When it comes to the corporate tax in Japan, companies are divided into two types: domestic and foreign. Domestic companies are defined as all companies with their head offices in the country, while foreign ones are those which are not considered domestic, including branch offices or manufacturing plants opened in Japan by foreign companies. Our company formation consultants in Japan can provide further information on this matter.
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Corporate tax rate in Japan
A local corporation is taxed on its worldwide income, while a foreign one is usually taxed on a certain income gained in Japan. The corporate tax rate in Japan for a branch is the same as for a subsidiary.
The local standard corporate tax rate in Japan is 23.4% and it applies to normal companies with a share capital which exceeds JPY 100 million (USD 896,387). Our company registration advisors in Japan can deliver more details related to the corporate tax in this country.
Other corporate taxes in Japan
Corporations in Japan must also pay the following taxes:
• The local inhabitant tax: it differs depending on the location and size of the company. It comprises the corporation tax levy, charged at a percentage of the national corporation taxation, and a per capita levy, established based on capital and employee number;
• The local enterprise tax: it is defined as an income-based taxation and a factor-based one. The factor-based taxation has three components:
o Progressive tax rate of maximum 3.6% of the taxable profits;
o A 1.2% of a value-added factor;
o A 0.5% of share capital and capital surplus.
• The effective tax rate for companies: based on the maximum rates applied in Tokyo for a corporation which has a paid-in capital of over JPY 100 million, is around 30%. For other companies, our Japan company formation executives can provide further details.
The Japan consumption tax is another important one to take into consideration for companies.
Our accountant in Japan can give you complete details about taxation, tax compliance, and the current filing requirements.
Taxation of dividends in Japan
Dividends gained by a local corporation in Japan from another local company are not taxed on income for corporation tax purposes when the receiver fully owns the corporation which is paying the dividends for a certain period of time. Our company formation representatives in Japan can provide further details on this subject, if required.
If a company owns more than 33.3% of the shares in a corporation that pays dividends for minimum six months prior to the date the right to get the dividends is established, the dividend is not taxed on income.
If you need to know more about the corporate taxation in Japan, or if you want to open a company in Japan, please contact us.