Summary of Japan's corporation taxes

Monday, November 21, 2011. 15:25 Entities incorporate in Japan are normally subject to corporate income taxes, consumption taxes, and stamp tax as follows: 1. Corporate income taxes Corporate income tax includes corporate tax, enterprise tax and inhabitant taxes: Type of companyCapitalTax bracketTax rate 1. Ordinary corporations（普通法人） 2. Non-juridical organizations（人格のない社団等）Capital of JPY100 millions or belowTaxable income of JPY8 millions or below22% (18%) Taxable income of more than JPY8 millions 30% Capital of more than JPY100 millions or30% 3. Cooperatives and similar associations （協同組合等）22% (18%) 4. Public interest corporations（公益法人）22% (18%) 5. Public corporations（公共法人）Not subject to corporate taxes － Note 1: An association without legal personality is obliged to pay tax for its income generated from profit-making activities. Note 2: (18%) is applied to companies of which the business year ends during 1st April 2009 – 31st March 2012. Type of companyTax bracketTax rate 1Tax rate 2 1. Ordinary corporations（普通法人） 2. Non-juridical organizations（人格のない社団等） 3. Public interest corporations（公益法人）Taxable income of JPY4 millions or below2.7%2.95% Taxable income of more than JPY4millions and smaller than or equal to JPY8 millions4%4.365% Taxable income of more than JPY8 millions 5.3%5.78% 4. Cooperatives and similar associations（協同組合等）Taxable income of JPY4 millions or below2.75%2.95% Taxable income of more than JPY4 millions3.6%3.93% Note 3: Enterprise tax rate 1 and 2 varies from place of incorporation, the above rates are for Tokyo. Note 4: Tax rate 2 is applied to an ordinary corporation of which the capital is more than JPY100 millions or the taxable amount is more than JPY25 millions or gross income is more than JPY200 millions. For the public interest corporations or non-juridical organizations, tax rate 2 will be applied if its taxable amount is more than JPY25 millions or gross income is more than JPY200 millions. c. Inhabitant tax c1. The following tax rate is an example of inhabitant tax applied to companies incorporated in Tokyo. Inhabitant tax = 【 5% (prefectural) + 12.3% (municipal) 】× Corporate tax = 17.3% × Corporate tax In addition, a special inhabitant tax is also required to pay 8.1%. c2. If a company's capital is more than JPY100 millions or the corporate tax amount is more than JPY10 millions, the inhabitant tax will be as follows: Inhabitant tax = 【 6% (prefectural) + 14.7% (municipal) 】× Corporate tax = 20.7% × Corporate tax In addition, if a company's capital is more than JPY100 millions, a special inhabitant tax is also required to pay at a tax rate of 148%. Example: an ordinary corporation with a capital of below JPY100 millions and its parent company (if any)'s capital is less than JPY500 millions. In addition, its corporate tax is less than JPY10 millions and taxable income is under JPY25 millions, it has two offices only: one in Tokyo and one in another prefecture: Tax bracketTaxable income≦ JPY4 millionsJPY4 millions< Taxable income ≦ JPY8 millionsTaxable income > JPY8 millions Corporate tax rate22.00%22.00%30.00% Inhabitant tax rate （1）Prefectural tax rate5.00%5.00%5.00% （2）Municipal tax rate12.30%12.30%12.30% Enterprise tax rate2.70%4.00%5.30% Special inhabitant tax rate81.00%81.00%81.00% Total tax rate30.80%33.10%133.60% Effective total tax rate24.91%25.90%40.86% Calculation: 【Corporate tax rate × (1+ Prefectural tax rate + Municipal tax rate) + Enterprise tax rate + (Enterprise tax rate × Special inhabitant tax rate ) 】 / 【　1+Enterprise tax rate　+ (Enterprise tax rate × Special inhabitant tax rate ) 】 【0.3 × (1 + 0.05 + 0.123 ) + 0.053 + ( 0.053 × 0.81 ) 】 / 【　1+ 0.053 + ( 0.053 × 0.81 ) 】≒　40.86% CapitalNumber of employeeFlat tax JPY5,000 millions< Capital ≦∞Over 50 peopleJPY3,800,000 JPY1,000 millions< Capital ≦JPY5,000 millionsOver 50 peopleJPY 2,290,000 JPY5,000 millions< Capital ≦∞below 50 peopleJPY 1,210,000 JPY1,000 millions< Capital ≦JPY5,000 millionsbelow 50 peopleJPY 950,000 JPY100 millions< Capital ≦JPY1,000 millionsOver 50 peopleJPY 530,000 JPY100 millions< Capital ≦JPY1,000 millionsbelow 50 peopleJPY 290,000 JPY10 millions< Capital ≦JPY100 millionsOver 50 peopleJPY 200,000 JPY10 millions< Capital ≦JPY100 millionsbelow 50 peopleJPY 180,000 0< Capital ≦JPY10 millionsOver 50 peopleJPY 140,000 0< Capital ≦JPY10 millionsbelow 50 peopleJPY 70,000 2. Consumption tax Transactions such as sale and leasing of goods, the provision of services carried out within Japan and imported goods delivered from bonded areas are subject to consumption taxation. Consumption tax = 【 4%(National) + 1% (prefectural) 】× sales price Therefore, the total effective tax rate is 5%. 3. Stamp tax Stamp tax is paid by affixing and cancelling a stamp on the documents which are exhaustively listed in the Stamp Duty Act. Depending on the amount stated in the documents and the type of documents, the tax amount varies. Disclaimer The publication contains information in summary form and is therefore intended for general guidance only. This publication is not intended as legal, accounting or other professional advice and should not be relied upon as such. If legal, accounting or other professional advice or expert assistance is required, the services of a competent professional should be sought. 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