Corporate tax rate in Japan

Under tax laws in Japan, there are four types of taxes levied on corporate income. Those are made of corporate tax (national tax), corporate inhabitant tax (local tax), enterprise tax (local tax) and special local corporate tax (a national tax, however tax filings are made to local governments along with other local taxes).

 

Corporate inhabitant taxes are levied on both income and a per capita basis using the company's capital and the number of its employees as the tax base. Corporations with paid-in capital of more than 100 million Japanese yen are also subject to size-based tax(local tax).

Note that the rates for local taxes may vary depending on the size of the business and the place where a company / branch is located.

A corporation subject to size-based tax  
  2016/3 2017/3 2018/3
 Corporate tax  23.90% 23.90% 23.90%
 Corporate inhaitant taxes  16.30% 16.30% 16.30%
 Local Corporate tax  4.40% 4.40% 4.40%
 Enterprise tax(excessive)  3.40% 2.20% 2.20%
 Enterprise tax(standard)  3.10% 1.90% 1.90%
 Special local corporate tax  93.50% 152.60% 152.60%
 Effective tax rate  33.06% 32.30% 32.30%

 

A corporation with capital of 100 million yen or less
  2016/3 2017/3 2018/3
 Corporate tax  23.90% 23.90% 23.90%
 Corporate inhaitant taxes  16.30% 16.30% 16.30%
 Local Corporate tax  4.40% 4.40% 4.40%
 Enterprise tax(excessive)  7.18% 7.18% 7.18%
 Enterprise tax(standard)  6.70% 6.70% 6.70%
 Special local corporate tax  43.20% 43.20% 43.20%
 Effective tax rate  35.36% 35.36% 35.36%


Under tax reform 2016, corporate tax rete is in the process of the following changes.

A corporation subject to size-based tax    
  2018/3 2019/3 2020/3
 Corporate tax  23.90% 23.40% 23.20%
 Corporate inhaitant taxes  12.90% 7.00% 7.00%
 Local Corporate tax  4.40% 10.30% 10.30%
 Enterprise tax(excessive)  1.90% 0.70% 0.70%
 Enterprise tax(standard)  1.90% 0.70% 0.70%
 Special local corporate tax  152.60% 414.20% 414.20%
 Effective tax rate  31.33% 29.97% 29.74%
* Assuming that no excessive rate applies.    

 

A corporation with capital of 100 million yen or less
  2018/3 2019/3 2020/3
 Corporate tax  23.90% 23.40% 23.20%
 Corporate inhaitant taxes  12.90% 7.00% 7.00%
 Local Corporate tax  4.40% 10.30% 10.30%
 Enterprise tax(excessive)  6.70% 6.70% 6.70%
 Enterprise tax(standard)  6.70% 6.70% 6.70%
 Special local corporate tax  43.20% 43.20% 43.20%
 Effective tax rate  34.33% 33.80% 33.59%
* Assuming that no excessive rate applies.    

 

Timing of tax return filing

Corporations are required to file a final tax return for corporate tax, corporate inhabitant tax and enterprise tax on their income within two months from the fiscal year end. Note that an extension of the deadline for filing a final tax return is allowed when a corporation gets approval from the taxation office under a situation where a company cannot file a final tax return due to accounting audit work.

 

Interim tax return

When the amount of corporate tax for the first six months of the fiscal year is over 100 thousand yen, based on the amount of tax in the previous year, interim tax return is required.

Filing and payment for the interim tax return have to be completed within two months from the end of the first six months.

NOL ( Net Operating Loss)

Net losses incurred in each fiscal year ending on or after April 1, 2008 can be carried forward for the following nine years. If a company has capital in excess of 100 million Japanese yen or is a wholly owned subsidiary of a large corporation with capital of more than 500 million Japanese yen, the amount of loss that may be deducted from taxable income cannot exceed 80% of taxable income. Although a corporation cannot receive a refund in principle, certain corporations, such as small and medium-sized companies meeting certain criteria, are allowed to carry back a loss to the business year beginning not more than one year prior to the date of commencement of the fiscal year in which the loss incurred, and receive a refund of the amount of corporate tax in the fiscal year in which the loss was carried back.

 

Under 2016 tax reform, NOL incurred in each fiscal year starting on or after April 1, 2018 can be carried forward for the following ten years. However, if a company has capital in excess of 100 million Japanese yen or is a wholly owned subsidiary of a large corporation with capital of more than 500 million Japanese yen, the amount of loss that may be deducted from taxable income cannot exceed 65% of taxable income for the fiscal year starting  between April 1, 2015 and March 31, 2016, 60% of taxable income for the fiscal year starting  between April 1, 2016 and March 31, 2017, 55% of taxable income for the fiscal year starting  between April 1, 2017 and March 31, 2018,and cannot exceed 50% of taxable income for the fiscal year starting after April 1, 2018.    

 

Beginning day of FY   2001/4/1 2008/4/1 2012/4/1 2015/4/1 2016/4/1 2017/4/1 2018/4/1  
                                 
Carry forward period 5 years 7 years 9 years 10 years
                                 
Limit of deduction                                
Small and medium-sized enterprize No limitation
                                 
Other ( including Large enterprize) No limitation 80% of
gross income
65% of
gross income
60% of
gross income
55% of
gross income
50% of
gross income