Benefiting from the Japanese tax system
享受日本的税务优惠
October 15, 2015 | BY
clpstaffThis article is from the Outbound - Japan chapter of the 2015 Annual Review and is available for download here.Chonghua Yao of Co-effort Law…
This article is from the Outbound – Japan chapter of the 2015 Annual Review and is available for download here.
Chonghua Yao of Co-effort Law Firm explains the key taxes that foreign investors in Japan need to be aware of, such as corporate tax, consumption tax and individual income tax
1. Why have foreign investors recently started to express more interest in investing in Japan?
Recently, with the devaluation of the Japanese Yen and the bottoming out of the Japanese economy, which, although not showing a strong rebound, nonetheless has ticked up from rock bottom, and from the perspective of 70 years of social development and change since WWII, Japan has essentially established itself as a country ruled by law that combines a market economy with mainly government-provided social welfare. In addition to the country's scientific technology on the whole occupying a global leading position, its soft environment, i.e. the stability of its laws, the quality of living standards, public safety, education, medicine and protection of its environment and cultural heritage, also ranks near the top in the world. Accordingly, the low social system-level risks of investing in Japan and the fact that Tokyo will host the Olympics make it easy and attractive for foreign investors to invest in Japan.
2. What are the taxes that have a bearing on foreign investment in Japan?
Firstly, Japan is a country ruled by law that implements the statutory taxation principle. All taxes must be levied in accordance with laws and regulations. As Japan is divided administratively into the central cabinet, and locally into the prefectural level (the capital Tokyo, Hokkaido, Osaka Prefecture, Kyoto Prefecture and the other prefectures) and the municipal level (cities, towns and villages), a system of local autonomy is implemented, which is also reflected in the tax system. Table 1 explains the classification by type of tax.
| TABLE 1 | |||
| NATIONAL TAXES | Direct taxes (corporation tax, individual income tax, inheritance tax, etc.) | ||
| Indirect taxes (customs duties, consumption tax, stamp tax, tobacco tax, liquor tax, gasoline tax, etc.) | |||
| LOCAL TAXES | Prefectural taxes | General taxes | Direct taxes (prefectural inhabitants tax, enterprise tax, real property acquisition tax, automobile tax, etc.) |
| Indirect taxes (local consumption tax, golf course utilisation tax, etc.) | |||
| Special purpose taxes | Direct taxes (hunting tax, etc.) | ||
| Indirect taxes (hotel occupancy tax, etc.) | |||
| Municipal taxes | General taxes | Direct taxes (municipal inhabitants tax, fixed property tax, light vehicle tax, etc.) | |
| Indirect taxes (municipal tobacco tax) | |||
| Special purpose taxes | Direct taxes (urban planning tax, business office tax) | ||
| Indirect taxes (bathing tax) | |||
3. What is the corporate tax rate in Japan?
Corporation Tax Act
| TABLE 2 | ||||
| TYPE OF | INCOME SEGMENT | TAX RATE | ||
| IN PRINCIPLE | SPECIAL CASES SUCH AS SMES, ETC. | |||
| Ordinary corporations | Small and medium corporations | Portion of the annual income of or below JPY8 million | 19% | 15% |
| Portion above JPY8 million | 23.9% | |||
| Large corporations | Income amount | 23.9% | ||
| Industry associations, etc. | Portion of the annual income of or below JPY8 million | 19% | 15% | |
| Portion above JPY8 million | 19% | 19% | ||
| Portion above JPY1 billion of specific associations | 22% | |||
| Public interest corporations, etc. | Portion of the annual income of or below JPY8 million | 19% | 15% | |
| Portion above JPY8 million | 19% | 19% | ||
| Specified medical corporations | Portion of the annual income of or below JPY8 million | 19% | 15% | |
| Portion above JPY8 million | 19% | 19% | ||
| Non-juridical associations | Portion of the annual income of or below JPY8 million | 19% | 15% | |
| Portion above JPY8 million | 23.9% | 23.9% | ||
4. What is the consumption tax rate in Japan?
| TABLE 3 | ||
| NO. | APPLICABLE DEDUCTION RATE | INDUSTRY TYPE |
| Type 1 | 90% | Wholesaling |
| Type 2 | 80% | Retailing |
| Type 3 | 70% | Agriculture, forestry and fisheries, mining, construction, manufacturing, electric power industry, water, gas and heat supply industry |
| Type 4 | 60% | Catering (not falling within the other five industry types) |
| Type 5 | 50% | Transport and communications, service industry (excluding catering), financial and insurance industry |
| Type 6 | 40% | Real property industry |
5. What about individual income tax in Japan?
| TABLE 4 | |
| EMPLOYMENT INCOME | Income amount – employment income deduction – necessary specific expenses exceeding the employment income deduction |
| DIVIDEND INCOME | Income amount – interest in indebtedness incurred in the acquisition of the principal |
| REAL PROPERTY INCOME | Income amount – necessary expenses |
| BUSINESS INCOME | Income amount – necessary expenses |
| RETIREMENT INCOME | (Income amount – retirement income deduction) 1/2 |
| TIMBER INCOME | Income amount – necessary expenses – special deduction (JPY500,000) |
| CAPITAL GAINS | Income amount – (cost of acquiring the asset + transfer expenses) – special deduction* |
| OCCASIONAL INCOME | Income amount – expenses incurred in obtaining the income – special deduction (JPY500,000) |
| MISCELLANEOUS INCOME | Public annuity income, etc.: income amount – public annuity, etc. deduction Non-public annuity. etc.: income amount – necessary expenses |
| *If the conditions are satisfied, a special returns deduction of up to JPY30 million may be available on the transfer of real property on which one resides. | |
| TABLE 5 | ||
| TAXABLE INCOME | TAX RATE | DEDUCTION AMOUNT |
| JPY1,950,000 or below | 5% | 0 |
| More than JPY1,950,000 but not more than JPY3,300,000 | 10% | 97,500 |
| More than JPY3,300,000 but not more than JPY6,950,000 | 20% | 427,500 |
| More than JPY6,950,000 but not more than JPY9,000,000 | 23% | 636,000 |
| More than JPY9,000,000 but not more than JPY18,000,000 | 33% | 1,536,000 |
| More than JPY18,000,000 but not more than JPY40,000,000 | 40% | 2,796,000 |
| Portion above JPY40,000,000 | 45% | 4,796,000 |
Author biography
协力律师事务所的姚重华律师阐述日本的外商需注意的主要税务要求如法人税、消费税和个人所得税
1. 最近不少海外投资者已经开始关注对日投资事宜，可否解释一下这关注的背景因素？
近来随着日元贬值以及日本经济本身虽无强势上升但已走出最低谷的基本经济面，同时从战后七十年日本社会发展变化情况来看，其已经基本确立了市场经济与政府为主的社会福利相结合的法治国家的社会形态。除了国家整体的科学技术处于国际领先地位外，其法律的稳定性、国民素质、社会治安、教育与医疗、环境与文化财产的保护等软环境均排世界前列。因此，投资日本的社会制度层面风险是低的，加上东京将召开奥运会，所以海外投资者对日本良好的社会综合环境以及各类经济因素的考量来决定投资日本。
2. 那可否就涉及投资日本的税制问题作一些简单介绍？
首先，日本是法治国家，实行税赋法定原则。即所有的征税必须依照法律和条例进行。由于日本的行政划分为中央内阁、地方为县级（东京都、北海道、大阪府、京都府和各个县，以下简称：县）和市级（市、町、村等，以下简称：市），实行地方自治制度，所以在税制方面就有体现。现结合税种来划分的话，大致如下表：
| 国税 | 直接税（法人税、个人所得税、继承税等） | ||
| 间接税（关税、消费税、印花税、烟草税、酒税、挥发油税等） | |||
| 地方税 | 县级税 | 普通税 | 直接税（县民税、事业税、不动产取得税、汽车税等） |
| 间接税（地方消费税、高尔夫球场使用税等） | |||
| 目的税 | 直接税（狩猎税等） | ||
| 间接税（旅馆住宿税等） | |||
| 市级税 | 普通税 | 直接税（市民税、固定资产税、轻型汽车税等） | |
| 间接税（市级烟草税） | |||
| 目的税 | 直接税（城市规划税、事业场所税） | ||
| 间接税（浴场税） | |||
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