Japan
– Tax System
Corporate Taxes :-
Tax Base For Resident and Foreign Companies
Resident companies are taxed on their worldwide income, but
non-resident companies are taxed only on Japanese-source income. A company that
has its principal or main office in Japan is considered to be resident.
Tax Rate
|
Corporate
tax (for companies with income lower than JPY 100 million)
|
19%
for first JPY 8 million (reduced to 15% for tax years beginning between 1 Apr
2012 and 31 Mar 2015)
|
|
Corporate
tax (for companies with income greater than JPY 100 million)
|
25.5%
|
|
Local
taxes
|
Inhabitant
tax and enterprise tax at varying rates
|
|
Effective
standard rate
|
29.97%
|
·
Inhabitant
Tax :- Inhabitants
Taxes are local prefectural and municipal taxes. These taxes are computed as a
percentage of the corporation tax before tax credits. From 1 October, 2014, a
part of inhabitant tax has been moved to national tax regime as ‘local
corporate tax’. Each prefecture and municipality may elect an Inhabitants Tax
rate within the range shown below:
|
Rates
|
|
|
Prefecture
|
3.2
% to 4.2 %
|
|
Municipality
|
9.7
% to 12.1 %
|
|
Tokyo
Metropolitan (continued)
|
12.9
% to 16.3 %
|
In
addition to the above, local governments charge a per capita levy on
inhabitants with standard rates that vary from Y70,000 to Y3,800,000 depending
upon the amount of the paid-in capital and the number of employees.
·
Enterprise
Tax :- Prefectures can elect to levy an Enterprise
Tax. The tax base is business income and liquidation income as computed for
corporation tax purposes, with certain adjustments such as the exclusion of
income from a business carried on in a foreign country. Enterprise Tax is
deductible in computing taxable income for corporation and Enterprise Tax
purposes.
Size-based
taxation has been newly introduced and this taxation is applied only to large
corporations with paid-in capital of more than Y100 million and for the
business years beginning on or after 1 April 2004. For such large corporations,
Enterprise Tax consists of the traditional Enterprise Tax levied based on the
taxable income and the newly introduced Enterprise Tax levied based on the
capital etc. (i.e. paid-in capital and capital surplus) and value added (i.e.
wages, interest and rental expenses). Tax rates vary depending on whether or
not the corporation is a large corporation with paid-in capital of more than
Y100 million and depending on the prefecture:
Taxable
periods beginning after 1 October 2014
|
1
|
Company whose paid-in capital is
Y100 million or less
|
Std (%)
|
Max
(%)
|
Local Corporate Special Tax
|
|
|
Taxable Income:
|
|
|
|
|
|
First
Y4,000,000 per annum
|
3.4
|
3.65
|
Taxable
Income x standard/max tax rate) * 81 5
|
|
|
Next
Y4,000,000 to Y8,000,000 per annum
|
5.1
|
5.465
|
(Taxable
Income x standard/max tax rate) x 81%
|
|
|
Above
Y8,000,000 per annum
|
6.7
|
7.18
|
(Taxable
Income x standard/max tax rate) x 43.2%
|
|
|
|
|
|
|
|
2
|
Company whose paid-in capital is
more than Y100 million
|
|
|
|
|
|
A) Income
base (taxable income):
|
|
|
|
|
|
First
Y4,000,000 per annum
|
2.2
|
2.39
|
Taxable
Income x standard/max tax rate) x 148%
|
|
|
Next
Y4,000,000 to Y8,000,000 per annum
|
3.2
|
3.475
|
(Taxable
Income x standard/max tax rate) x 148%
|
|
|
Above
Y8,000,000 per annum
|
4.3
|
4.66
|
(Taxable
Income x standard/max tax rate) x 67.4%
|
|
|
B) Added
value base:
|
|
|
|
|
|
The
sum of wages, net interest expense & net rental expnse
|
0.48
|
0.504
|
0.504
|
|
|
C) Capital
Base
|
|
|
|
|
|
The
sum of paid-in capital and capital surplus
|
0.2
|
0.21
|
0.21
|