4 Corporate taxes

Doing business in Japan

Tax rates

(updated August 2016)

There are three types of corporate income taxes as follows:

(Tax year starting on or after April 1, 2016)

1. National

  • For national 23.4% of taxable income
  • For local: 4.4% of national tax

2. Local (prefecture and city)

  • 16.3% of national tax

3. Enterprise

  • 3.78% of taxable income

Enterprise tax is deductible for other tax purposes resulting in an effective tax rate of 30.86%.

Depending upon profit, stated capital and the local government where an operation is located, rates may be lower.

Deductions denied

  • Director’s bonus
    Any additional pay, incentive bonus or other types of additional economic benefits, other than monthly fixed pay, given to directors (as defined by Japanese Commercial Code and Tax Law) are not deductible for corporate tax purposes unless certain notification has been filed on a timely basis.
    This will, of course, raise the effective tax rates described above.
    If you, as a director, want to obtain incentive bonuses and yet avoid additional corporate tax expenses, some creative ideas are required.
  • Entertainment expenses
    From tax year starting April 1st, 2014, 50% of entertainment expenses are not deductible.
    Smaller companies of which stated capital is 100 million yen or less, have option to choose above 50% or excess of fixed ceiling amount of 8 million yen.