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  Corporate income tax return in Japan (Latest 2017-2018)
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Articles & News Corporate income tax return in Japan (Latest 2017-2018)

2017.08.08 Corporate Tax

Corporation income taxes in Japan

Corporation income taxes in Japan are comprised of the following taxes.

Important thing is that in Japan Local taxes (Inhabitant tax, Local corporation tax, Enterprise tax and Local corporation special surtax) are levied in addition to National corporation tax.

This is, we need to check the local tax rate as well, to calculate the total corporation tax rate.

 

corporation taxes in Japan

 

National corporation income tax rate

National corporation income tax rate is as below.

Tax rate depends on the size and type of its company.

Corporation tax rate

2016: Tax years beginning between 1 Apr 2016~31 Mar 2017

2017: Tax years beginning between 1 Apr 2017~31 Mar 2018

2018: Tax years beginning between 1 Apr 2018~31 Mar 2019

After 2019 Tax years beginning after 1 Apr 2019

 

Estimated effective tax rate (including Local taxes)

Estimated effective tax rate for corporations in Japan is as below.

Effective tax rate

2016: Tax years beginning between 1 Apr 2016~31 Mar 2017

2017: Tax years beginning between 1 Apr 2017~31 Mar 2018

2018: Tax years beginning between 1 Apr 2018~31 Mar 2019

Before Sep 2019: Tax years beginning between 1 Apr 2019~30 Sep 2019

After Oct 2019: Tax years beginning after 1 Oct 2019

 

Medium and small sized company

Medium and small sized company is generally a ordinary company whose capital amount is not exceeding 100m JPY.

Medium and small sized company can enjoy some tax benefits under Japanese corporation tax law, such as;

 

  • Reduced corporation tax rate (Please refer to above tax rate lists)
  • Refund by carry back of losses
  • Favorable conditions for carry over of losses (Please refer to below for more detail)
  • Reserve for bad debts

 

However, for purposes of tax benefits, if it’s wholly owned (100%) by a large parent company with capital of 500m JPY or more, the company may not be treated as Medium and small sized company. This is, such company owned big parent company cannot enjoy above tax benefits.

 

Foreign branch can be Medium and small sized company?

In case of Foreign branch, it’s decided based on the capital amount of Head office.

Basically, as Foreign head office’s capital is big, if it’s exceeding 100m JPY, Japanese branch cannot enjoy lower tax rate.

 

Carry over of losses

Net loss occurred in a prior tax year beginning within 9 years (10 years for losses occur in the financial year beginning after 1 Apr 2018) can be carried forward to reduce the taxable income, if the company meets certain conditions.

However, even if the company meets certain conditions, carry over of losses can be offset with taxable income are limited as below.

 

  • Tax year beginning between 1 Apr 2016~31 Mar 2017: 60% of taxable income
  • Tax year beginning between 1 Apr 2017~31 Mar 2018: 55% of taxable income
  • Tax year beginning after 1 Apr 2018: 50% of taxable income

 

But, if the company is “Medium and small sized company”, the taxable income limitation does not apply. This means the company can use carry over of losses without taxable income limitation (100%).

 

When should corporate tax returns be submitted?

Even if there is no payment due, final tax return has to be submitted to tax office within 2 months after the end of corporation’s financial (tax) year.

Generally, preparation for tax return is very complicated and it’s written in Japanese, certified public tax accountant (which is one of national license) prepare the tax return and submit it on behalf of the company.

In case the financial year end is 31 Dec 2017, final tax return has to be filed by the end of Feb 2018.

Payment due date is same as the due date of filing of final tax return.

 

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