Corporate Inhabitant Tax in Japan: The Per Capita Levy Even When Your Company Has a Loss

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

I assist foreign business owners who may have difficulty dealing with Japanese accounting and tax procedures. If you find the Japanese tax system challenging, I can help you with your tax filings.

Did you know that a company in Japan may have to pay local corporate tax even when it has a loss?

This is because corporate inhabitant tax includes a per capita levy that is generally payable regardless of whether the company makes a profit.

Let’s take a look at how it works.

What Is the Corporate Per Capita Levy in Japan?

Corporate inhabitant tax in Japan consists of an income-based portion and a per capita levy.

The per capita levy is a local tax imposed on corporations that have an office or place of business in a prefecture or municipality. Unlike the income-based portion, the per capita levy is generally payable even when the company has a loss.

The basic idea is that companies also benefit from local public services and infrastructure, so they are required to bear part of the cost of those services.

How Much Is The Per Capita Levy In Japan?

For a typical small company with capital of JPY 10 million or less and 50 or fewer employees, the standard per capita levy is generally JPY 70,000 per year, consisting of prefectural and municipal portions.

The amount increases depending mainly on the company’s capital and number of employees.

The actual amount may also depend on the municipality and the period during which the company has an office or place of business there.

Where Do You Pay the Per Capita Levy?

Generally, the per capita levy is payable to the prefecture and municipality where your company has an office or place of business.

If your company has an office or branch in another prefecture or municipality and conducts business there, an additional per capita levy may also be payable in that location.

Therefore, having offices in several locations can increase the total amount of per capita levy your company has to pay.

A Company With a Loss May Still Have to Pay Tax

One point that sometimes surprises foreign business owners in Japan is that having a loss does not necessarily mean that the company has no tax to pay.

Even if your company has no taxable income, the corporate inhabitant tax per capita levy generally still applies.

If you establish additional offices or branches, it is also important to check whether additional local tax filings and per capita levy payments are required.

Koshida Accounting and Tax Office assists foreign business owners in Japan with accounting and tax matters.

If you need help with corporate tax filings or other Japanese tax matters, please feel free to contact us through the inquiry form.