Accounting & Tax Compliance in Japan

How accounting and tax compliance work in Japan

Japan's national corporate tax rate is 23.2% (reduced to 15% on the first JPY 8 million of taxable income for SMEs with paid-in capital of JPY 100 million or less), but the figure that matters for budgeting is the effective combined rate once local taxes are layered on: national local corporate tax, enterprise tax and inhabitants tax bring the effective rate to approximately 31.5% for large corporations and up to 35.4% for SMEs. Two further changes apply to fiscal years beginning on or after 1 April 2026 — a revised 10.3% national local corporate tax rate and a new 4% "defence capabilities" surcharge on base corporate tax above a JPY 5 million deduction — both of which shift the effective rate mid-transition for companies whose fiscal year does not align with 1 April.

Japan's operational complexity centers on the gap between the statutory minimum required for a company to legally exist and the practical minimum required for a foreign national to be physically present and running it.

Rate structure and what it applies to

23.2% national (15% on the first JPY 8M for SMEs with capital ≤JPY 100M); effective combined rate ~31.5–35.4% with local taxes

• Business Manager visa capital jump — — raised from JPY 5 million to JPY 30 million in October 2025, alongside new management-experience-or-degree, full-time-employee and Japanese-language requirements for the applicant or that employee
• Inkan and notarization formalities — — KK incorporation requires Articles of Incorporation notarized by a notary attached to the Legal Affairs Bureau and a registered company seal (inkan), adding steps with no direct analogue in signature-based jurisdictions
• Qualified Invoice System step-downs — — since October 2023, input tax credits require invoices from registered issuers; the transitional deduction rate for purchases from non-registered suppliers steps down again from 80% to 70% in October 2026
• Layered 2026 tax changes — — the revised 10.3% national local corporate tax rate and a new 4% defence-capabilities surcharge both apply to fiscal years beginning on or after 1 April 2026, changing the effective rate mid-transition for non-calendar-year filers

Rates that apply in Japan

Japanese GAAP (Corporate Accounting Principles); IFRS permitted for listed companies electing voluntary adoption, and when an audit is required

Statutory bookkeeping in Japan follows Japanese GAAP (Corporate Accounting Principles); IFRS permitted for listed companies electing voluntary adoption. Statutory audit by a CPA or audit corporation is required for "large" KK with paid-in capital of ¥500 million or more, or liabilities of ¥20 billion or more, and for any company voluntarily establishing an accounting auditor or audit/nominating committee.

Annual accounts and registration

Final corporate income and consumption tax returns due within 2 months of fiscal year-end; a 1-month filing extension is available for corporate income tax with Tax Office approval (consumption tax permits no extension).

Entity registration runs through the Legal Affairs Bureau (Ministry of Justice), typically taking GK: ~7–10 business days once documents are ready (2–4 weeks overall); KK: 14–21 business days due to mandatory notarization (4–8 weeks overall).

Frequently asked questions