Corporate tax rate: 15% on the portion up to JPY 8 million a year for small and medium-sized corporationsFor small companies, the first JPY 8 million of profit gets a discount on tax
For small and medium-sized corporations, such as those with capital of JPY 100 million or less, the corporate tax rate is 15% on the portion of income up to JPY 8 million a year, and 23.2% on the portion above JPY 8 million, the same as for ordinary corporations in general. For business years beginning on or after April 1, 2025 (Reiwa 7), the rate on the portion up to JPY 8 million becomes 17% only for business years in which income exceeds JPY 1 billion a year.
Key points
- Portion up to JPY 8 million a year: 15% (corporations with capital of JPY 100 million or less at the end of each business year, etc.)
- Portion above JPY 8 million a year: 23.2% for ordinary corporations in general (it was 23.4% for business years beginning on or after April 1, 2016)
- For business years beginning on or after April 1, 2025 (Reiwa 7), the rate on the portion up to JPY 8 million is 17% only for business years in which income exceeds JPY 1 billion a year
- Corporations wholly owned by a large corporation, for example, are excluded from the reduced rate for small and medium-sized corporations
- For specified businesses excluded from the application, there is a category where the portion up to JPY 8 million is taxed at 19%
What to do in practice
- At settlement, check whether capital at the end of the period is JPY 100 million or less and whether the corporation is not wholly owned by a large corporation.
- If income is expected to exceed JPY 1 billion a year, estimate the tax payable on the assumption that 17% applies.
Corporate tax is the tax on a company’s profit, and small companies have a special, gentler rule. For the first JPY 8 million of profit in a year, the tax rate is a low 15%. The part above that is calculated at a somewhat higher rate.
- First JPY 8 million × 15%
- JPY 1.2 million
- Remaining JPY 2 million × 23.2%
- JPY 464,000
- Total corporate tax
- JPY 1.664 million
Points
- The first JPY 8 million: tax rate 15%
- The part above JPY 8 million: tax rate 23.2%
- In a year with very large profit (over JPY 1 billion), the discount becomes a little smaller
What the words mean
- Tax rate
- The percentage of tax charged on profit
- Capital
- Money that a company received from its investors, for example when it was set up
- National Tax Agency (NTA): National Tax Agency (NTA): No. 5759 Corporate tax rates
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.