3.2 Domestic-Sourced Income
Section 3: Taxes in Japan
This section discusses the aspects of Japan’s tax system that are most relevant to a foreign corporation or individual investing in Japan. Emphasis is placed on corporate tax structures, tax treaties, and personal taxes.
3.1 Overview of Japanese Corporate Tax System for Investment in Japan
3.2 Domestic-Sourced Income
3.3 Overview of Corporate Income Taxes (Corporate Tax, Corporate Inhabitant Tax, Enterprise Tax)
3.4 Overview of Withholding Income Tax
3.5 Tax Treaties
3.6 Overview of Consumption Tax
3.7 Overview of Personal Tax System
3.8 Other Principal Taxes
3.9 Other Principal Corporate Taxation Regarding International Transactions
3.2.1 Domestic-Sourced Income in the Business Year Commencing by March 31, 2016
Below is the typical example of the domestic-sourced income that forms the basis to determine the tax treatment on foreign corporations. Please note that the specific scope of taxation differs by the mode of activity of a foreign corporation in Japan, as will be described later.
- Business Income derived from business activities in Japan
- Consideration for providing certain services rendered in Japan such as engineers
- Rent of real estate and other properties in Japan
- Interest on deposits and savings deposited to offices in Japan
- Dividends received from domestic corporations
- Interest on loans for business operations in Japan
- License fees, royalties and usage fees for machinery and equipment received from business operation in Japan
- Proceeds from the transfer of real estate in Japan
- Income derived from the management of assets in Japan
3.2.1 Domestic-Sourced Income in the Business Year Commencing on or After April 1, 2016
Types of domestic-sourced income and taxable scope will also change from the business year commencing on or after April 1, 2016. The major domestic-sourced income in the business year commencing on or after April 1, 2016 is as follows. In addition, the concept of domestic-sourced income has drastically changed, and it has been determined that the income, which is attributable to Japanese branches and falls under 3.2.1 1., 4., 5., 6. and 7. above, is included in the following 1., 2. and 6.:
- Income attributable to permanent establishment
- Income derived from the management/holding of assets in Japan
- Proceeds from the transfer of assets in Japan
- Consideration for providing certain services rendered in Japan such as engineers
- Rent of real estates and other properties in Japan
- Other domestic-sourced income
