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AKIA TAX CONSULTANTS is an accounting firm. Our specialty is international tax service for foreign companies. We have continued to provide useful information for foreign companies which are considering to launch business in Japan or who have already started their business in Japan.

 In this round, we will give a general explanation of corporate tax.

 

 

Outline of Corporate Tax

 

I.                   Corporate Taxes

Corporate Taxes are levied on a Japanese company and a Japanese branch of a foreign company.

 

Japanese Corporate Taxes consist of as follows:

Taxes

Taxable Base

National Corporate Tax

Taxable Income

Local Corporate

Tax

Inhabitant Tax

National Corporate Tax amount

Per Capita Tax

Capital amount and the number of employees

Enterprise Tax

Taxable Income

Local Special Tax

Enterprise tax amount

Pro Forma

Standard Tax

a.      Added value base: the sum of wages, net interest expense and net rental expense

b.      Capital base: The sum of paid-in capital and capital surplus

 

 


 

II.                Corporate tax rates

Effective tax rate is from about 25% to about 41%. It depends on taxable income and paid-in capital amount of the company. Detail tax rates are as follows.

 

1.      National Corporate Tax

Taxable income range

Company whose paid-in capital is 100 million or less yen

Company whose paid-in capital is more than 100 million yen

8 million yen or less

18%

30%

Over 8 million yen

30%

 

2.      Inhabitant Tax

Tax rate depends on local government. The following rates are for Tokyo.

Taxable income ranges

Tax rate

Company whose paid-in capital is \100 million or less and its annual national corporate tax amount is \10 million or less

17.3%

Other than above

20.7%

 

3.      Per Capita Tax

Tax rate depends on local government. The following rates are common case.

Type of corporation

Tax amount

The sum of paid-in capital and capital surplus

The number of employees

 

\10 million or less

50 or less

70,000 yen

More than 50

140,000 yen

Over \10 million but not more than \100 million

50 or less

180,000 yen

More than 50

200,000 yen

Over \100 million but not more than \1 billion

50 or less

290,000 yen

More than 50

530,000 yen

Over \1 billion but not more than \5 billion

50 or less

950,000 yen

More than 50

2,290,000 yen

Over \5 billion

50 or less

1,210,000 yen

More than 50

3,800,000 yen


 

4.      Enterprise Tax

Tax rate depends on local government. The following rates are for Tokyo.

 

1) For a company other than 2)

Taxable income range

Company whose paid-in capital is \100 million or less and its annual taxable income is \25 million or less

Other than the company in the left column

\4 million or less

2.7%

2.950%

Over \4 million but not more than \8 million

4.0%

4.365%

Over \8 million or a certain company*

5.3%

5.780%

 

Standard tax rate

Special tax rate

*  A company which is engaged in business in 3 or more prefectures with capital amount of \10 million or more

 

2) For a company which Pro Forma Standard Tax is applied to

Taxable income range

Tax rate

Standard tax rate (Tax rate used for Local Special Tax computation)

\4 million or less

1.69%

1.5%

Over \4 million but not more than \8 million

2.475%

2.2%

Over \8 million or a certain company*

3.26%

2.9%

*  A company which is engaged in business in 3 or more prefectures

 

5.      Local Special Tax

Local Special Tax is levied from the fiscal year starting after October 2010.

The tax amount is 81%(*) of the amount of enterprise tax calculated in accordance with standard tax rate above.

*  148% is applied to a company whose paid in capital amount is 100 million yen or more at the end of the fiscal year.

 

6.      Pro Forma Standard Tax

Pro Forma Standard Tax is subject on the company whose paid in capital amount is more than 100 million yen. Tax amount is calculated as the total of 1) added value base and 2) capital base.

 

1)      Added value base: 0.504% of the sum of wages, net interest expense and net rental expense

2)      Capital base: 0.21% of the sum of paid-in capital and capital surplus

 

 

When printing out the contents above, it is convenient to use the attached word file you can see the bottom of this page.

 

If you need further information on Japanese tax system or look for an assistance of your company’s accounting issues, please feel free to contact us. When sending us an e-mail, please visit the URL

 à  http://www.akia-tax.com/contact/index.htm

 

AKIA TAX CONSULTANTS K.K.

February 26, 2010

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