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Withholding Tax

Under Japan domestic law, a payer may have a duty to withhold tax in relation to the payment of a specified nature. When to file and pay withholding tax?

What is 'Withholding Tax'

Under Japan domestic law, a payer may have a duty to withhold tax (gensen choshu, 源泉徴収) in relation to the payment of a specified nature (e.g. salary, dividends, professional fees, etc.) to certain payees (e.g. individuals, non-resident companies, etc.). A payer is required to withhold a percentage of that payment and pay to tax authorities. The tax amount is applied as a prepayment of payee’s income tax. The filing of withholding tax and tax payment are due on 10th of the next month from the date of payment.

Nature of Payments That Are Subject to Withholding Tax
The following types of payments attract withholding tax when paid. Please note, however, that this is not an exhaustive list of all the deductions.

a.    Salary
b.    Dividends
c.    Professional fees (lawyer, CPA, etc.)
d.    Certain types of payments to individuals (translator, designer, etc.)
e.    Certain types of payments to non-residents (interest, dividends, royalty, etc.)

Tax Extension for SMEs

Payment of taxes withheld from a) Salary and c) Professional fees can be paid twice a year if the payer is a small business with 10 employees or less.

Application for Withholding Tax Extension for SMEs

If you want to take tax advantages of this tax extension for SMEs, you are required to submit the application form.

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