1. Company formation and
taxation
The following types of corporation can be formed in
Japan.
1-1 Domestic corporation
( Head office is registered in
Japan .)
Kabushi Kaisya ( Joint stock company, KK ) is the most widely
used form.
The compnay must be registered in the Japanese registry
office.
Incorporation of a Japanese corporation requires the drawing up of
the company article.
One of representative directors must be a resident
in Japan. Other directors are not
required to be a resident in Japan. He is
not necessarily a citizen of Japan.
| KK | |
| Minimum Capital | Not less than yen 1 |
| Number of director | At least 1 director |
1-2 Foreign corporation
( Head office is registerd outside
Japan , ex. Branch )
A branch must be registered in the Japanese registry
office . One of the representative in Japan
branch must be a resident in
Japan but not necessarily a citizen of Japan.
1-3 Representative
office
A representative office is not a legal entity and is not
required to register in Japan. It's activitties
are limited soley to
information gathering, advertising and publicity, market reserch and
general
liaison with the head office of a foreign corporation. Liaison office
are not allowed to engage in any
commercial transactions such as making
contracts, taking orders or invoicing or collection money.
1-4 Scope
of Taxable Income
1) Domenstic
Corporation
Income from all over the
world
2) Branch of a foreign
corportion
Income derived from the
sources only within Japan
The taxes paid in Japan may be offset as a tax
credits in the country of the head office located.
Main difference in tax
treatments between a domestic corpoation and a foreign
corporation
| Profit Distribution | Domestic corp. | 20% withholding tax (Reduced 10% -15% on a tax treaty ) |
| Branch | Nill |
3) Representative
office
No tax will be
imposed.
1-5 Accounting and corporate tax procedures
A
corporation records a book and prepares the financial statements in accordance
with Generally accepted accounting principle.
A corporation holds General
Shareholders' meeting in 2 or 3 months after the year end based on busniess
law.
The corporate tax return is required to file to the tax authorities by
the due date 2 months afterthe year end ( 3 months if extention is approved. )
under the corporate tax law.
The corporate tax consists of National tax ,
Local inhabitants tax and enterprise tax.
Tax rates including 3 taxes will be
aroud 30 % - 45% . It will differ based on the taxable amounts and captital
amount.
1-6 Withholding tax system
Japanese taxes on
taxable income is collected by the withholding system and the assessment tax
system . The withholding taxes are imposed on interest income, divident income,
salaries,professional fees, royalties etc. paid to individuals and corpotations.
Withholding tax is withheld at source from payments to individuals as well as
corporations.
The withholding tax rate is generally 10% - 20% which will
differ from type of income, and type of residets or non-residents. However, the
tax withheld from the salaries paid to resident individuals is often higher than
20% because the tax is caluculated by applying a progressive tate.
The
withholding tax on interest, dividend, royalties etc. to non-residents or
overseas corporations will be reduced by applying the relevant tax
treaties.
1-7 Consumption tax
Consumption tax is levied at
the rate of 5% on almost all domestic transactions such as sales and leasing of
goods, the provision of services carried out within Japan and imported goods
delivered from bonded areas.
Main non-taxable transactions are sales or
lease of land,financial transactions, medical transactions, education service,
rent of residential house etc.
Consumption tax due is calculated by
deductiong the consumption tax paid on the puchased goods or services from the
consumption tax received on the sales transactions.
Consumption tax return is
required to file the tax authorities by the due date 2 months after the year
end.
The Scope of taxable income in Japan is determined in accordance with the resident status.
Resident staus is classified into Resident and Non-resident .
Resident is further classified into Non-permanent and Permanent resident.
1. Resident
A person who has a domicile in Japan or a residence in Japan for one year or more.
1 ) Non-permanent resident
A resident who is not a Japanese national and has had a domicile in Japan for an aggregate period of 5 years or less within the last 10 years.
2) Permanent Resident
A resident other than non-permanent resident.
2. Non-resident
A person other than resident
2-2 Scope of taxable income
The taxable income is clasified into the following in accordance with the status.
1. Resident
1 ) Non-permanent resident
(1) Income from Sources in Japan
(A)Paid in Japan
All income paid in Japan is taxable.
(B)Pain Abroad
All income paid in Abroad is taxable.
(2)Income from Source Abroad
(A)Paid in Japan
All income paid in Japan is taxable.
(B)Paid Abroad
Only the portion deemed remitted to Japan is taxable.
2) Permanent Resident
Income from sources in Japan and all income from source abroad
2. Non-resident
Income from sources in Japan
( Note) Salaries performed in Japan are treated as " Income source in Japan", whether it is paid in Japan or abroad.
2-3 Income tax return filing
1) Principle
The individual income tax is based on the self-assessment system for the annual period from Jan. 1 to Dec. 31. A taxpayer is required to calculate the tax amount , file the tax return to the tax authorities and make a payment by the due date March 15.
2) Parmanent departure from Japan
(A)Designating of a tax agent
Filling and payment due date is March 15 of the next year.
(B)Non designating of a tax agent
Filling and payment due date is on the date of departure from Japan .
2-4 Income tax rate
1 Resident
The simplified formula for income tax rate are as follows;
1) National tax
| Taxable Income amount ( A) | Tax Rate | Formula |
| Not more than JPY 1,950,000 | 5% | (A) x 5% |
| Not more than JPY3,300,000 | 10% | (A) x 10% less JPN 97,500 |
| Not more than JPY 6,950,000 | 20% | (A) x 20% less JPN 427,500 |
| Not more than JPY 9,000,000 | 23% | (A) x 23% less JPN 636,000 |
| Not more than JPY 18,000,000 | 33% | (A) x 33% less JPN 1,536,000 |
| More than JPY 18 million | 40% | (A) x 40% less JPN2,796,000 |
2) Loca tax
| Taxable Income | Tax Rate | Formula |
| Total Taxable income (A) | 10% | (A) x 10% |
( Note ) Loca Individual local tax is imposed on the taxable income of the previous year to the person who has the resident in Japan on January 1 .
In other word the person who leaves Japan before January 1 will not be subject to the local tax. It means that the local tax is not imposed on a nonresident person even he has income from source in Japan.
2 Non-resident
The tax rate is 20% in principal.
3. Social insurance
and Labor insurance
3-1 Social insurance
Social insurance
consisting of Health insurance and Pension insurance is a system for helping
workers providing medical or pension benefits for illness, injury, childbirth,
death, old age, physical disability etc. Every foreigner as well as Japanese who
is employed on a full time basis will be required to join the social insurance
system.
Monthly premiums are determined based on the insured worker's monthly
standard salary and the premium is shared equally between the employer and the
insured worker. The total premium for both the employer and the insured worker
is about 24% of the standard monthly salary of the worker.
3-2 Labor
insurance
Labor insurance consosts of workers compensation insurance
and employment insurance. Both the employers and employees must join the Labor
insurance system regardless of nationalities. Directors are not eligeble to join
the system. The workers compemsation premium is 0.3% of the salary of the
insured worker and paid fully by the employer. The employment premium is paid
0.7% by an employer and 0.4% by an insured worker.
4. Employee work
rule required to submit to the Labor Standard Inspection Office
An
employer with at least 10 or more employees is mandatry to submit the emplyee
work rule to the labor standard inspection office with the written statement of
opinion from a representative in employees. The work rule contains Work hour,
Break time, Days off, Wages, Retirement including gorunds for dismissal
etc.
Even an employer who employees less that 10 regular workers will be
recomended to furnish the work rule.
5. Government subsidiary
support
There are so many Government subsidiary supports in Japan.
However, the applicable conditions and procedures are very complicated. It will
require utmost attention and confirmation to satisfy the necessary conditions
and procedures for the local government office.
We introduce you the initial
hiring employee subsidiary after incorporation granting yen 1.4 million per
hiring posisioned person.
A company is required to meet the following
conditions;
1) The compnay joins the Government labor insurance
system.
2) The compnay will hire a certain employee subject to the local
government requirement.
3) Expenditure more than yen 3 million will be
invested for new business such as new office, fasility, equipments etc.
4)
Applications for certaine planning reports etc. will be subumitted to the local
government.
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