Taxation in the Asia-Pacific Region/Japan Table

Useful Lives for Selected Fixed Assets
Asset	Useful Life (years)
Office buildings	24 - 65
Warehouses	7 - 45
Furniture and fixtures	2 - 15
Automobiles and trucks	3 - 6

Japan

Tax Treatments of Subsidiaries and Branches
	Subsidiaries	Branches
Remittance of profits	Withholding tax is assessed on dividends remitted to corporate shareholders.	No withholding tax is payable on branch profit remittance.
Reduced tax rate	May apply based on the amount of paid-in capital of the subsidiary.	May apply based on the amount of paid-in capital of the home office.
Loss deduction	A parent company cannot recognize its subsidiary's loss except as an investment loss.	A branch's loss is combined into the home office's income, affecting the home office's income statement.
Inhabitants tax-per capita levy	Assessed on the amount of capital of the subsidiary.	Assessed on the amount of capital of the head office.
Allocation of overhead expenses	A reasonable allocated amount is deductible from the subsidiary's profit if the basis of the contract and the rendering of services are confirmed. The parent's general and administrative expenses are not allocated and are taken as an investor's proper control expense.	A reasonable allocated amount of overhead expenses incurred by the home office is deductible if the basis of computation is disclosed.
Expatriate staff	An employee who holds a position as president or managing director is not eligible for tax benefits as an employee.	An employee who holds a position as vice president (provided that the employee does not have physical power of management of the branch operation) is eligible for tax benefits as an employee.
Dividends received from Japanese corporations	A percentage of dividends received can generally be excluded from gross income after the deduction of allowable interest (see 6.02). Credit for withholding tax is available.	A percentage of dividends received can generally be excluded from gross income after the deduction of allowable interest (see 6.02). Credit for withholding tax is not available, but the home office can apply for a foreign tax credit.
Interest payable to parent or home office	Interest, except as related to the holding of shares, may be deducted when the obligation to pay it accrues. Tax authorities may challenge de-ductions deemed excessive. Interest paid to affiliated parties is closely examined and should be at arm's length. Thin capitalization rules deny deduction for interest payments on loans from foreign related companies when such debt is in excess of 3 times the net asset.	Interest is not deductible. However, if the head office borrows funds from a third party, it may allocate interest expenses to the branch based on the amount of funds the branch receives. The branch may deduct allocated interest. Thin capitalization rules apply to the Japanese branch of a foreign corporation that is 50% or more foreign owned.

Japan

National Income Tax Rates
Band of Taxable Income (%)	Rate of Tax on Band (%)
0- 3,300,000	10
3,300,001- 9,000,000	20
9,000,001-18,000,000	30
18,000,001-30,000,000	40
Over 30,000,000	50

Japan

Inhabitants Tax-Levy on Income Rates for Individuals
Band of Taxable Income ( )	Rate (%)
0-2,000,000	5
2,000,001-7,000,000	10
Over 7,000,000	15

Japan

Withholding Tax Rates for Treaty Countries
	Dividends a
Country of Recipient	Major Rate(%)	Minor Rate(%)	Major Holding(%)	Interest b (%)	Royalties (%)
Nontreaty countries	20	20	-	15	20
Treaty countries:
Australia	15	15	-	10	10c
Austria	10	20	50	10	10c
Bangladesh	10	15	25	10	10
Belgium	10	15	25	10	10
Brazil	12.5	12.5	-	12.5	12.5d
British Virgin Islandse	10	15	50	10	10
Bulgaria	10	15	25	10	10
Canada	10	15	25	10	10
China (People's Republic of)	10	10	-	10	10
Czech Republicf	10	15	25	10	10g
Denmark	10	15	25	10	10
Egypt	15	15	-	15	15h
Fijie	20	20	-	15	10
Finland	10	15	25	10	10
France	10	15	15	10	10
Germany	10	15	25	10	10i
Hungary	10	10	-	10	10g
India	15	15	-	15j	20
Indonesia	10	15	25	10	10
Ireland	10	15	25	10	10
Israel	5	15	25	10	10
Italy	10	15	25	10	10
Korea (Republic of)	12	12	-	12	12c
Luxembourg	5k	15k	25	10k	10k
Malaysia	10l	15l	25	10l	10c,l,m
Montserrate	10	15	50	10	10
Netherlands	5	15	25	10	10
New Zealand	15	15	-	15	20
Norway	5	15	25	10	10
Pakistan	15	20	33.33	15	-
Philippines	10	20	25	15n	20o
Poland	10	10	-	10	10g
Romania	10	10	-	10	15p
Singaporeq	10	15	25	15	10m
Slovakiaf	10	15	25	10	10g
Soviet Unionr	15	15	-	10	10g
Spain	10	15	25	10	10
Sri Lanka	20	20	-	15	10g
Sweden	10	15	25	10	10
Switzerland	10	15	25	10	10
Thailand	15s	20	25	15j	15
Turkey	10	15	25	15j	10
United Kingdom	10	15	25	10	10
United States	10t	15	10	10	10
Zambia	-	-	-	10	10
a. Japan's tax treaties often provide that the major rate only applies if the recipient has held the applicable percentage of voting shares for a specified period of time (for example, the six or twelve months immediately preceding the end of the accounting period for which the dividend is paid).
b. Under Japan's domestic law, interest paid by a Japanese bank on deposits made in the bank's offshore account is exempt from withholding tax. Interest paid on other deposits with a bank, as well as on bonds and debentures, is subject to a 15% withholding tax. A 20% rate applies to other interest payments to finance business in Japan (except for that on short-term credit). In addition, Japan's tax treaties often provide for the exemption of certain types of interest, including the following: interest on industrial bonds or loans, interest paid to a bank or other financial institution, interest paid to a government authority or other institution as specified in the treaty, interest on government-guaranteed debt-claims or bonds, and interest on deferred payments. As provisions vary, the treaty should be consulted.
c. Royalties paid in connection with mining or the exploitation of natural resources are not covered.
d. Trademark royalties are taxed at the nontreaty rate, and film royalties are taxed at 15%.
e. The 1962 treaty between Japan and the United Kingdom was extended to this country by an exchange of notes. The rates shown apply under the provisions of that treaty. In the case of Fiji, the dividend and interest articles do not apply, so the nontreaty rates apply instead.
f. The rates shown are those under the treaty signed with Czechoslovakia. Negotiations are in progress with both the Czech Republic and Slovakia. The expected outcome is that the treaty with Czechoslovakia will continue to apply to the two new states.
g. Copyright royalties, including film royalties, are exempt.
h. Film royalties are taxed at the nontreaty rate.
I. Royalties with respect to containers used in international traffic and related transportation equipment are exempt.
j. The rate is 10% if the recipient is a bank or, under some treaties, other financial institutions.
k. Nontreaty rates apply to certain Luxembourg holding companies.
l. The treaty rates apply if the payment is subject to tax in the country of the recipient.
m. Copyright royalties of literary and artistic work, including film royalties, are not covered.
n. nterest paid with respect to government securities, bonds, or debentures is taxed at 10%.
o. Film royalties are taxed at 15%.
p. Copyright royalties, including film royalties, are taxed at 10%.
q. A new treaty with Singapore will be effective for tax years on and after 1 January 1996.
r. Since the dissolution of the Soviet Union, this treaty continues to apply with respect to Georgia, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Negotiations are in progress with the Baltic states and other members of the Commonwealth of Independent States, but the application of the treaty to those states remains unsettled at this time.
s. The 15% rate applies only if the payer is engaged in an industrial undertaking as defined in the treaty.
t. The application of the rate is limited to circumstances prescribed in the treaty.

Japan

Registration Tax Rates on Selected Transactions
Registered Transaction	Basis	Rate(%)
Purchase of ownership in real property	Assessed value	5.0
Acquisition of real property through inheritance or corporate merger	Assessed value	0.6
Registration of a company in a merger	Stated (paid-in) capital	0.15
Issue of shares by a company (except through a merger)	Stated (paid-in) capital	0.7

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