Ultimate guide to corporate Tax in Japan

Starting a business is every entrepreneur’s dream come true. That is, until taxes come into the picture and you’re faced with all these papers, numbers, and whatnot. As daunting as this aspect of business may sound, we’re here to remind you that you’re not alone! Many prospective foreign business owners are also still trying to navigate corporate tax in Japan. To help you, we’ve crafted this article with some things you need to know when doing taxes in Japan as a business owner.

But, why would you need to know all this in the first place ultimate guide to corporate? Also known as corporate income tax (CIT), corporate tax in Japan is something you need to learn for financial planning and operations. This will make an impact on your business profitability and possibly investment decisions. It is also important to comply with regulations in Japan to avoid any legal or financial hurdles in the long run.

How much tax will a company have to pay in Japan?

Once the Japanese fiscal year ends, usually on afghanistan phone number library March 31, taxes must be filed and quarterly provisional tax payments must be made. The national rate of corporate tax in Japan is around 23% and an additional 5-10% local tax rate is implemented. The table below summarizes the total tax rate for each bracket of taxable income in Japan according to the Japan External Trade Organization (JETRO).

Although this is the case for Japan, how does this compare with other countries?

To give you a gist of corporate tax in countries aside from Japan, we put together a simple list based on information from PricewaterhouseCoopers. Excluding local taxes from the provided total tax rates in the earlier table, Japan’s national CIT averages 23%.

Note: The following corporate tax rates are exclusive of local taxes.

1. Singapore: 17%
2. Hong Kong: 16.5%
3. Korea: 24%
4. US: 21%
5. UK: 19-25%
6. Germany: ~16%

Compared to the six countries in the following list, one could say that Japan’s CIT rate of 23% including local taxes is at a relatively moderate level. While higher tax rates may seem daunting at first, there are several reasons behind those numbers! Some reasons behind higher tax rates include government revenue needs, public services and infrastructure, and a country’s economic development goals.

Japan is popular for its advanced transportation system. To add to this, it offers several public services and social welfare programs for its residents. Higher corporate taxes can also be used to support infrastructure and education which boosts an economy in the long run.

How do I prepare to file my corporate tax in Japan?

It’s best to prepare the necessary documents as early as you can ultimate guide to corporate. To make sure you’re ready to file corporate tax in Japan, here’s a general list of the requirements and important deadlines!

Required documentation for tax filing

( * = if applicable)

1. Financial reports: Documents such audit of advertising campaign in yandex direct and google ads as financial statements (e.g. balance sheets, cash flow statements) and income details
2. Tax-specific documentation: tax return forms, receipts of tax payments made, documentation for claimed deductions or credits
3. Transaction records: invoices, receipts, contracts, records of inter-company transactions*
4. International operations documentation*: both international and domestic companies must provide documents supporting transfer pricing arrangements and/or details of income from foreign operations
5. Other*: Previous year’s tax return

Key deadlines for tax filing

1. Companies usually align their fiscal year ends with the calendar, which means it ends on December 31st. Under this system, the deadline for corporate tax return filing would be by the end of February ultimate guide to corporate.
2. Provisional Tax Payments: These payments are usually due in four installments throughout the fiscal year.
3. In case of special circumstances: In case of unforeseen or exceptional situations such as pandemics or disasters, governments may implement special extensions. For example, the Japanese government implemented the Grace system when COVID-19 hit. This system allowed taxpayers to defer their payments or pay in installments in case the pandemic caused any difficulties in doing so.

To learn more about tax filing deadlines and what you need to do for your corporate tax each year, check out our Q&A with a certified Japanese accountant below :

What makes corporations subject to corporate tax in Japan?

In terms of tax residency, there are two types of corporations subject to corporate tax in Japan; domestic companies and foreign companies. Depending on which classification your business falls under, there may be different circumstances under which your income is taxable.

Domestic Corporations

Some examples of domestic companies subject belize lists to corporate tax in Japan are the famous Toyota Motor Corporation, Mitsubishi UFJ Financial Group, and Sony Group Corporation.

This means anything they are earning outside of the country is also subject to corporate tax in Japan.

Foreign Corporations

We had a Q&A session with Japanese tax accountant Shimpei Wakana. Give it a listen if you’d like to learn more about Japanese accounting!