Japan Tax Rates

Income Tax Brackets

Japan imposes a national progressive income tax with seven brackets ranging from 5% to 45%. In addition, a flat local inhabitant tax (comprised of prefectural and municipal taxes) of approximately 10% applies to taxable income, bringing the combined top marginal rate to roughly 55%. A special reconstruction surtax of 2.1% is also applied to the base national income tax amount through 2037 to fund earthquake recovery efforts.

Corporate Tax

The national corporate tax rate is 23.2% for standard corporations. Small and medium-sized enterprises (SMEs) with paid-in capital of ¥100 million or less benefit from a reduced rate of 15% on the first ¥8 million of taxable income. When combined with local corporate taxes (enterprise tax, local corporate tax, and inhabitants tax), the effective total corporate tax rate is approximately 30% for most companies, though the exact rate varies by municipality and company size.

Capital Gains Tax

Capital gains on listed stocks and securities are taxed at a flat combined rate of 20.315% (15.315% national income tax including reconstruction surtax, plus 5% local inhabitant tax). This applies uniformly regardless of holding period. Gains on real estate are taxed at different rates depending on the holding period: short-term gains (property held 5 years or less) are taxed at approximately 39.63%, while long-term gains (held more than 5 years) are taxed at approximately 20.315%.

VAT / Sales Tax

Japan levies a consumption tax (shohizei) at a standard rate of 10%, which functions similarly to a value-added tax. A reduced rate of 8% applies to qualifying food and non-alcoholic beverages (takeout and grocery items, but not restaurant dine-in meals) as well as newspaper subscriptions delivered at least twice per week. The consumption tax is comprised of a 7.8% national portion and a 2.2% local consumption tax portion (or 6.24% and 1.76% respectively for reduced-rate items).

Cryptocurrency Tax

Cryptocurrency gains in Japan are classified as miscellaneous income (zatsu shotoku) and are subject to the standard progressive income tax rates plus the local inhabitant tax. This means the combined marginal tax rate on crypto gains can reach up to 55% for high earners. Unlike capital gains on listed securities which enjoy a flat 20.315% rate, crypto profits receive no preferential tax treatment and are aggregated with other income.

Tax Treaties

Japan has an extensive network of approximately 80 tax treaties (covering over 150 jurisdictions when including multilateral agreements) designed to prevent double taxation and fiscal evasion. These treaties generally provide reduced withholding rates on dividends, interest, and royalties. Japan is also a signatory to the OECD Multilateral Convention to Implement Tax Treaty Related Measures (MLI), which modifies existing bilateral treaties to address treaty abuse and improve dispute resolution mechanisms.

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