InvestJapan.com - Get a Better Understanding of the Japanese Tax System

Discover some basic facts regarding the Japanese taxation and learn in what way it may affect your business there. InvestJapan.com brings you easy-to-understand explanations of the way the Japanese tax system works and of the relevance it has to different business enterprises in the country. Keep in mind that this is simply a short summary of the very basic principles and if you want to fully understand this topic further reading will be in order.

Taxation in Japan - Short History

After the end of World War Two, Japan began to implement a direct tax system, similar to that of the UK and USA. The two most significant taxes that were set and still exist today are the standard income tax and the corporation tax. Taxation in Japan is under the Ministry of Finance, under the control of The National Tax Administration Agency.

Who is Liable to Japanese Taxes?

Any corporation doing business in Japan is subject to taxation as set by law and depending on the nature of its activities and level of incomes. This rule applies to all types of firms, branch offices and companies. There are however, a few limitation and corrections that were added in order t assure that foreign businesses will not be subjected to excessive or unfair taxation.

Types of Taxes in Japan

Foreign businesses in Japan are all subject to taxation in one level or the other. For most businesses these taxes are divided into several categories. The national Tax (also known as corporation tax), standard local tax which is really simply a business tax, municipal inhabitant tax and prefectural inhabitant tax. As in any other country, the level of taxation will depend on many different factors including the category the business false into and the level of earnings.

Double Taxation

The profits of all companies established in Japan are subject to taxation. This includes earnings that were gained outside of Japan as well. However, to avoid double taxation and cases in which a business has to pay twice for the same earnings, taxes paid to a different country can in many cases be deducted from the owed Japanese taxes. This rule is very important for overseas businesses, but is only useful under several restrictions. There are several other means taken by Japan to avoid cases of double international taxation, especially in cases of branch offices.