Section 3. Taxes in Japan

Section 3. Taxes in Japan
3.1 Overview of Japanese corporate tax system for investment in Japan

3.1.1 Neutrality of tax system with respect to mode of business presence (branch or subsidiary)

Corporations engaged in economic activities in Japan are subject to taxes in Japan on the profits generated by those economic activities. Steps have been taken, however, to ensure that the tax system does not impose unfair burdens on multinational corporations engaged in economic activities in Japan on the basis of the mode of their business presence in Japan.

Income of corporations established in Japan is, as a rule and with the exception of certain non-taxable and tax-exempt income, subject to taxation, regardless of where it was generated (i.e., the source country of income), but when that income includes profits earned in foreign countries that are taxed in the source countries of that income, foreign tax credits are available whereby taxes paid in a foreign country may be credited within certain bounds against Japanese taxes owed for the purpose of eliminating double taxation between the source country of income and Japan.

Regarding Japanese branches of foreign corporations, measures such as only certain income is subject to taxation in Japan, have been implemented to avoid international double taxation in Japan. The scope of taxable income of Japanese branches of foreign corporations has changed significantly from the business year commencing on or after April 1, 2016, and Japanese branches, head office, etc. shall be respectively deemed to be an independent corporation and subject to taxation. Due to this, the income of a Japanese branch subject to taxation will be the income attributable to the Japanese branch (permanent establishment) which is the income earned by the Japanese branch on the basis that if the branch is deemed to be a company which is separated/independent from the head office, etc. as well as other prescribed income. When calculating the income attributable to the Japanese branch (permanent establishment), the profits/losses from the internal transactions between the branch and head office, etc. are to be recognized based on the presumption that transactions are conducted with the arm's length prices. With the change in the scope of taxable income of Japanese branches (permanent establishment), new foreign tax credits have also become available to foreign corporations. When the income that the Japanese branch (permanent establishment) has earned in a third country which is attributable to the Japanese branch (permanent establishment) is taxable in the third country, foreign tax credits are available whereby taxes paid in the third country may be credited within certain bounds against Japanese taxes owed to avoid international double taxation.

3.1.2 Withholding at source and self-assessment/payment

Multinational corporations engaged in activities in Japan that earn income subject to taxation in Japan calculate and pay the taxes owed through withholding procedures or self-assessed income tax procedures according to their form of corporation and type of income.

3.1.3 Designation of tax agent

When individuals who do not have domiciles in Japan, or corporations conducting economic activities in Japan, as well as Japanese branches of foreign corporations that do not have a head office or an office in Japan need to file tax returns, they must appoint a tax agent and submit a notification.

After April 1, 2022, if an individual or a corporation that is required to appoint a tax agent does not submit a notification of tax agent, the director of the competent tax office can designate its related party in Japan (relative, affiliated company, etc.) as a tax agent.

Section3: Table of Contents


Section3:Documents businesses are required to submit to authorities

Section3
(Section1)
Documents Where documents are listed within the URL The competent authorities and relevant web pages
3.3.1
(1.6)
Notification of Incorporation of a CompanyExternal site: a new window will open See Guidelines 1. Notification of corporation establishment National Tax AgencyExternal site: a new window will open
3.3.1
(1.6)
Notification of Incorporation / Establishment of corporation
(for submission to Tokyo Metropolitan when establishing an office in Tokyo)External site: a new window will open
See "1.Notification of Incorporation (example form)" under the "Duties" headline. Tokyo Metropolitan Government
Bureau of taxation(English)External site: a new window will open
3.3.1
(1.6)
Notification about Becoming Foreign Ordinary CorporationExternal site: a new window will open See Guidelines 2. Notification about Becoming Foreign Ordinary Corporation National Tax AgencyExternal site: a new window will open
3.3.10(3)
(1.6)
Application for Blue Form ReturnExternal site: a new window will open See Guidelines 6. Application form for Approval of Filing Blue Return National Tax AgencyExternal site: a new window will open
3.4.2
(1.6)
Notification of Establishment / Relocation / Discontinuance of Salary Paying Office etc.External site: a new window will open See Guidelines 10. Notification of Establishment/
Relocation/Closure of a Salary-paying office
National Tax AgencyExternal site: a new window will open
3.3.10(1)
(1.6)
Application for Special Provision for Extension of the Due Date for Filing a Final Tax ReturnExternal site: a new window will open See Guidelines 5. Application for Special Provision for Extension of the Due Date for Filing a Final Return Form National Tax AgencyExternal site: a new window will open
3.4.1
(1.6)
Application for Approval Made in Relation to the Special Provision for Due Dates for Withholding Income TaxExternal site: a new window will open See Guidelines 11. Application for Approval Made in Relation to the Special Provision for Due Dates for Withholding Income Tax National Tax AgencyExternal site: a new window will open
3.3.10(1)
(1.6)
Notification/Application for Extension of Time to File Tax Statement
(for submission to Tokyo Metropolitan)External site: a new window will open
See "2.Notification/Application for Extension of Time to File Tax Statement (example form)" under the "Duties" headline. Tokyo Metropolitan Government
Bureau of taxation(English)External site: a new window will open

Materials listed as ‘Reference’ contain samples of documents regarding registration, visa, taxation, personnel and labor matters that are necessary when a foreign company establishes a corporation or other entity in Japan. These documents are not published by competent authorities and therefore are not official. For those who are going through the official procedures, please obtain the latest official documents from the competent authorities and related bodies or consult a person who specializes in advising on such information and procedures.

The information contained in this documents should be used at the reader’s independent discretion. While JETRO makes every effort to ensure the accuracy of the information it provides, no responsibility is accepted by JETRO for any loss or damage incurred as a result of actions based on the information provided in these documents or provided by the external links listed on these pages.

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