Import Procedures

Any person wishing to import goods must declare them to the Director-General of Customs and obtain an import permit after examination (if necessary) of the goods concerned. The formalities start with the lodging of an import declaration and end with issuance of an import permit after the necessary examination and payment of Customs duty and excise tax. In this way, measures are taken to ensure the fulfillment of the requirements for the control of foreign exchange and other regulations concerning the importation of goods. More than 90 percent of import procedures is currently computerised.

All steps and required documents are available on the website of Japan Customs.

The Customs Counsellor System assists companies with import procedures.

Specific Import Procedures

Under the "immediate import permission system upon arrival", import permission may be granted as soon as cargo entry is confirmed. To be eligible for this system, importers must file a preliminary declaration online.
For goods whose value is less than or equal to JPY 200,000, a simplified declaration system applies.

Distribution channels

According to the latest USDA Foreign Agricultural Service report, in 2021, the total value of all retail food and beverage sales in Japan was $467.20 billion an overall decrease of 2.3% from the previous year. The food processing industry produced $216 billion in food and beverage products in 2021. Supermarkets account for the majority of food retail sales, at 74%, but the fast growing convenience shop sector now accounts for 14.4% of sales. Ready-to-eat (REM) or take-away food products represent a growing area. Although Japan is a huge market, it is highly fragmented. The Japanese Food and Beverage (F&B) retail industry includes supermarkets, general merchandise stores, department stores, convenience stores, drugstores, and the internet.

Japan's general merchandise stores (GMS), offer shoppers the convenience of one-stop shopping for groceries, perishables, clothing, household goods, furniture, and electrical goods. GMS's are operated by major national chains that have nationwide networks with hundreds of outlets and typically rely on centralised purchasing. They often purchase foreign products via trading companies.

Supermarkets (SM) stores are smaller in size than GMS's and are more specialised in food and household goods. Supermarkets are facing higher purchasing costs than GMSs. They are seeking ways to stay competitive through product/service differentiation, private brand development, and global sourcing. To gain economies of scale, regional supermarkets are forming alliances through joint merchandising companies with non-competing retailers.

Department store sales have been slowly declining in recent years due to increasing competition with other retailers.

Convenience stores (CVS) are an extremely important sales channel in Japan. They have limited floor space, about 100 m² on average, and typically stock about 3,000 products. Convenience stores derive their competitive advantage from high turnover and efficient supply chains. Convenience stores are notably competing strongly by offering attractive consumer food service options, particularly as fast food offers high potential profits.

Distribution market players

Retailers with the highest food retail sales in 2021 (USDA, latest data available):
•    Supermarket: 345.59 billion dollars – 74% share of sales
•    Convenience Store: 67.18 billion dollars - 14.4% share of sales
•    General Merchandise Store: estimated at 24.78 billion dollars
•    Department Store: 13.98 billion dollars - 3% share of sales
•    Drugstore: 20.34 billion dollars - 4.4% share of sales
•    Internet: 20.70 billion dollars in 2020 (latest data available) - 4.3% share of sales
The largest retail outlet is Aeon Co. Ltd, leading player in supermarkets. The second largest retailer in terms of overall sales value is Seven & I Holdings, which operates Ito-Yokado, which is a convenience store business. The well-known U.S. brand retailers Costco and Walmart are also successful in Japan.

Retail Sector Organisations

Japan Retailers Association
Japan Department Store Association
Japan Council of Shopping Centres

Consumption Taxes

Nature of the Tax

Shouhizei (Consumption Tax)

Tax Rate

10% (7.8% national tax and 2.2% local tax)

Reduced Tax Rate

Supplies of food and drinks (excluding alcoholic beverages and dining out) and subscriptions to newspapers (limited to those issued at least twice a week and featuring information on general topics such as politics, economics, society, and culture) are subject to a reduced tax rate of 8%, comprising 6.24% for national tax and 1.76% for local tax.

Other Consumption Taxes

Excise taxes are imposed on gasoline, aviation fuel, tobacco, and liquor.
Stamp duties of JPY 200 to JPY 600,000 are imposed on the execution of taxable documents.
Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.
Vehicle taxes are applied locally.

Corporate Taxes

Company Tax

23.2%

Tax Rate For Foreign Companies

A company that has its head office in Japan is considered a domestic corporation, regardless of the place of central management or the nationality of its shareholders.

Capital Gains Taxation

Capital gains and losses are treated as ordinary income and losses, respectively.
Gains from the sale of stock are taxed at a total rate of 20.315%, comprising 15.315% for national taxes and 5% for local taxes. Gains from the sale of real property are taxed at a total rate of up to 39.63%, which includes 30.63% for national taxes and 9% for local taxes, depending on various factors.
In specific situations, such as qualified reinvestments or property exchanges, the taxes typically imposed on capital gains can be deferred, known as rollover relief, provided certain conditions are satisfied. Special relief is available when real property is expropriated by the national or local government. Additionally, the recognition of capital gains or losses from transferring certain assets between group companies is deferred until the asset is transferred to a company outside the group.

Main Allowable Deductions and Tax Credits

In order to file for tax privileges - including deductions for business expenditure, tax loss carryforwards and accelerated depreciation - companies must apply for a "blue form" tax return at the beginning of a fiscal year.
Reserves for doubtful receivables and returns of goods not sold are deductible for corporate tax purposes. Deductions are also available for charitable contributions (up to certain limits). Start-up expenses are allowed to be amortised on a voluntary basis. Interest expenses are generally deductible in the calculation of taxable income but interest payments to related parties within the corporate group may be disallowed in certain cases..
Generally, entertainment expenses are not deductible for tax purposes. However, SMEs, defined as companies with paid-in capital of JPY 100 million or less (excluding those wholly owned by a company with paid-in capital of JPY 500 million or more), can take a tax deduction up to the lesser of the actual entertainment expense or JPY 8 million. Additionally, expenses for eating and drinking are deductible as long as they do not exceed JPY 5,000 per person (excluding expenditures for internal purposes), since these do not classify as entertainment expenses for tax purposes.
The remuneration paid to directors is deductible only in specific cases. Enterprise tax and business premises tax are deductible in the calculation of the taxable income.
Only 50% of a company’s taxable income may be offset by net operating losses (NOLs). SMEs with share capital of no more than JPY 100 million are exempt from this NOL restriction, unless they are owned by a large company. NOL carryforwards may face further restrictions in certain situations, such as a change in ownership of more than 50% in connection with the discontinuance of an old business and the commencement of a new one. The NOL carryforward period is 10 years for losses incurred during fiscal years starting on or after 1 April 2018. SMEs are allowed to carry back losses for one year.
95% of dividends received by a company from a foreign company in which it has held at least one-fourth of the outstanding shares for an uninterrupted period of at least six months can be excluded from the company’s taxable income.
Various tax credits are available, including a research and development (R&D) credit and a carbon neutral credit. Tax incentives are also offered for increasing wages and salaries for fiscal years starting between 1 April 2022 and 31 March 2024. However, the R&D credit and certain other tax incentives are not available to large companies that do not meet specific conditions for fiscal years starting between 1 April 2018 and 31 March 2024.

For further information on tax incentives, consult the website of JETRO (Japanese External Trade Organization).

Other Corporate Taxes

Stamp duty ranging from JPY 200 to JPY 600,000 is imposed on the execution of taxable documents.

An annual fixed assets tax is levied by local tax authorities on real property and depreciable fixed assets used for business purposes. Real property is taxed at 1.7% of its value, as appraised by the local tax authorities. The tax on depreciable fixed assets is assessed at 1.4% of the cost after statutory depreciation. For certain fixed assets acquired by 31 March 2025 under an accredited plan, the taxable basis for small and medium-sized enterprises will be reduced by one-half or one-third.

A prefectural real estate acquisitions tax of 3% to 4% (generally reduced to 1.5% to 2% through 31 March 2024) is applied to the assessed value when land or buildings are acquired. Additionally, a real estate registration tax is imposed on the assessed value of real property at rates ranging from 0.4% to 2%, depending on the type of transfer.

Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis or at a fixed amount. A share registration tax is assessed at 0.7% on the registration of new or additional share capital.

Business premises tax is levied and designated by certain cities in Japan, including Tokyo, Osaka, Nagoya, Fukuoka, and other cities with populations exceeding 300,000. Corporations using business premises larger than 1,000 square meters and/or employing more than 100 people in a designated city are required to pay this tax. The tax is based on the physical footprint of the business (JPY 600 per square meter) and the gross payroll (0.25% of gross payroll).

Social security contributions paid by the employer amount to a maximum of 16.23%.

If an individual shareholder, along with family members, holds over 50% of a Japanese corporation's total issued shares or voting rights, whether directly or indirectly, the corporation is categorized as a family corporation, except for those with paid-in capital of JPY 100 million or less, and is subject to both corporation tax and family corporation tax. The family corporation tax is applied to the corporation's undistributed current earnings exceeding specified limits, calculated by deducting 40% of income, JPY 20 million, or 25% of the year-end capital amount minus capital reserves, from the undistributed current earnings. The tax rates are 10% for the first JPY 30 million of undistributed earnings annually, 15% for the next JPY 70 million, and 20% for amounts exceeding JPY 100 million annually.

Other Domestic Resources

National Tax Agency

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

List of Japan's tax conventions

Withholding Taxes

Dividends: a standard withholding tax of 20% applies to dividends paid to both residents and nonresidents. However, dividends paid by a listed company to nonresident companies are taxed at a reduced rate of 15%. Similarly, dividends paid by a listed company to a resident or nonresident individual holding less than 3% ownership in the company incur a 15% tax rate (plus a 5% local inhabitants tax for resident individuals). With a 2.1% surtax, the effective rates become 20.42% and 15.315%, respectively. These rates may be further reduced under relevant tax treaties.
Interest: typically, no withholding tax is levied on loan interest paid to a resident company. However, interest on loans from resident individuals and nonresidents is generally subject to a 20% withholding tax. Interest on deposits and bonds is taxed at a rate of 15% for both residents and nonresidents. Certain interest payments on government bonds to specific nonresident trust companies and financial institutions are exempt from withholding tax. With a 2.1% surtax, the effective rates become 20.42% and 15.315%, respectively. These rates may be lowered under applicable tax treaties.
Royalties: if paid to a resident company, royalties are not subject to withholding tax, while those paid to nonresidents face a 20% withholding tax, with a 2.1% surtax increasing the effective rate to 20.42%. However, this rate may be lowered under relevant tax treaties. Royalties paid to resident individuals are subject to a 10% withholding tax (10.21% including surtax) on amounts up to JPY 1 million, and 20% (20.42%) on amounts exceeding JPY 1 million.
Rates may be lowered under a tax treaty.