JAPAN Law and Practice Contributed by: Junichi Ueda, Etsuko Hara, Nobuto Shirane, Takahiro Hayase, Yutaka Shimoo and Miki Goto, Anderson Mori & Tomotsune
• are not Japanese residents at the time of the decedent’s death; or • have lived in Japan with certain types of visas for a period not exceeding ten years in the past 15 years before the decedent’s death. 5.2 Taxes Applicable to Businesses A company doing business in Japan is subject to various taxes. Corporate income tax must be paid where a company has its head office or principal office in Japan (such a company is a domestic corpora - tion). If a company does not have its head office or principal office in Japan, such a company is a foreign corporation. For foreign business opera - tors, several exceptional rules would apply. The company must only pay corporate income tax on domestic-sourced income. As for some cat - egories of income, such as dividends and inter - est, income tax will be withheld at the time of payment but corporations can credit the amount of such income tax from the amount of corporate income tax subject to certain limitations. Inhabitant tax and enterprise tax must be paid if a company has its head office or principal office in Japan or has its permanent establishment in Japan. Consumption tax, which is a type of VAT, must be paid if a company conducts certain kinds of transactions, such as: • sales of goods, leases of goods and provi - sions of services in Japan; • certain categories of digital services provided to Japan; and • importation transactions. Notwithstanding the foregoing, with some exceptions (eg, where a company’s capital is
JPY10 million or more), consumption tax will be exempted if the amount of taxable sales in the base period – which is the fiscal year two years prior to the current fiscal year – is less than JPY10 million. Under the qualified invoicing system, a buyer who claims an input (purchase) consumption tax credit is required to receive and retain invoices that are issued by a registered seller and include certain types of information. In addition to the foregoing, there are other tax - es, including: • fixed property tax; • stamp duty; • registration tax; and • real estate acquisition tax. Regarding Pillar Two of the OECD’s Two Pillar solution, the Income Inclusion Rule (IIR) was firstly implemented under the 2023 tax reform in Japan and came into force on 1 April 2024. The IIR specifically applies to the ultimate parent corporation of a multinational corporation group, the consolidated revenue of which is equivalent to no less than EUR750 million in two or more accounting business years in the four most recent consolidated accounting business years. The IIR has a certain exemption that is equiva - lent to the de minimis rule. In addition, there are transitional safe harbours according to the con - tent of country-by-country (CbC) reporting – for example, the de minimis test, simplified effective tax rate test and routine profits test. In addition, under the 2025 tax reform, the Undertaxed Profits Rules (UTPR) and the Quali - fied Domestic Minimum Top-up Tax (QDMTT) will also apply to the financial years starting on or after 1 April 2026.
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