Japanese Corporate Income Tax Rates
1. Statutory Tax Rates:
The Japanese corporate income tax rates prevailing for the fiscal years commencing on or after October 1, 2008 are summarized as follows.
A: Company whose paid in capital is ¥100 Million or less:
Tax Rate(%)
Kind of income taxes Standard Maximum
1.Corporation Tax (National Tax):
First ¥8 Mill of taxable income 18.0 18.0 (Note 1)
Balance 30.0 30.0
2.Enterprise Tax:
2-1 Ordinary portion to be the revenue of residing
prefecture (Local Tax)
Companies whose paid-in-capital is less than 10 Mill, or who does not have offices in 3 prefectures or more
First ¥ 4 Mill of taxable income (a) 2.7 2.95 (Note2) Second ¥ 4 Mill of taxable income (b) 4.0 4.365 (Note2)
Balance (c) 5.3 5.78 (Note2)
Companies whose paid-in-capital is ¥ 10 Mill or
more and who has offices in 3 prefectures or more 5.3 5.78 (Note2) 2-2 Special portion to be allocated by national
government to all prefectures (National Tax): Companies whose paid-in-capital is less than 10
Mill, or who does not have offices in 3 prefectures or more
First ¥ 4 Mill of taxable income (aX81%) 2.187 2.187 (Note2) Second ¥ 4 Mill of taxable income (bX81%) 3.24 3.24 (Note2)
Balance (cX81%) 4.293 4.293 (Note2)
Companies whose paid-in-capital is ¥ 10 Mill or
more and who has offices in 3 prefectures or more 4.293 4.293 (Note2)
3.Inhabitants Tax (Local Tax): (Note4)
Inhabitants tax rate to be applied to the amount
of Corporation Tax (the above 1) 17.3 20.7 (Note3) Notes
(1): Due to the special measures to support recovery from worldwide recession, for the periods ending during the period from April 1, 2009 to March 31, 2011, corporation tax rate for the first ¥8 Million is reduced to 18% from ordinary rate of 22%.
standard tax rates, several prefectural governments (Tokyo, Kanagawa, Shizuoka, Aich, Kyoto, Osaka and Hyogo) are imposing higher tax rates to companies whose whose taxable income exceeds certain amount ( From ¥ 25 Mill(Tokyo's case) to ¥ 50 Mill (Osaka and Hyogo's case)).
Enterprise tax was separated into two parts for the periods commencing on or after October 1, 2008, in order for national government may allocate the part of the tax into all prefectures, as a temporal arrangement until the time the budgeting system is reorganized in the future.
(3): Inhabitants tax consists of prefectural inhabitants tax(standard rate of 5.0%)and municipal inhabitants tax(standard rate of 12.3%).
Since prefectural governments and municipal governments are allowed to increase tax rates up to the maximum rates (6.0% for prefectural and 14.7% for municipal), many local governments are imposing higher tax rates to companies whose whose taxable basis (the amount of Corporation Tax) exceed certain amount (mainly ¥4 Mill to ¥10 Mill).
(4):In addition to tax on income, companies are subject to inhabitants tax per capita charges which are assessed by the local government who governs the place where the business premises of the company is located. Current per capita charges are summarized as follows.
Prefectural per capita charge:
Amount of paid-in-capital and capital surplus
Amount of per capita charge (In ¥ Thousand) Standard rate Maximum
rate
¥10 Mill or less ¥20 ¥22
¥100 Mill or less, more than ¥10 Mill ¥50 ¥55 Municipal per capita charge:
Amount of per capita charge (In ¥ Thousand) Amount of paid-in-capital and capital
surplus Number of employees of each office, etc.
Standard
rate Maximum rate
¥10 Mill or less 50 or less ¥50 ¥60
¥10 Mill or less More than 50 ¥120 ¥144
¥100 Mill or less, more than ¥10 Mill 50 or less ¥130 ¥156 ¥100 Mill or less, more than ¥10 Mill More than 50 ¥150 ¥180
B: Company whose paid in capital is more than ¥100 Million:
Tax Rate(%)
Kind of income taxes Standard Maximum
1.Corporation Tax (National Tax):
Companies whose paid-in-capital is more than
¥100 Mill 30.0 30.0
2.Enterprise Tax on income (Note 1): 2-1 Ordinary portion to be the revenue of residing
prefecture (Local Tax)
Companies who does not have offices in 3
prefectures or more
First ¥ 4 Mill of taxable income (a) 1.5 1.69 (Note1) Second ¥ 4 Mill of taxable income (b) 2.2 2.475 (Note1)
Balance (c) 2.9 3.26 (Note1)
Companies who has offices in 3 prefectures or more
2.9 3.26 (Note1) 2-2 Special portion to be allocated by national
government to all prefectures (National Tax): Companies whose paid-in-capital is less than 10
Mill, or who does not have offices in 3 prefectures or more
First ¥ 4 Mill of taxable income (aX148%) 2.22 2.22 (Note1) Second ¥ 4 Mill of taxable income (bX148%) 3.256 3.256 (Note1)
Balance (cX148%) 4.292 4.292 (Note1)
Companies whose paid-in-capital is ¥ 10 Mill or
more and who has offices in 3 prefectures or more 4.292 4.292 3.Enterprise Tax (Local Tax) on value added: Tax basis = salary, bonus, remuneration and
pension contribution+ net interest expenses + rent
expenses + net taxable income 0.48 0.504 (Note1) 4.Enterprise Tax (Local Tax) on capital:
Tax basis = paid in capital + capital surplus
0.20 0.21 (Note1)
5.Inhabitants Tax (Local Tax): (Note3)
Inhabitants tax rate to be applied to the amount of
Corporation Tax (the above 1) 17.3 20.7 (Note2) Notes
(1): Enterprise Tax is in principle assessed by prefectural governments. From April 2004, in addition to historic assessment of enterprise tax on income, the concept of assessment on the size of business is introduced by the government for the companies whose paid in capital is more than ¥100 Million. Since prefectural governments are allowed to increase Enterprise Tax rates up to 105% of standard tax rates, several prefectural governments (Tokyo, Kanagawa, Shizuoka, Aich, Kyoto, Osaka and Hyogo) are imposing higher tax rates to companies whose whose taxable income exceeds
Enterprise tax assessed on income was separated into two parts for the periods commencing on or after October 1, 2008, in order for national government may allocate the part of the tax into all prefectures, as a temporal arrangement until the time the budgeting system is reorganized in the future.
(2): Inhabitants tax consists of prefectural inhabitants tax(standard rate of 5.0%)and municipal inhabitants tax(standard rate of 12.3%).
Since prefectural governments and municipal governments are allowed to increase tax rates up to the maximum rates (6.0% for prefectural and 14.7% for municipal), many local governments are imposing higher tax rates to companies whose whose taxable basis (the amount of Corporation Tax) exceed certain amount (mainly ¥4 Mill to ¥10 Mill).
(3):In addition to tax on income, companies are subject to inhabitants tax per capita charges which are assessed by the local government who governs the place where the business premises of the company is located. Current per capita charges are summarized as follows.
Prefectural per capita charge:
Amount of paid-in-capital and capital surplus
Amount of per capita charge (In ¥ Thousand) Standard rate Maximum
rate
¥1,000 Mill or less, more than ¥100 Mill ¥130 ¥143 ¥5,000 Mill or less, more than ¥1,000 Mill ¥540 ¥594
More than ¥5,000 Mill ¥800 ¥880
Municipal per capita charge:
Amount of per capita
charge (In ¥ Thousand)
Amount of paid-in-capital and capital surplus Number of employees of each office, etc.
Standard
rate Maximum rate ¥1,000 Mill or less, more than ¥100 Mill 50 or less ¥160 ¥192 ¥1,000 Mill or less, more than ¥100 Mill More than 50 ¥400 ¥480 More Than ¥1,000 Mill 50 or less ¥410 ¥492 More Than ¥1,000 Mill, less than ¥5,000 Mill More than 50 ¥1,750 ¥2,100 More than ¥5,000 Mill More than 50 ¥3,000 ¥3,600
2. Effective Tax Rates:
Since the Enterprise Tax is deductible for computation of taxable income for the fiscal period when the tax become due (i.e., usually three month later than the closing date of the company when the Enterprise Tax Return has to be filed), the Japanese effective tax rates should be calculated by taking into account of the effect of deductibility of the Enterprise Tax and ordinarily calculated as follows.
Effective Tax Rates = Corporation tax rate + Inhabitants tax rate + Enterprise tax rate1 + Enterprise tax rate Accordingly, the statutory tax rates and effective tax rates for a company whose paid in capital is more than ¥100 Million may be summarized as follows.
Top marginal tax rate on income Company whose paid in capital is ¥100M or less Company whose paid in capital is more than ¥100M
Statutory rates:
Corporation tax 30.00 30.00Inhabitants tax (20.7% (Maximum) of
Corporation tax) 6.21 6.21
Enterprise tax (Maximum) 10.073 7.552
Total 46.283 43.762
Effective rates
42.05 40.69Note: The above effective tax rate does not include effect of Enterprise Tax on value added and on capital explained above.
