Japan

Social security contributions

An employee whose salary or bonus, including fringe benefits, is paid in Japan by a local employer (including a Japanese branch of a foreign corporation) is generally liable to pay a share of social insurance premiums. The employee’s share consists of the following contributions: 

Note

1. The fixed rate of 4.955% (previously 4.99%) for health insurance applies from March 2024. Simultaneously, the fixed rate of 0.795% (previously 0.80%) for long-term care insurance also applies from March 2025. Long-term care insurance is required for individuals from the age of 40 to the age of 64. 
2. Premiums on child allowances will be imposed separately at 0.36%. 
3. The fixed rate of 0.55% (previously 0.60%) for unemployment insurance applies from April 2025. 

Japan social insurance paid by the employee is deductible for Japan income tax purposes. 

Consumption taxes

Similar to a corporation, consumption tax is levied when a sole proprietor transfers goods, provides services, or imports goods into Japan. Please refer to the Other taxes section under Corporate for additional details.  

Net wealth/worth taxes

There are currently no net wealth/worth taxes in Japan. 

Inheritance, estate, and gift taxes

Inheritance tax is a national tax imposed on the recipients of an inheritance. 

The transfer of overseas assets from foreign nationals who have had a “Jusho” ( tax residency determined based on the family, business, days staying in Japan, asset location ) in Japan with a visa issued under Table 1 of the Visa Status Table of Immigration Control and Refugee Recognition Act ('temporary foreigners') to foreign nationals who have had a “Jusho” in Japan for less than ten out of the last 15 years with a visa issued under Table 1 (‘temporary foreigners)  or non-Japanese nationals outside of Japan is exempt from Japan gift and inheritance tax. Note, however, that the transfer of overseas assets among non-Japanese nationals and Japanese nationals who currently have a “Jusho” or have had a “Jusho” in Japan within the previous ten years is not exempt. 

Note that a Table 1 visa under the Visa Status Table of the Immigration Control and Refugee Recognition Act includes work-related visas and does not include the following visa types: permanent resident, spouse or child of a Japanese national, spouse or child of a permanent resident, and long-term resident. 

The transfer of overseas assets to a Japanese national heir or donee who is not a resident of Japan but who has had a ‘Jusho’ in Japan within the ten years prior to the gift or inheritance is subject to Japan gift and inheritance tax. Similarly, the transfer of overseas assets from a Japanese national decedent or donor who is not a resident of Japan but had a ‘Jusho’ in Japan within the ten years prior to the gift or inheritance is also subject to Japan gift and inheritance tax. If a Japanese national heir or donee has not had a ‘Jusho’ in Japan within the ten years prior to the gift or inheritance, they will not be subject to tax so long as the decedent or donor is a foreign national.  

Note that any transfers of assets located in Japan are always subject to Japan gift and inheritance tax, regardless of whom the transfers are between or when the transfers take place. 

Assets subject to inheritance tax include tangible, intangible, real, or personal property, unless otherwise specifically exempt under the law. Assets are valued in accordance with the provisions of the Japanese tax rules. The same rules apply to the gift tax system. 

The basic exemption is JPY 30 million plus JPY 6 million per statutory heir. If the gross estate is smaller than the total amount of the basic exemption, there is no filing requirement. 

After any exemptions are applied, the total amount of inheritance tax is determined as follows. First, the assets are allocated to individuals (referred to as statutory heirs) in accordance with the statutory inheritance proportions. Then, the graduated inheritance tax rates are applied to each statutory heir’s portion. Each statutory heir’s portion is then added together to ascertain the total inheritance tax on the assets. Then, this tax is allocated based on the actual recipient(s) of the assets (this allocation is generally based on the deceased’s will. If there is no will left behind, the statutory heirs decide how to divide the assets.). The actual recipient will be liable for the tax payment, and the tax credit (if any) will apply to the actual taxpayer’s liabilities. In summary, a will executed in the home country of the deceased will generally be respected; however, the total amount of tax is always calculated in accordance with the inheritance proportions for each statutory heir. 

Gift tax is a national tax levied on the recipients of a gift. The scope of gift tax is similar to the scope of inheritance tax in that a taxpayer’s visa type and the time they have resided inside and outside of Japan affects which gifts may be subject to gift tax. However, the gift tax regime is not unified with inheritance tax, with the exception of gifts made within seven years (within three years for gifts made on or before 31 December 2023) prior to the death of the donor.  

The annual gift tax exemption per recipient is JPY 1.1 million. Any amount of gift(s) received above the exemption will potentially be subject to Japan gift tax. 

Additionally, there is a special system where the taxpayer can make an irrevocable election to integrate inheritance and gift tax when certain conditions are met. 

Under the special system, referred to as 'settlement of taxes at the time of inheritance':

• Qualified transfers are those from lineal ascendants who are aged 60 years and older made to their lineal descendants who are aged 18 years or older. 
• Gifts are taxed at a flat rate of 20% if the total value of assets gifted in a year exceeds the annual basic deduction of JPY 1.1 million and the life-time special deduction of up to JPY 25 million. 
• The amount of gift tax, if any, will be treated as a prepayment of tax against a future inheritance tax liability. 
• Valuation of the gifted assets will freeze at the time of the gift for the inheritance tax calculation. 
• Those who made this election will automatically be subject to the inheritance tax filing regardless of the situation at the time of inheritance. 

Inheritance tax rates

Basic allowance for inheritance tax: JPY 30,000,000 + (JPY 6,000,000 × number of statutory heirs) 

Gift tax rates

Annual basic exemption for gift tax: JPY 1,100,000 

Property (fixed assets) taxes

The annual fixed assets tax is levied by the local tax authorities on real property. Real property is taxed at 1.4% (standard rate including city planning tax) of the value appraised by the local tax authorities. The depreciable fixed assets tax is assessed at 1.4% of cost after statutory depreciation. 

Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis. The taxable basis depends upon the property being registered.