JAPAN Law and Practice Contributed by: Raku Raku, Gen Takahashi, Yoshihiro Morisato and Taku Matsumoto, Anderson Mōri & Tomotsune
to avoid this, the Civil Aeronautics Act permits airline companies to reject any request for a registration of foreign entities in its shareholder registry if the change will result in one third or more of the shares being held by foreign entities. Similarly, the Radio Act and the Broadcast Act limit foreign investment in corporations with radio sta - tion licences to not more than one third or one fifth (depending on the type of licence) of their voting rights, and the Act on Nippon Telegraph and Tele - phone Corporation, etc limits foreign investments in Nippon Telegraph and Telephone Corporation (NTT) to not more than one third of its voting rights. Corporate tax and consumption tax are the main taxes generally imposed on companies doing business in Japan. Corporate Tax Corporate tax is a tax on the income of companies. Corporate tax is imposed on all incomes of domes - tic corporations regardless of whether their sources are in Japan or abroad. For foreign corporations, only domestic source incomes are subject to taxa - tion. Partnerships are not subject to taxation, but their Consumption tax is a kind of value-added tax. It is imposed on almost all domestic transactions (sale and lease of goods, and provision of service for con - sideration) and import transactions, excluding certain transactions, such as transfers and lending of land and transfers of securities. 9. Tax 9.1 Taxation of Business Activities partners are taxed. Consumption Tax The consumption tax rate is 10% of the sales amount, while the reduced tax rate of 8% applies to certain sales transactions, such as the transfer of foodstuffs. Consumption tax is imposed on companies whose revenue for the reference period (which is the fiscal year preceding the last fiscal year in principle) is more than JPY10 million.
From 1 October 2023, new invoicing rules which require a “qualified invoice” in respect of consumption tax (the “Qualified Invoice System”) were introduced and came into effect. Under the Qualified Invoice Sys - tem, in principle, a purchaser of goods or services may claim input tax credits only if it receives a quali - fied invoice from a seller and retains it. However, for six years from 1 October 2023 to 30 September 2029, a transitional measure has been established under which a purchaser may claim a partial tax credit on purchases without a qualified invoice, subject to cer - tain requirements. A seller needs to be registered as a qualified invoice issuer in order to issue such an invoice to purchasers. If a company is registered as a qualified invoice issuer, consumption tax will be levied on its supply of goods or services even if its revenue for the reference period is JPY10 million or less. Other Taxes In addition to the above, the following notable taxes may be imposed on companies: • fixed property tax; • real property tax; • registration and licence tax; and • stamp duty. 9.2 Withholding Taxes on Dividends, Interest, Etc For foreign corporations, Japanese taxation is relevant only in respect of their domestic source income. Cer - tain domestic source income such as: • dividends received from Japanese corporations or distributions of profit from certain investment trusts in Japan; • income from a partnership, which means the income received through a distribution that is made in accordance with a partnership agreement in Japan; and • interest on bonds and debentures, which includes interest on bonds or debentures issued by Japa - nese corporations and interest on deposits with • withholding income tax; • corporate inhabitant tax; • business tax;
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