Optia Partners

Taxes

Generally speaking, any revenues generated in Japan will be taxed according to Japanese Tax Laws and the Japanese government has taken measures to ensure that foreign companies are not double taxed. Tax is paid through withholding or self assessed income tax procedures. Shortly after incorporating a new entity in Japan, corporations should make sure to submit a “tax notification” to the tax authorities.

The 3 main types of corporate related taxes are Corporate Tax, Corporate Inhabitance Tax and Enterprise Tax. Tax rates will vary according to the size of the corporation, the location and amount of taxable income. For a start up company in Tokyo, approximate taxes rates may look like this:

Taxable income	Corporate Tax	Inhabitance Tax	Enterprise Tax	Approx Total
Up to ¥8mio	22%	4%	6%	32%
Over ¥8mio	30%	5%	9%	44%

Consumption Tax of 5% is applicable in Japan, which comprises of 4% National Consumption Tax and 1% Local Consumption Tax.

Companies should also take labor and social insurances for employees into consideration. Labor insurance comprises of “workers accident” and “employment” insurances and social insurance comprises of “health” and “pension”. Totally they will come to around 13% of each employee’s salary.

Start ups should also note that net losses under income in each business year can be carried forward for the next seven years, providing blue forms are appropriately filed. Corporations filing a blue form are also allowed to carry back a loss to the previous year and receive a full or partial refund of the amount of corporate tax in the business year in which the loss was carried back. However, this system of carrying back is subject to changes and recent status should be checked with a Tax Accountant.

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