Corporate Tax, JCT, Qualified Invoice System, and Transfer Pricing — Simplified
Japan Tax & Legal Consulting
Corporate Tax, JCT, Qualified Invoice System, and Transfer Pricing — Simplified
Last Updated: March 2026 · Reading Time: ~10 min
Japan's Tax Stack at a Glance
Japan taxes businesses at national + local levels simultaneously. The effective combined rate varies by size and location, but most companies see 30–34%.
┌─────────────────────────────────────────────────────────┐
│ JAPAN CORPORATE TAX STACK │
├─────────────────────────────────────────────────────────┤
│ National Corporate Tax │ 23.2% (standard) │
│ Local Corporate Tax │ 10.3% of nat'l tax │
│ Enterprise Tax (事業税) │ 3.5%–7% (progressive)│
│ Special Local Corporate Tax │ % of enterprise tax │
│ Inhabitant Tax (住民税) │ ~12.9%–16.3% + levy │
├─────────────────────────────────────────────────────────┤
│ 💡 Effective Combined Rate │ ~30%–34% (Tokyo) │
└─────────────────────────────────────────────────────────┘
🌐 Japan has 80+ tax treaties that can reduce or eliminate withholding tax. Always check the applicable treaty before structuring cross-border payments.
Example Treaty
Dividends
Interest
Royalties
🇺🇸 USA
10% / 0%
10% / 0%
0%
🇬🇧 UK
10% / 0%
10% / 0%
0%
🇭🇰 Hong Kong
5% / 10%
10% / 0%
5%
🇸🇬 Singapore
5% / 15%
10%
5%
🇰🇷 Korea
5% / 15%
10%
10%
Rates are illustrative and subject to treaty conditions. Verify with the actual treaty text.
⚠️ The payer in Japan bears responsibility for withholding. Failure to withhold = liability on the payer, not the payee.
5. Transfer Pricing
The Arm's Length Principle
Japan subsidiary ←──── transaction ────→ Foreign parent/affiliate
│
▼
Must be priced at arm's length
(独立企業間価格)
"Related party" = 50%+ voting rights or substantive control
Accepted Methods
Method
Abbreviation
Best For
Comparable Uncontrolled Price
CUP
Commodity transactions
Resale Price
RP
Distribution companies
Cost Plus
CP
Manufacturing / service providers
Transactional Net Margin Method
TNMM
Most common in practice
Profit Split
PS
Highly integrated operations
Discounted Cash Flow
DCF
Hard-to-value intangibles (since 2019)
Documentation Requirements (BEPS Action 13)
Document
Required When
Deadline
🌐 Master File
Group consolidated revenue ≥ ¥100B
With annual return
📋 Local File
Related-party transactions ≥ ¥5B (or ¥300M for intangibles)
With annual return
🗺️ CbCR
Group consolidated revenue ≥ ¥100B
12 months after FY-end
💡 Pro Tip: Even below mandatory thresholds, maintain contemporaneous documentation. The NTA can request it during audits, and absence shifts the burden of proof.
This article is for informational purposes only and does not constitute tax or legal advice. Consult a licensed tax accountant (税理士) or certified public accountant (公認会計士) for your specific situation.
