Entering the Japanese market requires a clear understanding of corporate and personal taxation. Japan’s tax framework is structured, predictable, and transparent — but it varies based on company size, income level, and business structure.
Japan’s corporate tax generally consists of national corporate tax, local corporate tax, corporate inhabitant tax, enterprise tax, and special corporate enterprise tax. The actual burden depends on taxable income, paid-in capital, company size, location, and the start date of the fiscal year.
For companies with taxable income above JPY 8 million/year.
For qualifying small & medium enterprises, on taxable income up to JPY 8 million/year, subject to conditions.
Applicable for fiscal years beginning on or after 1 April 2026. Calculated on the standard corporate tax amount, after a basic deduction of JPY 5 million.
Local taxes include both prefectural and municipal income-based charges.
Applied at approximately 1% of income, varying slightly by region.
For qualifying small & medium enterprises, on taxable income up to JPY 8 million/year, subject to conditions.
Prefectures apply additional taxes based on income and company size.
Determined by taxable income and regional factors.
Applies to companies with capital above JPY 100 million, calculated using value-added elements such as payroll and depreciation.
Apan’s combined corporate tax burden is not a single fixed percentage — it varies according to taxable income, company size, paid-in capital, business location, and other factors. For many companies, the combined burden may be around 30% or more; qualifying SMEs may have lower effective rates at lower income levels, while larger companies may face higher rates. For fiscal years beginning on or after 1 April 2026, the Special Defense Corporate Tax must also be factored in.
Illustrative Effective Tax Rates — FY beginning on/after 1 April 2026
| Business Category | Taxable Income | Illustrative Effective Rate |
|---|---|---|
| Qualifying SME | Up to JPY 4 million | 21.94% |
| Qualifying SME | Over JPY 4M up to JPY 8M | 23.73% |
| Qualifying SME | Over JPY 8 million | 34.43% |
| Enterprise (non-SME) | Standard example | 30.64% |
Businesses may offset future income by carrying forward past losses.
Losses may be carried forward for up to 10 years, subject to compliance requirements.
Application depends on proper filing, and some limitations may apply depending on company size and structure.
Japan generally applies consumption tax to domestic transactions and imports.
Applies to most goods and services.
Applies to certain food & beverage products and newspaper subscriptions.
A business must retain the required accounting records and qualified invoices to claim a credit for consumption tax paid on purchases. Since 1 October 2023, purchases from suppliers not registered as qualified invoice issuers are generally not fully eligible for input tax credit.
Of the relevant purchase tax amount may be deductible.
Of the relevant purchase tax amount may be deductible.
Foreign companies supplying digital services to customers in Japan may be subject to special consumption-tax rules.
Depending on the transaction type, either the foreign supplier must file and pay Japanese consumption tax, or the Japanese business customer must account for it under a reverse-charge mechanism.
Companies providing SaaS, cloud services, online advertising, digital content, games, or online subscriptions should confirm applicable tax treatment before launching services in Japan.
Japan applies a progressive tax system combining national and local components.
All resident taxpayers must declare yearly income and pay taxes based on total earnings.
Total liability includes national income tax plus a fixed 10% local inhabitants tax.
| Annual Income (¥) | Approx USD | Total Tax Rate |
|---|---|---|
| 0 – 1,950,000 | ~$13k | 15.105% |
| 1,950,001 – 3,300,000 | ~$22k | 20.21% |
| 3,300,001 – 6,950,000 | ~$46k | 30.42% |
| 6,950,001 – 9,000,000 | ~$60k | 33.483% |
| 9,000,001 – 18,000,000 | ~$120k | 43.693% |
| 18,000,001 – 40,000,000 | ~$266k | 50.84% |
| 40,000,001 and above | - | 55.945% |
Establishing a company or branch in Japan usually creates ongoing tax and reporting obligations, including:
No corporate tax (cannot generate revenue)
No Japanese tax unless income is sourced in Japan
Taxable in Japan on Japan-source income
Full corporate tax obligations
The information on this page is based on general guidance published by the Japan External Trade Organization (JETRO). For the latest official information on establishing and operating a business in Japan, please visit:
As laws, tax rules, visa requirements, and administrative procedures may change, users should always confirm the latest requirements directly with the relevant authorities or qualified professionals.
Understand visa types, certifications, and eligibility requirements for working and operating in Japan’s ICT sector.
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