The Consumption Tax. rate is 10%. The breakdown is National Consumption Tax rate of 7.8% and Local Consumption Tax of 2.2 % ( The 17/63 of the amount of National Consumption Tax).
Consumption tax is levied on “Taxable Sales”. “Taxable sales” mean sales that satisfy all of the following four conditions.
(1) Effectuated in Japan
(2) Effectuated by a business for its business purposes
(3) Effectuated for a compensation
(4) Effectuated by the transfer or lease of assets or by the provision of services
(Referred to as “transfer of assets etc.”)
For example, machinery rental fees and proceeds from the sale of machinery, buildings and other business assets are included in taxable sales in addition to such things as proceeds from sales of products, contract work and services.
“Fixed asset” is a general term for land, buildings and depreciable assets, including the followings:
Rice fields, farms, residential land, mineral springs, ponds and swamps, forests, stock farms, wasteland and land for other purposes (miscellaneous land)
Residential buildings, stores, factories (including power stations and substations), warehouses and buildings for other purposes
Business property such as structures, machinery, equipment, vessels, aircrafts, tools, instruments, fixtures that are subject to depreciation under the Corporate Tax Act or Income Tax Acts, excluding the property subject to motor vehicle tax or light motor vehicle (See pages 30 and 31 for fixed assets tax on depreciable assets.)
Those who are registered in the fixed assets tax cadaster as owners of land and/or buildings as of January 1.
Taxpayer Subsequent to Transfer of Assets
In the event that the transfer of ownership of assets is executed on or after January 2, the obligation for paying taxes on the assets is not transferred. Although there may be cases in which the burden of the fixed assets tax is shared between the parties based on the sales contract or the like in proportion to the length of period of ownership, such an arrangement would be nothing more than to bind the parties concerned.
Land and buildings
Standard taxable value* x Tax rate 1.4% – Reduction amount, etc.
* Price registered in the fixed assets tax cadaster.
Due Date and Procedures for Tax Payment
In principle, taxpayers shall pay the tax four times a year in June, September, December, and February based on the Tax Notice that is sent in the first tax due month in June. (For due dates on tax payment in each city, town, or village municipality, please see page 90.) For land and buildings, the Tax Notice is accompanied by a detailed specification of tax assessment. For payment methods, please see pages 69 and 70 for details.
Assessed Value of Fixed Assets
The value of fixed assets is the price that is determined by the prefectural governors or the mayors of city, town or village on the basis of the Standard Valuation Code of Fixed Assets, which was established by the Ministry of Internal Affairs and Communications, and then registered in the fixed assets tax cadaster.
Assessed Value of Land and Buildings
Once every three years, an across-the-board revaluation is carried out to determine new prices. The fiscal year of this revaluation is called the basic taxable year, and FY 2018(H30) is one of the basic taxable years.
In the second (fiscal 2019 (R1)) and third (fiscal 2020 (R2)) years following the basic taxable year, the prices set in the basic year (fiscal 2018 (H30)) are retained. However, fixed assets are newly assessed to determine new prices, such as in the case of subdivided/consolidated land tracts or newly built, extended or renovated houses.
Tax Exemption Limit
The fixed assets tax is not imposed when the total standard taxable value of fixed assets owned by the same person in the same municipality is less than the following :
Land: ¥300,000 Residential building: ¥200,000
Capital Gain Tax
A capital gain is the profit realised on the sale of a property. Capital gains tax is charged on the taxable portion of the gain. Any gain is declared on your income tax statement as ‘other income‘ and is taxed separately to your own income. Both residents and non-residents (eg. those living overseas) are liable to pay this tax, although non-residents are not required to pay the municipal tax. Also, both foreign and domestic investors may be liable to pay consumption tax to the Japanese tax office upon the sale of Japanese property. This may include private individuals who were renting out their property to a tenant.
TAX RATE ; For Non-Residents
(those living overseas):
If held less than 5 years: 30% income tax + 2.1% Tohoku reconstruction tax (+ 9% municipal tax*¹ )
If held for more than 5 years: 15% income tax + 2.1% Tohoku reconstruction tax *²
*1 If you are not a resident of Japan, in principle you are not required to pay municipal tax (juminzei). If you recently left Japan but held residence on January 1, then you may still be liable. Please check with a tax advisor.
*2 The special Tohoku reconstruction tax was introduced in 2013 and will be in effect until 2037. It applies to both residents and non-residents and is taxed based on the income tax amount of the sale rather than the total taxable capital gain value. See the examples below.
A 20% of withholding tax normally is levied on dividends paid to a nonresident, unless tha rate is reduced under a tax treaty. A 2.1% surtax increases the rate to 20.42%. The withholding tax on dividends received from listed companies, including the surtax, is 15.315% for a nonresident and 20.315% for a resident (including the 5 % local tax that is applicable only for Japanese residents).
Interest on loans paid to nonresident corporation generally is subject to a 20% withholding tax, while the rate on deposits and bonds is 15%(usually reduced to 10% in Japan’s tax treaties). Due to the 2.1% surtax, the rates are 20.42% and 15.315%, respectively.
Royalties paid to a nonresident for patents, trademarks, know-how or copyrights and service fees are subject to a 20% withholding tax, unless reduced under a tax treaty. Due to the 2.1% surtax, the effective rate is 20.42%.
Branch remittance tax
Japan does not impose a branch remittance tax.
Wage tax/social security contributions
The employer must withhold the employee’s contribution and make its own contributions to social security, which has several components and income caps. The employer portion (assuming general business rates for labor insurance apply) may be up to 16.283%, and the employee’s portion up to 15.451% .
A 20.42% withholding tax is imposed on partnership income attributable to nonresident partners of a partnership that conducts business in Japan. Nonresident partners that have a permanent establishment through means other than the partnership interest may be exempt from the withholding tax because they are required to file Japanese income tax returns.
Taxes on Gifts and Inheritances
(1) Gift Tax
Those who acquired property as a gift must file a return to pay gift tax in the period from February 1 to March 15 of the year following the acquisition of the property. The taxable value is the amount after deducting the basic allowance (¥1,100,000) and the special spouse allowance (¥20,000,000).
The donee who receives a gift from the parents or grandparents has an option to apply the inheritance tax adjustment system in which the donee pays smaller amount of tax on gifts and settles the final amount as inheritance tax later.
Taxable amount and tax rate
(2) Inheritance Tax
Those who acquired properties by inheritance or bequest, and the total value of the properties exceeds the basic deductible allowance, must file a return to pay inheritance tax within, in principle, ten months after the date of the acquisition. The person who died is called the ancestor, and the person who inherited property is called the inheritor. The scope of property subject to inheritance tax varies depending on whether the inheritor’s address (domicile) is within or outside of Japan.
Taxable amount and tax rate
|Transfer other than those stated to the right||Transfer from lineal ascendant
to a person of 20 years or over
|Taxable amount (Yen)||Tax Rate (%)||Taxable amount (Yen)||Tax rate (%)|
|2 million or under||10||2 million or under||10|
|3 million or under||15||—||15|
|4 million or under||20||4 million or under||15|
|6 million or under||30||6 million or under||20|
|10 million or under||40||10 million or under||30|
|15 million or under||45||15 million or under||40|
|30 million or under||50||30 million or under||45|
|Over 30 million||55||45 million or under||50|
|—||55||Over 45 million||55|
* The amount of basic deductible allowance is 30 million yen plus 6 million yen times the number of legal heirs.