basically exempt from the tax due to no existing of the base period.

But this method is not applicable for companies whose stated capital at the commencement date of the FY is over 10 Million JPY.

Stamp duty(印紙税)

Stamp duty is imposed on certain taxable documents such as contracts and receipts.

Registration tax(登録免許税)

When certain information is registered, it is subject to the Registration tax.

Registration of property, vessel, company and so on gives rise to this tax.

Fixed assets tax(固定資産税)

Fixed assets tax is imposed both on real estate and depreciable assets a company holds as of January 1st every year.

Others

Other taxes such as Customs duties, Cigarette tax, Liquor tax and Automobile tax are imposed according to a business nature.

We, Iwasawa Tokyo Accounting, are committed to helping those who engage in their business in Tokyo mainly in accounting & tax point of view. If you plan to set up a business in Tokyo, we are always happy to help you!

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税理士岩沢将志の写真

Masashi Iwasawa

Certified Accountant / Business Advisor / Taxation Consultant based in Tokyo.
Lover of traveling, climbing mountains, reading books, learning new languages, and gym.