Tax Figures
Corporate Income Tax
25.5%
Corporations are required to file a final tax return within two months of the end of its annual accounting period. Corporate taxpayers are obligated to file and pay a national ‘local corporate tax’ of 4.4%.
Income Tax Rate
- 1 – 1,950,000 ¥: 5%
- 1,950,001 – 3,300,000 ¥: 10%
- 3,300,001 – 6,950,000 ¥: 20% of base exceeding 3,300,000
- 6,950,001 – 9,000,000 ¥: 23% of base exceeding 6,950,000
- 9,000,001 – 18,000,000 ¥: 33% of base exceeding 9,000,000
- 18,000,001 – 40,000,000 ¥: 40% of base exceeding 18,000,000
- Over 40,000,000 ¥: 45% of base exceeding 40,000,000
Sales Tax
8%
Withholding Tax
- Dividends: 20%
- Interest: 15-20%
- Royalties: 20%
- Rents (from real properties): 20%
Other Tax
Local inhabitant tax is made up of prefectural tax (4%) and municipal tax (6%).
Time to prepare and Pay Taxes
175 hours
Employers Social Security and statutory contributions
Social insurance premiums are deducted from a salaried worker’s monthly salary. A pension insurance premium for salaried workers is imposed at 17.828%, half of which must be paid by the employer. Employer covered worker’s accident compensation insurance varies between 0.3% to 10.3% depending on a company’s industry.
Employees Social Security and statutory contributions
Half of the pension insurance premium of 17.828% must be paid by the employee.
Payroll
There are specific rules for payroll and taxation in Japan, and must be followed precisely at both the national and local levels. The primary concerns for a foreign company that needs to comply with tax laws in Japan are: individual income tax (for employees in Japan), public welfare pension costs, health insurance, payroll tax, sales tax, business tax and permanent establishment concerns.
Remote Payroll
A remote payroll in Japan is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Japan. One option for a non-resident company to payroll its employees (local and foreign) in Japan is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Japan under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to Japan may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Japanese payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Japanese employment laws.
Currency
Japanese Yen – ¥
