Japan Tax Guide - for Beginners -

Should the dividends be paid?


タグ: Japan Tax Guide - for Beginners -

Question: From the viewpoint of tax, are there any problems if the company keeps retained earnings without paying dividends?

Answer: In the case of specific companies, additional corporation tax is levied when they keep excess earnings without paying dividends.

  Japanese corporation tax law provides that the company shall be regarded as “specific family-owned company” if over 50% of its shares are owned by a person and/or his relatives directly or indirectly. The law is applied to any companies, for example, owned by the listed foreign businesses.

  If a specific family-owned company has excess earnings retained in the company, additional corporation tax should be levied based on the retained earnings after deduction of certain amount. To avoid this tax, company should pay dividends when they have earnings exceeding the deductible amount above.

  As an exception, small and medium size companies with JPY 100 million or less capital amount are exempt from this tax, unless it is fully owned by large-scale company with capital of JPY 500 million or more directly or indirectly.

  In Japan, it seems that tax authority tend to assume that the subsidiaries of the foreign public companies are not “specific family-owned company.” However, starting from 2010, a new group taxation regime has been introduced which applicable to domestic companies (“group companies”) that are wholly owned by either a domestic company, foreign company or individual. It requires the chart of shareholding structure of 100% group to be attached to the corporation tax return documents and it may draw the interest of tax authority about the detail of ultimate shareholders, even if they are non-residents or foreign companies. We recommend that the company consider to pay dividends when they make a big profit for the year, as long as they are the “specific family-owned company.”

  For more detail, please feel free to contact TOMA Consultants Group.

TOMA Consultants Group English Site      ⇒  https://toma.co.jp/en/



Question: 会社が配当せずに利益を留保している場合、税務上で何か問題になりますか?

Answer: 会社によっては、配当を払わずに利益を溜め込んでいると、追加の法人税が課されます。