Japanese tax policy

Understanding Japan's local tax policies will help you better formulate employment plans and hiring strategies in Japan.

The meaning and tax rates of major conventional taxes

【Corporate Tax】

Japan's corporate tax is a national tax, similar to China's corporate income tax, and adopts a proportional tax rate. Starting from April 1, 2016, Japan lowered the corporate tax rate from 23.9% to 23.4%, and will continue to reduce it to 23.2% from 2018. The preferential tax rate for small and medium-sized corporations and public welfare corporations (annual tax amount below 8 million yen) was reduced from 19% to 15%. For more details, please refer to the following website. https://www.nta.go.jp/taxes/shiraberu/taxanswer/hojin/5759.htm https://www.mof.go.jp/tax_policy/summary/corporation/c01.htm

【Corporate Resident Tax】

It is a local tax, also known as prefectural tax and municipal tax. It is paid at 17.3-20.7% of the corporate tax payable by the enterprise.
[Income tax]

When you receive interest, dividends, and other income, the bank or company must withhold income tax on your behalf. The tax rates are: national tax, 15%; local tax, 5%. https://www.nta.go.jp/publication/pamph/koho/kurashi/html/01_1.htm

Japan implements a territorial tax system for corporate entities. Japan's corporate income tax consists of two parts: national tax and local tax. For non-profit enterprises or less profitable enterprises, local tax can be assessed and levied based on the size of the company (Japanese: external standard tax). Japan has gradually lowered the tax rate since 2014. In 2017, the national average actual tax rate after including local taxes was about 29.97% (37% in 2013).

2. Relevant procedures for corporate tax returns

【Tax filing time】

Legal entities must submit tax returns within two months after the end of the fiscal year. If they are unable to submit within the prescribed time, the deadline may be extended with the approval of the Director of the Taxation Office.

【Tax filing channels】

Self-filing means filing tax returns with the local tax authorities where the enterprise is located. Generally, you only need to submit tax return materials to the tax office or local tax authorities.

【Tax filing procedures】

【Final declaration and payment】

Corporations must file tax returns for taxable income for corporate tax, corporate resident tax, and business tax within two months from the day following the end of each fiscal year. If a corporation is unable to file a final tax return due to an unfinished audit or other unavoidable circumstances, it may request an extension of time for filing the final tax return with the approval of the head of the tax office. The amount of income and tax amounts recorded in the final tax return must be calculated based on the final accounting report approved by the shareholders' meeting. The calculated tax amounts must be paid within the same period. Even if the tax return can be filed with an extension under the above conditions, the tax payment deadline cannot be extended. When calculating the final tax amount, if the overdue tax has been paid, it can be deducted.

【Mid-term declaration and tax payment】

A corporation with a fiscal year of more than six months (limited to corporations with tax payments exceeding a certain amount in the previous fiscal year) must file an interim return within two months after six months from the start of the fiscal year to declare its income for the first six months of the fiscal year and pay the interim tax.

【Blue declaration】

There are two types of tax returns for corporations: white and blue. Blue returns can be submitted after approval by the tax office, and the tax characteristics of the blue return are that it can enjoy various tax benefits. In order to obtain approval for the blue return from the tax office, an application for approval must be submitted to the tax office in a certain format before the start of the fiscal year. Newly established corporations and foreign corporations that have newly established branches in Japan must submit an application for approval within three months after the establishment (establishment) of the organization, or on a certain day before the end of the first fiscal year after the establishment (establishment).