Welcome to the Japan Tax site

A resource for investing and doing business in Japan and understanding Japanese tax issues and Japanese culture.

The Japan Tax Site is intended to help people understand the Japanese tax system and its implications for their business or life in Japan. The site includes reporting on Japanese tax issues, explanations of key concepts in domestic and international tax along with analysis of Japanese tax policy and the Japanese business environment.

Foreign direct investment

In the UNCTADs 2010 World Investment Report foreign direct investment (‘FDI’) in Japan in 2009 was USD11.9Bn – only 70% of the USD16.8Bn FDI figure for Singapore. This is despite Japan having a population twenty five times and an economy eighteen times the size of Singapore.

This site’s objectives

High tax rates are undoubtedly one of the reasons for Japan’s record in attracting FDI but a lack of understanding of the Japanese legal, business and cultural environment is also a factor.

This site aims to play its small part in promoting FDI into Japan by making tax and other business regulation more transparent to foreign investors.

Culture

In line with its objective of helping investors have a fuller understanding of the country and also to provide some light relief from tax, the site includes pictures and articles on Japan’s rich cultural and natural heritage.

Please take time to enjoy some of the pictures, articles and other artworks on the site.

Accounting

The accounting section includes information on Japanese accounting practice useful to an understanding of the tax implications of Japanese transactions.

Merger accounting

The accounting rules around intangible assets and group re-organisations including flow-charts and updates on current Japanese GAAP accounting issues relating to corporate reorganisations. Read more.

Policy

The policy section includes links to public and private sector tax policy analysis as well as articles on tax policy developments and tax reform.

Public sector policy

Articles on the progress of tax committees within Japan’s government ministries including the influential tax committee of the Japanese Cabinet Office and tax subcommittees established in the Japanese Ministry of Finance. Read more.

News, developments

The news section includes shorter articles on recent developments, court cases, translations of tax law or commentary and tax court judgements. These short sections will often be cross referenced by longer articles elsewhere in the site.

News

News on audits, litigation or other miscellaneous developments not included under any of the news sections below. Read more.

Hanrei

Summaries of recently decided Japanese court cases and of older cases that are still have value as precedent to current tax issues. Read more.

Policy

Short reports on policy matters, committee meetings, government announcements or on work coming from think tanks and academic policy research. Read more.

Guidance

Brief articles commenting on non statutory guidance from the tax authorities including occasional translations.Read more.

Featured picture

Mikyako Odori

A picture from 1966 advertising the ‘Miyako Odori’ – an annual dance performed in Gion in Kyoto, a center of historic geisha culture and one of the few remaining areas of Japan maintaining some of the related traditions.

International

Japanese tax law includes a comprehensive range of provisions aimed at mitigating international tax anti-avoidance, a well developed body of academic literature on international tax issues and Japan has long been a leader in promoting APA negotiations with its trading partners.

Japan source income

The scope of Japanese taxation of foreign companies and non-resident individuals and more detailed interpretations of the scope of different sources of Japanese income. Read more.

Tax treaties

Summaries of withholding taxes on different sources of Japanese income, interpretation of tax treaties, forms required for Japanese treaty benefit claims and links to the English text of tax treaties where available. Read more.

Thin capitalisation

How to apply Japan’s thin capitalisation regulations, diagrams, safe harbor rules and anti-avoidance rules included in the thin capitalisation regulations. Read more.

Japanese CFCs

The Japanese taxation of foreign companies based in low tax jurisdictions, often an issue for subsidiaries of Japanese groups based in China, Hong Kong and Singapore. Read more.

Domestic

Issues with a strong domestic tax element and limited cross border consequences such as tax consolidation, audits, interest and penalties and tax administration.

Tax filings, penalties

Tax filings, statute of limitations, penalties and interest and other issues administrative issues. Read more.

Intangible assets

Tax and accounting treatment of intangible assets including goodwill. Their relevance to mergers, corporate or supply chain reorganisations. Read more.

Diagrams

The site makes extensive use of diagrams illustrating tax grouping concepts, steps in corporate re-organisations and similar.

Group taxation

This page includes a selection of diagrams covering group taxation including the new rules allowing deferral of tax on group transactions. Read more.

Transactions

Issues in structuring transactions in Japan, looking at entities, corporate reorganisations, capital market transactions and corporate recovery.

Tokumei kumiai


The Japanese taxation of parties to tokumei kumiai contracts, a partnership form extensively used in securitisation, real estate transactions and cross border investment into Japan. Read more.

Mergers and corporate reorganistions

The tax and accounting treatment of Japanese corporate reorganisations: Mergers, corporate splits, capital contributions, asset sales and similar. Read more.

Corporate recovery

Debt equity swaps, debt forgiveness and other tax issues or procedures arising in the course of Japanese bankruptcy or corporate rehabilitation procedures. Read more.

Individual

While the main focus of this site is on corporate and international taxation, the individual tax section covers tax issues key to expatriates living in Japan.

Tax residence

A critical issue for anyone coming to work in Japan is their tax residence status as related rules and the definition of Japanese source income are critical to understanding the scope of Japanese individual taxation for expatriates. Read more. Read more.

Future articles

This site is continuously being developed and listed below are areas where content will be added in the near to medium term.

Please be patient if an area you are interested in has not yet been covered, and also please use the contact form to let the editor know if you have any other areas of interest.

Coming weeks

In the short to medium term additional site content is planned for the following areas:

  • Completion of articles on Japanese permanent establishments and then outlining their application to tokumei kumiai, private equity and other cross border investment into Japan.
  • Development of the work on mergers and other corporate reorganisations.
  • Extensive analysis of Japanese entities, TMKs, nin’i kumiai and similar.
  • Expansion of the corporate recovery section to cover in more detail tax in corporate bankruptcy and rehabilitation.
  • Assisting foreign investors understand the tax reporting of their Japanese subsidiaries including reviewing Japanese permanent and temporary tax differences