Corporate and Individual Tax Rates in Japan

Taxes on Corporate Taxable Income

In Japan, taxes on corporate income are corporation tax, local corporation special tax, business tax, and resident tax, collectively called corporation tax.

The effective tax rate for corporate tax refers to the substantial income burden ratio of a corporation. But because the Japanese tax law allows for reduction of business taxes, the sum of these tax rates cannot simply become the effective tax rate. The resulting calculation of the surface tax rate or corporate tax on taxable income, local corporation special tax, business tax, and resident tax using a predetermined formula varies on the size of the company and the income amount, but it is around 30%.

Taxes on Personal Taxable Income

In Japan, taxes on personal taxable income are income tax, business tax, and residence tax, collectively called income tax.

Japan has adopted a progressive taxation system for personal income tax. The higher the income, the higher the tax rate. The range is at 5% to 45% while the resident tax rate is 10%.

The rate of personal income tax and others are at 0% to 55% because individuals whose income is below a certain amount will not be taxed.

In addition to taxes, social insurance premiums are also considered when thinking about personal taxes. In Japan, social insurance premiums are not included in taxes, but in the United States for example, they are referred to as “social security taxes” and are considered to be similar to taxes. Now that since social insurance rates are rising rapidly, it is necessary to think about individual income tax rates including social premiums.