9.Japanese Tax Affairs

Basics of Entry into Japanese Market

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Japanese Tax Affairs

Taxes imposed on corporations in Japan are roughly as follows.

1.Corporation Tax (national tax)

The tax amount is calculated by multiplying the company’s income (≈ profit) by the tax rate. Corporation tax is not imposed on companies with no income or less. Filing a blue return allows you to carry over your loss for 10 years.

Income amount 8 mn yen/year or less Over 8 mn yen/year
Tax rate 16.54% 25.59%

2.Corporate Inhabitant Tax (local tax)

Corporate inhabitant tax is divided into Tokyo inhabitants tax and ward tax (of Tokyo) that are imposed on corporations. The tax amount is calculated by multiplying the corporation tax rate by the inhabitant tax rate (7.0% for corporation tax amount of 10 mn yen/year or less).

Income amount 8 mn yen/year or less Over 8 mn yen/year
Tax rate 1.05% 1.62%

3.Business Tax etc. (business tax and special business tax)

This tax is imposed on running a business. The tax amount is calculated by multiplying your income by the corresponding tax rate.

Income amount 4 mn yen or less 8 mn yen or less Over 8 mn yen
税率 4.80% 7.26% 9.59%

For a company capitalized at 100 mn yen or less, a total of the aforementioned taxes 1 through 3 is roughly as follows.

Tax Income (≈ profit)
4 mn yen or less 4-8 mn yen Over 8 mn yen
Corporation tax 16.54% 16.54% 25.59%
Inhabitant tax 1.05% 1.05% 1.62%
Business tax 4.80% 7.26% 9.59%
Total 22.39% 24.85% 36.80%

The effective tax rates are slightly lower than these figures.

4. Consumption Tax

Consumption tax is imposed on the sale of articles and compensation for services. Although this tax is eventually borne by consumers, it is paid by business operators (companies).

Raw material provider Manufacturer Retailer Consumer
Sales 600 1000 1500 Purchase 1,500
Consumption tax 150
Consumption tax 60 100 150
Procurement 600 1000
Consumption tax 60 100
Consumption tax difference 60 40 50 Total 150

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