Japan Tax Rates 2020

Japan Individual Income Tax

• Permanent resident.
• Non-permanent resident (those who have been living in Japan for less than five years).
• Non-resident.

Japan Capital Gains, Companies

Capital Gains, Individuals

Japan Capital gains from the sale of real estate

Japan Capital gains from the sale of shares

Japan Reporting Dates

An Individual

A Company

• A company is bound to report and pay within two months of the end of the tax year (it is usually possible to request an extension of an additional month).

Japan Corporate Tax

• In 2020 Japan national corporate tax is 23.2%.
• Corporate tax on income of SMEs below 8 million yen is 15% on condition that the total equity is less than 100 million yen.
• In addition to corporate tax (a national tax) there are two classes of local tax paid by the corporation:
  1) Inhabitant Tax.
  2) Enterprise Tax.
  These two classes of local tax significantly increase the rate of Japan corporate tax, so that it may, in actual fact, reach 33.06% in Tokyo.
• While Inhabitant Tax is not recognized as a deductible expense, "Enterprise Tax" may be deducted as an expense.
• Income from a dividend is not classed as regular income. A dividend received by one company from another Japanese company, when the holding in the payer's equity is 25% or more, held for more than 6 months is tax exempt.






Japan Deduction of Tax at Source

Japan Taxation of Employees

Japan Income Tax
The employer is obligated to deduct tax at source from a salaried worker in accordance with the tax tables. The employer is obligated to pay the income tax to the authorities by the 10th of the month after the month of payment. When paying a salary to a foreign resident, 20% should be deducted at source.





Japan Social Security

The social security covers matters such as health insurance, pension insurance, unemployment insurance and more. The rates are as follows:
• Employer - 16.23%
• Employee - 15.69%




Dividend, Royalties and Interest in Japan

When payments of the following sorts are made to non- residents, deductions must be made at source at the following rates:





	%
Dividend	15/20
Royalties	20
Interest	15/20
Technical Fees	20



Note: Starting January 1, 2013 an additional 2.1% surtax was imposed on the above mentioned payments resulting in a 20.42% rate.



Japan Other Deductions

• Benefits to senior employees - mainly bonuses and compensation paid to employees are allowable as an expense. Nevertheless, payments of unreasonable amounts to directors will not be allowed as an expense.
• Entertainment expenses - the allowance on these expenses is calculated according to a formula that takes account of the amount of the company equity; the percentage allowed as an expense shall in no case exceed 90% of the expense, or a maximum of 3.6 million yen a year.
• Donations - as a general rule, donations to public or government institutions are allowable as an expense up to 40% of the income.
• Research and development - a credit of 20% is given for research and development plus additional credit for the excess of R&D expenses over those of the previous years. In any event, the total combined credit is limited to 30% of the corporation tax.
• Transactions between affiliated parties - such transactions are defined as being between 2 parties when the percentage holding, whether direct or indirect, between the companies is 50% or more. Reasonable proof of the price of the transfer between the affiliated parties is demanded from the taxpayer. As a rule, the law specifies 3 methods of calculating the reasonability of the price of the transfer.
• Interest expenses - there is a limit to the interest allowable to companies with an overseas obligation to foreign shareholders of 50% or more when the amount of the obligation is more than 3 times the amount of the equity.
• Offsetting losses - a company is eligible to offset the loss forward, up to 50% of the current year's income, for the following nine years.
• The limit does not apply to small & medium companies.
• SMEs can carry back losses for one year.
• Consolidated Returns - Companies in the same group may file a consolidated return and offset losses in the group under certain terms.




Japan Depreciation of Fixed Assets

In most cases either the straight line method or the declining balance method are allowed.
Depreciation is allowable at the following rates:



Class of Asset	No. of years depreciated
Buildings	50
Air conditioners	15
Sailing vessels	12-15
Aircraft	5-10
Computers	4-5
Machinery and equipment	6-22
Patents	3-10
Goodwill	5
Mining rights	5-8



Comments:
• An asset that costs less than 200,000 yen shall be depreciated over 3 years.
• An asset that costs less than 100,000 yen shall be fully depreciated in the year of purchase.