Japan Tax Rates 2020

Corporate Tax

• Taxpayer: Corporations, both domestic and foreign, that derive income from sources within Japan.
• Tax Base: Taxable income, which is generally calculated by deducting deductible expenses from gross revenue.
• National Corporate Tax Rate: The national corporate tax rate is a set percentage of taxable income.
• Local Corporate Taxes: In addition to the national corporate tax, corporations are also subject to local corporate taxes, which include:
  • Prefectural inhabitant tax
  • Municipal inhabitant tax
  • Enterprise tax
• Permanent Establishment (PE): Foreign corporations are taxed in Japan on profits attributable to their PE in Japan.
• Tax Treaties: Japan has tax treaties with many countries to prevent double taxation and may provide for reduced tax rates or exemptions.

Individual Income Tax

• Taxpayer: Individuals, both residents and non-residents, who earn income sourced in Japan.
• Tax Base: Taxable income, calculated by deducting various allowances and deductions from gross income.
• Tax Rates: Individual income tax rates are progressive, meaning they increase as income rises.
• Resident vs. Non-Resident:
  • Residents are taxed on their worldwide income.
  • Non-residents are taxed only on their Japan-source income.

Consumption Tax

• Taxpayer: Businesses that sell goods or provide services in Japan, and those that import goods into Japan.
• Tax Base: The value of goods sold or services provided.
• Tax Rate: The consumption tax rate is a set percentage, with a standard rate and a reduced rate for certain items.
• Input Tax Credit: Businesses can generally deduct the consumption tax they paid on purchases (input tax) from the consumption tax they collect from sales (output tax).
• Qualified Invoice System: Japan has implemented a Qualified Invoice System, which affects how businesses can claim input tax credits.

Other

• Property Taxes:
  • Fixed asset tax: Tax on the ownership of land, buildings, and depreciable assets.
  • City planning tax: Tax levied in urban planning areas.
• Inheritance Tax and Gift Tax: Taxes imposed on inherited assets and gifted assets, respectively.
• Excise Taxes: Taxes levied on specific goods, such as alcohol, tobacco, and gasoline.
• Stamp Duty: Tax imposed on certain documents, such as contracts and deeds.

Important Notes for Foreign Investors

• Tax laws and regulations are subject to change.
• It is essential to consult with a qualified tax professional in Japan for specific advice.