Corporate Taxes Rate in Japan

Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.

I aim to assist non-Japanese business owners who need help with reading or writing in Japanese.

If you find the Japanese tax return system challenging, I can help you with your tax filings.   This blog may help if you are unclear about Corporation Tax in Japan.

Corporate taxes in Japan are composed of corporate tax, corporate inhabitant tax, and corporate business tax.

Corporate tax (including local corporate tax)

This is levied on the taxable income of corporations and is paid to the national government (the tax office).

(1) Corporate Tax

The tax rate is 15% for profit portions under 8 million yen and 23.2% is applied to portions exceeding 8 million yen to calculate the corporate tax.

(2) Local Corporate Tax

This is calculated by multiplying the corporate tax amount by 10.3%.

In short, the total corporate tax rate is 23.2 % times 110.3%(100%+10.3%) equals approximately 26%.

Corporate Inhabitant Tax

Similar to individuals, this tax is levied on corporations that have a residence in the area. Payments are made to prefectures and municipalities.

(1) Corporate Tax Basis

This is by applying a 7% tax rate calculated to the amount of corporate tax, with the total being distributed to both prefectures and municipalities. The tax rate on a the taxable income is 23.2% times 7%, equal to approximately 1.6%.

(2) Per Capita Basis

This tax is levied irrespective of taxable income. For small and medium-sized enterprises with a capital of 10 million yen or less, the total annual amount is approximately 80,000 yen.

Corporate Business Tax (Including Special Local Corporate Tax)

This tax is levied on the businesses conducted by corporations and is payable to prefectures. Note that the Corporate Business Tax is deductible when calculating Corporate Tax.

(1) Corporate Business Tax

Taxable income up to 4 million yen is taxed at 3.5%, income over 4 million yen and up to 8 million yen at 5.3%, and income over 8 million yen at 7%. This tax is calculated by calculating the taxable income times the rates.

(2) Special Local Corporate Tax

This is calculated by applying a 37% rate to the amount of Corporate Business Tax.

The Total Effective Tax Rate Shouldered by Corporations

The effective tax rate considers the fact that the Business Tax is deductible when calculating Corporate Tax. To sum it up, for small businesses, for corporate income up to 4 million yen, the total effective corporate tax rate is around 22%. It’s about 24% for income up to 8 million yen, and for amounts over 8 million yen, it jumps to around 34%.

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