Related

National Corporation Tax is a national tax levied against profit after subtracting expenses (they will not be levied when loss is incurred) and through self-assessment. Due to the economic situation of Japan, the government has modified the fiscal legislation several times the past few years. Lowering the corporate taxation rate was important aspect of the growth strategy of the present government, while at the same time broadening the tax base.  However, in recent years no major efforts to decrease corporate taxation have been seen. For SMEs in Japan, a special reduced rate of 15% (instead of the regular 19%) has been in place during the past years. 

 

 %

 

FY 2016

FY 2018

FY 2019

FY 2021-2024

Regular companies

 

23.40

23.20

23.40

23.20

SMEs

Income < ¥8mln/y

19.0

(15.0)

19.0

(15.0)

19.0

(15.0)

15.0

Income>¥8mln/y

23.40

23.20

23.20

 

23.20

Source: JETRO

 It means for a SME with a permanent establishment in Japan that its business income will be taxed on a 15% rate basis up until JPY 8 million.  All income in excess of JPY 8 million will be taxed at 23.20%.

For any domestic corporation registered in Japan, both for domestic and subsidiaries of foreign companies, a corporate tax on national level is levied by the National Tax Agency, an integral part of the Ministry of Finance. The present corporate taxation level will vary from 15 up to 23.2% on the annual net business income of the company. The total tax burden for corporations will vary between 22.46% up to a steep 36.81% (March, 2019, In Tokyo) as effective rates depending upon factors like capital, employees, place of business registration, geographical spread of offices and manufacturing plants nationwide and total taxable income.

The consolidated taxation system was replaced with a new regime of group relief under the 2020 Tax Reform Act and effective for tax years beginning on or after April 1, 2022. 

Under the system of the thin capital taxation system interest is partly excluded from a corporation’s deductible expenses when the corporation has borrowed money exceeding three times the amount of its capital from its foreign leading shareholders. The thin capitalization system in Japan its main goal is prevent overseas headquartered enterprises from over-leveraging their fully-owned subsidiaries or branches in order to claim excess corporation tax deductions through interest charges booked into the annual financial statements of the local commercial entity in Japan. 

Further information in English:

EU-Japan Centre's News

More
The EU Japan Centre is releasing a weekly press review covering Japan's economic and policy matters…
On 19 September 2024, the European Commission announced plans for a study on the production and use…
The Centre quarterly newsletter, October 2024 issue, is out! In this issue: Call for applicants…
Join Us as a Cross-Cultural Expert! The EU-Japan Centre for Industrial Cooperation is looking for…
The EU Japan Centre is releasing a weekly press review covering Japan's economic and policy matters…

Events

More
Europa House
27/11/2024
The EU-Japan Centre for Industrial Cooperation and EURAXESS Japan invite you to the 2024 Innovation Day, a unique hybrid event showcasing the latest European and Japanese advancements in health…
Japan
02/12/2024 - 05/12/2024
Join our Innovation Business Mission in Japan and exhibit for free at the Innovation Leaders Summit (“ILS”) 2024 in Toranomon Hills, Tokyo. Are you running a business that applies cutting-edge…
Subscribe to
our newsletters

The EU-Japan Centre currently produces 5 newsletters :

  • EU-Japan NEWS - our flagship newsletter covering the Centre's support services, information about EU (or Member States) - Japan cooperation
  • Japanese Industry and Policy News
  • “About Japan” e-News (Only available for EU companies / EU organisations)
  • Japan Tax and Public Procurement Weekly Tender Digest (Only available for EU companies / EU organisations)
  • Tech Transfer Helpdesk Newsletter
Subscribe