A. At a Glance

Corporate Income Tax Rate (%)                     37.5 (a)
Capital Gains Tax Rate (%)                        37.5 (a)
Branch Tax Rate (%)                               37.5 (a)
Withholding Tax (%) (b)
  Dividends                                         20
  Interest                                        15/20 (c)
  Royalties from Patents, Know-how, etc.            20
  Branch Remittance Tax                              0
Net Operating Losses (Years)
  Carryback                                           1 (d)
  Carryforward                                        5

(a) Local income taxes (see Section D) are also imposed. The resulting effective corporate income tax rate is approximately 51%.
(b) Except for the withholding tax on royalties, these withholding taxes are imposed on both residents and nonresidents. For nonresidents, these are final taxes, unless the income is effectively connected with a permanent establishment in Japan. Royalties paid to residents are not subject to withholding.
(c) Interest paid to nonresidents is generally subject to a 20% withholding tax. Interest paid to nonresidents on bonds,debentures and bank deposits, however,is subject to a 15% withholding tax. For residents, this tax consists of a national tax of 15% and a local tax of 5%.
(d) The loss carryback is temporarily suspended (see Section C)

B. Taxes on Corporate Income and Gains

Corporate Tax. Japanese domestic companies are subject to tax on their worldwide income, but nonresident companies pay taxes only on Japanese-source income. A domestic corporation is a corporation that is incorporated or has its head office in Japan. Japan does not use the "central management and control" criteria for determining the residence of a company.

Rates of Corporate Tax. The basic rate of national corporation tax is 37.5%. For corporations capitalized at