A Japan company owes tax even at zero profit because of the per-capita component (均等割) of the Corporate Inhabitant Tax (法人住民税), a flat local levy owed simply for having a registered office in Japan. The minimum is JPY 70,000 per year for the smallest capital and headcount tier, and it applies regardless of revenue, trading activity, or whether the company has a bank account yet.
What Is the Corporate Inhabitant Tax (法人住民税) Per-Capita Levy?
The per-capita component (均等割) is a flat annual charge assessed by the prefecture and municipality where a company keeps an office, independent of whether the company made money that year. It sits alongside a second, income-based component (法人税割), which is calculated as a rate applied to the company's national corporate tax liability under the Corporate Tax Act (法人税法) and therefore drops to zero in a loss year. The 均等割 does not drop to zero. That distinction is the entire mechanism behind "zero profit still owes tax," and it is a genuine and common surprise for foreign founders who assume no income means no tax bill.
Both components are collected under the Local Tax Act (地方税法), which authorizes prefectures and municipalities to levy Corporate Inhabitant Tax on any entity with a business location inside their jurisdiction. The amount owed keys off capital and employee headcount, not profitability, which is why a well-capitalized but pre-revenue company can face a materially higher bill than a small dormant shell. For background on incorporation structure choices that affect this exposure, see our Japan company setup overview.
How Much Is the Minimum 均等割 Payment?
For a company with capital of JPY 10 million or less, 50 or fewer employees, and a single office in the Tokyo 23 wards, the standard annual 均等割 is JPY 70,000 (prefectural portion JPY 20,000 plus municipal portion JPY 50,000). This is the floor, not a cap: the amount scales upward in bands as capital and headcount rise, and rates vary by prefecture and municipality outside Tokyo. Founders should not assume JPY 70,000 applies automatically once capital exceeds the smallest tier or the company operates offices in more than one municipality.
The practical planning point is that capital size at incorporation directly sets this recurring cost. A company capitalized well above the smallest band pays a materially higher 均等割 every year it exists, profit or no profit, so capital structuring at formation is a real lever, not a cosmetic decision.
Does This Apply to a KK, GK, or a Branch Office?
Yes. The per-capita levy applies to a Kabushiki Kaisha (株式会社, KK), a Godo Kaisha (合同会社, GK), and a registered Japan branch (支店) of a foreign company alike, because all three constitute a taxable business location under the Local Tax Act. Entity choice changes cost of formation, governance requirements, and banking credibility; it does not remove this liability. A foreign-company branch is a permanent establishment for tax purposes and owes the 均等割 in a loss year exactly as a subsidiary would, so switching from a subsidiary to a branch to avoid recurring local tax is not a workable strategy.
This matters most for GK structures because GK founders sometimes assume a simpler entity implies a lighter tax footprint. It does not, for the per-capita levy specifically. For related GK-specific mechanics, including how a GK books and deducts officer costs correctly, see our GK officer expense reimbursement guide.
Key points:
(a) The per-capita component (均等割) is owed regardless of profit, loss, dormancy, or entity type (KK, GK, or branch).
(b) The minimum annual figure is JPY 70,000 for the smallest capital and headcount tier in the Tokyo 23 wards; the amount rises with capital and employee count and varies by local jurisdiction.
(c) The levy is prorated for a partial first fiscal year and continues every subsequent year the company remains registered, including years with no trading activity or bank transactions.
When Does the Per-Capita Levy Start and Stop?
The obligation starts on the date of incorporation, not the date of first revenue or first bank transaction, and it is prorated for the number of months in the company's first, partial fiscal year. It then recurs every fiscal year the company stays registered, including fully dormant years with no sales and no bank activity, and it does not stop until the company is formally dissolved and deregistered. This creates a real operational trap for newly incorporated foreign entities: the gap between incorporation and opening a functioning bank account, which can run for months, does not pause this tax.
A company that has not yet secured banking, has not yet hired staff, or has not yet generated its first invoice is still liable for the 均等割 for that period. Founders who plan for corporate tax exposure only once revenue starts frequently miss this and are surprised by a bill covering months in which the company had no activity at all.
How and When Is the 均等割 Paid?
The 均等割 is assessed and paid together with the company's annual tax return filing cycle, typically due within two months of fiscal year end unless a filing extension applies, and it is paid to the prefectural and municipal tax offices directly, not to the National Tax Agency (国税庁). This is a separate filing track from the national corporate tax return even though the two are usually prepared and submitted in the same cycle. A company with no resident officer or staff still needs someone positioned to receive filing notices and coordinate payment; where a non-resident structure has no one locally handling this, appointing a Tax Agent (納税管理人) is the standard mechanism, covered in our Japan Tax Agent guide.
Missed or late payment of the per-capita component carries the same delinquency exposure as other local tax liabilities, assessed independently by each municipality. Companies operating across more than one prefecture or municipality owe a separate per-capita assessment to each location with a registered office, which compounds the total figure for multi-location operations. Cross-border groups also carry other year-round Japan tax exposure worth tracking alongside this, including withholding on dividends, interest, and royalties paid to a foreign parent, addressed in our tax treaty withholding relief guide.
Frequently Asked Questions
Do I still owe this tax if my Japan company has no bank account and no revenue yet?
Yes. The per-capita component (均等割) attaches from the date of incorporation and is prorated for a partial first fiscal year, independent of whether the company has opened a bank account, hired staff, or generated any revenue. It is a common trap for newly incorporated foreign entities that assume tax exposure begins only once the business is operating.
Can I avoid the per-capita levy by choosing a GK instead of a KK, or by using a branch instead of a subsidiary?
No. The per-capita component of the Corporate Inhabitant Tax applies to a KK, a GK, and a registered Japan branch alike, because all three maintain a taxable business location under the Local Tax Act (地方税法). Entity choice affects setup cost, governance, and banking outcomes, but it does not change this recurring local tax liability.
What is the minimum amount, and does it ever go to zero?
The minimum is JPY 70,000 per year for a company with capital of JPY 10 million or less, 50 or fewer employees, and a single office in the Tokyo 23 wards; it scales up with capital, headcount, and number of office locations, and varies by prefecture and municipality. It does not go to zero in a loss year, unlike the income-based component (法人税割), which is calculated off national corporate tax liability and falls to zero when that liability is zero.
Conclusion
The per-capita component (均等割) of the Corporate Inhabitant Tax exists precisely to tax presence, not profit, and it runs from incorporation through dormancy regardless of entity type. Founders budgeting a Japan entity should treat the JPY 70,000 floor, or whatever higher band their capital and headcount fall into, as a fixed annual cost from day one, not a contingent one tied to revenue.
This article is informational only and does not constitute legal, tax, or regulatory advice. Consult a qualified advisor before acting on the content. Last updated: August 2026.