TKEG Expat ™ (EU) Japan Corporate Tax Guide

Corporate Income Tax (CIT) in Japan is imposed at a rate of 23.2%, making it one of the core taxes that businesses must account for. Companies in Japan are required to file their CIT returns within two months following the end of their annual accounting period. This filing timeline ensures that businesses comply promptly after the close of their fiscal year. The final payment of CIT also follows the same two-month rule, meaning it should be settled within two months post the accounting period. Estimated CIT payments are due within two months after the sixth month of the corporation’s accounting period, providing businesses with an interim obligation to ensure continuous compliance throughout the year.

Japan personal income tax is generally imposed at progressive national rates of 5% to 45%, and a 2.1% surtax applies to the national income tax amount through 31 December 2037. Individual income tax returns are generally due by 15 March following the tax year. Taxpayers may also need to make provisional payments, generally by 31 July and 30 November, depending on their prior-year tax liability.

Capital Gains Tax (CGT) in Japan distinguishes between corporate and individual rates. Corporate capital gains are subject to the normal CIT rate, maintaining consistency in how profits from sales of assets are taxed. For individuals, capital gains from the sale of stock are taxed at a total rate of 20.315%, with 15.315% allocated to national tax and an additional 5% for local tax. Meanwhile, capital gains from the sale of real property are taxed at a rate as high as 39.63%, reflecting both national and local tax obligations. This higher rate for real property sales depends on various factors, such as the location and value of the asset, adding complexity to the taxation of capital gains in Japan.

The annual fixed assets tax is levied by the local tax authorities on real property and depreciable fixed assets used for business purposes. Real property is taxed at 1.7% of the value appraised by the local tax authorities. The depreciable fixed assets tax is assessed at 1.4% of cost after statutory depreciation.

Business premises tax is levied and designated by each city in Japan, such as Tokyo, Osaka, Nagoya, Fukuoka, and other cities with a population of more than 300,000. A corporation that uses business premises in excess of 1,000 square metres and/or has more than 100 employees in a designated city is responsible to pay this tax based on the physical footprint of the business (JPY 600 per square metre) and gross payroll (0.25% of gross payroll).