If you want to set up a company in Japan, this article will educate you on the tax laws for a LLC (GK), which is the most common company type in Japan.
Japan taxes resident companies on their worldwide income. The predominant effective tax rate for offshore income, from our research, and your results may vary, is 34.60%. The standard CIT rate is 23.4%, but there are also local, enterprise and inhabitant taxes, resulting in an income effective tax rate of 34.60% for SME and 30.62% for large companies This ranks Japan as 167th when compared to corporate tax rate worldwide.
The value added tax (VAT) rate in Japan is 8.00%, that ranks Japan as 43rd overall in terms of VAT globally. In terms of other taxation, an employer will contribute 16.25% to the equivalent of a social security fund and an employee will contribute 15.44%. The overall complexity of the tax system is medium. This is measured by average time to comply with a country's labor tax requirements is as it is 140hours. Contributing to this is the number of yearly labor tax payments, which is 2 in JP.
Thin capitalisation restrictions are officially enacted. Thin capitalisation refers to any type of laws on given company with respect todebt-to-asset ratios.
Dividends received by resident companies from another resident company are taxable. However several exemptions and reductions may apply. If recipient holds 100% of the dividend-paying corporation for a certain period or holds more than 33.3% of the shares for at least 6 months, dividends are excluded from taxable income. If recipient holds more than 5% of the shares for more than 6 months or 33.3% of the shares less than 6 months, a 50% reduction may apply. If company owns 5% or less of the shares, a 20% may apply. Dividends received from foreign companies are taxable. However, if resident company owns more than 25% of the shares for more than 6 months, a 95% exemption may apply.
Capital Gains are subject to Corporate Income Tax. A capital gains tax is levied on the profits that a corporation or natural person realizes when they sell sells a capital asset for a price that is higher than the purchase price.
The dividends withholding effective tax rate is 20.42%. Which means that the relevant tax authorities expects relevant legal entities to automatically withhold 20.42% of dividends paid to non-residents. If dividends are paid by a listed company, withholding effective tax rate is 15.315%. The interest withholding tax rate is estimated at 20.42%. Which means that the taxman expects relevant legal entities to automatically withhold 20.42% of interests remitted abroad. If interests are from deposits or bonds, withholding effective tax rate is 15.315%. The royalties withholding tax rate is 20.42%. Which means that the tax authorities expects companies to withhold 20.42% of money remitted abroad on royalty payments. Withholding tax rates may be reduced under a tax treaty.
There is no known tax on wealth in Japan. There are inheritance, transfer and real property taxes in Japan. There are frequently implemented research and development tax incentives in this country.
The above is not tax or legal advice for your particular situation. Incorporations.io can help you to find to a lawyer in Japan who can answer all your questions. Click incorporate now if you are in a hurry, or press the free consultation button above.
It takes approximately 155 hours to file and prepare documents for a Japan Civil Law (German).
The corporate tax is approximately 34.6% which is 167 in the world.
Owners of a company in Japan are allowed to carry back a loss and may be allowed to carry forward a loss for 9 years.
The vat rate in Japan is 8% which ranks 42 in the world.