background image

Retained

  • Statutory Tax Rate 23.2
  • Surtax Based on Taxable Income 0
  • Surtax Based on Statutory Tax 0
  • Surtax Deductible from Taxable Income 0
  • Statutory Tax Deductable 0
  • Effective Tax Rate 23.2

Statutory Tax Rate

The national standard corporate tax rate is 23.2% for companies with share capital exceeding JPY 100 million.

For small-medium enterprises (SMEs) with paid-in capital of JPY 100 million or less, other than companies wholly owned by a company that has paid-in capital of JPY 500 million or more, a concessional tax rate of 19% applies on the first JPY 8 million of taxable income (the rate was 15% for tax years beginning prior to 1 April 2021). The rate is 23.2% on taxable income exceeding JPY 8 million.

Corporate taxpayers are also liable to pay a national local corporate tax at a rate of 10.3% on their corporate tax liabilities.

Additionally, a local inhabitant’s tax is levied by prefectures and municipalities, which varies with the location and size of the company and is composed of:

  • A corporate tax levy (levied as a percentage of national corporate tax), at the rate of 1% to 2% for prefectures and 6% to 8.4% for municipalities; and
  • A per capita levy between JPY 70,000 to JPY 3.8 million, depending on the amount of capital for tax purposes and the number of employees.

A local enterprise (business) tax is also levied by prefectures, which is an income-based and factor-based tax that includes 3 components, progressive rates of up to 3.6% of taxable profits, 1.2% of a “value-added” factor, and 0.5% of share capital and capital surplus. A special corporate business tax also applies, together resulting in the following local enterprise (business) tax rates:

Companies with share capital exceeding JPY 100 million:

Local Enterprise (Business) Tax

Special Corporate Business Tax

Taxable Income

Standard Tax Rate

Standard Tax Rate

Up to JPY 4 million

0.4%

260%

JPY 4 million to JPY 8 million

0.7%

Over JPY 8 million

1%

 

Note: The top progressive base rate of 1% plus the special corporate business tax of 260% on the base rate, results in an effective top rate of 3.6%.

Companies with share capital less than JPY 100 million:

Local Enterprise (Business) Tax

Special Corporate Business Tax

Taxable Income

Standard Tax Rate

Standard Tax Rate

Up to JPY 4 million

3.5%

37%

JPY 4 million to JPY 8 million

5.3%

Over JPY 8 million

7%

 

Note: The top progressive base rate of 7% plus the special corporate business tax of 37% on the base rate, results in an effective top rate of 9.6%.

Taking into account the standard corporate tax rate and the varying local taxes, the effective tax rate on companies is generally between 30% to 35%, calculated as:

Effective tax rate = (corporate tax rate + (corporate tax rate * inhabitant's tax rate) + enterprise tax rate) / (1 + enterprise tax rate).