Tax (Corporate)

Summary of Tax

Registration Tax	Registration Tax is levied on the registration of the preservation or transfer of ownership of land or buildings when they are constructed or purchased.Tax amount = assessed property tax value x tax rate (land 1.5%, building 2.0%) (note) The tax rate for land is subject to a reduced rate until March 31, 2026.
Real Estate Acquisition Tax	Real Estate Acquisition Tax is levied on the acquirer of real estate when it is acquired, newly constructed, or expanded. Tax amount = tax base (property tax assessed value)※1 x tax rate※２ ※1 In the case of residential land, the tax base of such land will be 1/2 of its value until March 31, 2027. ※2 Tax rates are as follows; Acquisition date Land Buildings (Residential) Buildings (Non-residential) from April 1,2008 to March 31, 2027 3.0% 4.0%
	Stamp Duty	Stamp Duty is imposed on taxable documents. Taxable documents include real estate sales contracts, construction contracts, and loan agreements. The amount of tax is calculated based on the contract amount. Tax amount = 0 yen to 480,000 yen (reduced until March 31, 2027)
	Consumption Tax (incl. Local Consumption Tax)	Consumption Tax is levied on domestic transactions by businesses in Japan.The tax is levied on the transfer price of buildings, brokerage commissions,etc. Consumption Tax does not apply to transfer and leasing of land. Tax amount = tax base x 10% (2.2% of 10% is local consumption tax) For an overview of consumption tax, please access the following URL on the National Tax Agency (NTA) website. National Tax Agency HP Outline of Consumption Tax
Corporation Tax Local Corporate Tax	Corporation Tax is levied on the company’s taxable income, which is revenue less expense. When a company leases real estate, rent income is added into other revenue in calculating Corporation Tax. Corporate tax ＝ taxable income×15%( If your taxable income exceeds 8 million yen per year, 23.2% will be charged on the excess amount.) Local corporation tax ＝ Corporate tax×10.3%（Refer below for effective tax rates of Japanese corporations.)
Local Tax （Business Tax・Special Corporate Enterprise Tax Corporate Inhabitant Tax）	Local Tax comprise Business Tax, Special Corporate Enterprise Tax and Corporate Inhabitant Tax levied by prefectures and municipalities on corporations. （If a foreign company only engages in real estate business, local taxes are not imposed.） Below is the effective tax rate taking into account both Corporation Tax and Local Tax. 21.366％(SME with taxable income of JPY 4 million or less) 23.173％(SME with taxable income of more than JPY 4 million and JPY 8 million or less) 33.583％(SME with taxable income of more than JPY 8 million) 30.50％＋levy on value added basis＋levy on capital basis (all other companies)
Inheritance Tax	Inheritance Tax is levied on the inheritance of property based on a person's death (including non-residents). Even non-residents of Japan are subject to the tax on real estate in Japan. In addition, if real estate is held through a Japanese corporation, shares issued by the Japanese corporation are subject to inheritance tax. In other words, if a foreign corporation purchases Japanese real estate or establishes a subsidiary in Japan to purchase real estate, real estate, no Inheritance Tax is imposed on shares issued by the foreign corporation. Inheritance tax rate JPY 10,000,000 or less 10% JPY 30,000,000 or less 15% JPY 50,000,000 or less 20% JPY 100,000,000 or less 30% JPY 200,000,000 or less 40% JPY 300,000,000 or less 45% JPY 600,000,000 or less 50% More than JPY 600,000,000 55%
Gift Tax	Gift Tax is imposed on individuals (including nonresidents) who acquire property by gift. The tax is also imposed on the donation of real estate in Japan or the donation of funds to purchase real estate in Japan.In other words, if a foreign corporation purchases Japanese real estate or establishes a subsidiary in Japan to purchase real estate, no gift tax is imposed on shares issued by the foreign corporation. Gift tax rate JPY2,000,000 or less 10% JPY3,000,000 or less 15% JPY 4,000,000 or less 20% JPY 6,000,000 or less 30% JPY 10,000,000 or less 40% JPY 15,000,000 or less 45% JPY 30,000,000 or less 50% More than JPY 30,000,000 55%
Property Tax and City Planning Tax	Property Tax and City Planning Tax are levied on property owners as of January 1 of each year. Property Tax = tax base※1 x 1.4% (standard tax rate) City Planning Tax = tax base※1 x 0.3% (maximum tax rate) ※1 The tax base is calculated based on the property tax assessed value, and the property tax assessed value is reassessed every three years. In addition, there are special exceptions to the tax base for residential land and tax reduction measures for newly constructed housing.

Related Taxation System

Permanent Establishment	The taxation relationship for foreign corporations in Japan changes depending on whether or not they have a permanent establishment in Japan. Under Japanese tax law, a permanent establishment is defined as one of the following three conditions However, if a tax treaty applies, priority will be given to a permanent establishment under the tax treaty. ① Branch A place in Japan where the management of a business is conducted, a branch,office, factory, workshop, or certain other places where business is conducted. ② Construction site Places in Japan where construction or installation work or the provision of services for the direction and supervision of such work is to be performed for a period exceeding one year. ③ Agent Certain persons such as agents located in Japan who repeatedly have the authority to make contracts or repeatedly play a major role in concluding contracts with respect to the business of the agent. As an example, if a foreign corporation purchases real estate in Japan, the taxation (corporate tax, local corporate tax, and local tax) will change as follows depending on whether the foreign corporation has a permanent establishment or not. Foreign corporations that do not have a permanent establishment are taxed only on income from real estate owned in Japan. Foreign corporations with a permanent establishment are taxed not only on income from real estate owned in Japan, but also on business income attributable to the permanent establishment. Note that depending on how the purchased property is used, it may qualify as a permanent establishment.
Thin Capitalization Rule	This tax system applies when a Japanese corporation has a loan from a foreign majority shareholder and the amount of the loan is more than three times the amount of its equity. The interest paid on the excess amount is a non-deductible expense. This tax system is designed to prevent tax avoidance because dividends on equity are not deductible, but interest on loans is deductible. Therefore, care must be taken when acquiring real estate as a Japanese corporation.
Earnings stripping rules	This tax system, the portion of a Japanese corporation's net interest expense that exceeds 20% of its adjusted income is not deductible. In addition, this non-deductible amount can be carried forward for seven years and included in deductions. However, this tax system does not apply if the interest paid in a fiscal year is 20 million yen or less. ※1 Net interest expense is the amount of interest paid overseas by Japanese companies minus the amount of interest received . (The amount of interest received is the amount obtained by multiplying the amount of interest received by the ratio of the amount of interest paid overseas to the total amount of interest paid). ※2 Adjusted income amounts are income amounts adjusted by certain amounts, such as depreciation and net interest expense. Care must be taken when acquiring real estate as a Japanese corporation.
Taxation of Real Estate Incorporated Shares	If a non-resident transfers shares issued by a Japanese corporation, in principle, no tax is levied in Japan on the gain from the transfer. However, if such transferred shares are Real Estate Incorporated Shares※1 and meet certain requirements※2 , income tax will be levied on the gain from the transfer. If a tax treaty is applicable, the tax relationship under the tax treaty will prevail. ※1 Real Estate Incorporated Shares These are shares issued by corporations (including foreign corporations) whose total value of real estate located in Japan (including shares, etc. of other real estate corporations) is 50% or more of the total value of their total assets. ※2 Certain requirements mean that both of the following two requirements must be met. ① The share transfer or falls under the category of a special related shareholder, etc. ※3 of a real estate-related corporation. ② Special shareholders, etc. of the real estate-related corporation own more than 2% of the shares issued by the real estate-related corporation as of the day before the first day of the fiscal year of transfer. ※3 Special related shareholder, etc. means "a shareholder of a real estate-related corporation" and "a family member, etc. of such shareholder".
Offshore corporation	When purchasing real estate in Japan, you may consider using an offshore corporation. An offshore corporation is a corporation established in a country that has a tax system that does not tax profits earned outside that country. If an offshore corporation purchases real estate in Japan, the taxation in Japan is the same as that of a foreign corporation, but the tax burden in the country of residence may differ depending on the tax system of the country of residence.

• (Based on the 2024 Tax Reform)

Tax withholding system

※1 Determination of withholding tax (prepaid corporate tax) obligation at the time of real estate lease for foreign corporations

Status

Lender is a foreign corporation?

NO

YES

Is the lessee an individual?

NO

YES

Lessee or his/her relatives residing?

NO

YES

Tax Withholding

N/A

withhold tax
（20.42％）

N/A

Method of Taxation

Comprehensive
Taxation

※2 Determination of withholding tax (prepaid corporate tax) obligation upon sale of real estate of a foreign corporation

Status

Seller is a foreign
corporation?

NO

YES

Is purchaser an individual?

NO

YES

For residence of purchaser or
his/her relatives?

NO

YES

JPY100,000,000 or less?

NO

YES

Tax Withholding

N/A

withhold tax
（10.21％）

N/A

Method of Taxation

Comprehensive
Taxation