Japanese Tax System
The tax company must pay
There are three types of tax that companies must pay, which are corporate tax, consumption tax, and withholding tax.
Corporate tax
Corporate tax is the income tax of a company. Their rates differ depending on tax destination and kind of tax.
- Corporate Tax to Nation
- Corporate Business Tax to Prefecture
- Inhabitant tax to Prefecture and City or village
Rate of corporate tax per profit
| Profit | |||
|---|---|---|---|
| Destination and kind of tax(*1) | 4M or less | Over 4M and 8M or less |
Over 8M |
| Nation | 16.54% | 16.54% | 25.59% |
| Business tax to Prefecture | 4.8% | 7.62% | 9.59% |
| Inhabitant tax to Prefecture and City or village(*2) | 1.05% | 1.05% | 1.05% |
| Total | 22.39% | 24.85% | 36.8% |
(*1)M is a million
(*2)The minimum is 70,000yen
Consumption tax
Consumption tax is calculated as the difference between the output consumption and the input consumption tax (excluding non-creditable input consumption tax) for the relevant taxable period if the former is greater than the latter, while receiving a refund equal to the difference if the latter is greater than the former.
Withholding tax
Withholding tax isn’t a tax that companies must bear. But the company must deduct income tax from the salary of its employees and board members and pay it instead of the employees and board members.
Japanese Tax Law is extremely complicated. So, companies should use professional accountants from the start.
Note: Outline of Japan’s Withholding Tax System Related to Salary (The 2021 edition, National Tax Agency JAPAN)Visa Japan Tokyo support setting up your business in Japan
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