Japan Tax Guide

Taxable income of Japan branch

Creation date2017/12/19 Last updated2022/07/19


Question: Can you explain about taxable income of Japan branch?

Answer: As a result of tax revision in 2016, corporation tax of Japan branch is calculated based on the income earned in Japan and foreign countries which is attributed to Japan branch. If the foreign headquarters directly have income earned in Japan, its corporation tax is calculated separately.

  The revision of corporation tax is as follows:

Taxation principal applied to a foreign corporation was changed from an “entire income approach” to an “attributable income approach,” in line with the OECD Model Tax Convention amended in 2010. 

< Old >     Entire income approach: Any income earned in Japan is taxable as the income of branch,                     regardless of attribution.

< New >    Attributable income approach: The income earned in Japan and foreign countries attributed to                  Japan branch is taxable as the income of branch.

  The domestic income earned by foreign headquarters had been declared together with the income of Japan branch, and the income earned in the foreign countries had been non-taxable even when it is attributed to Japan branch.  However, the revised tax law provides that headquarters and branch should calculate their own taxable income independently including internal transactions, and branch have to declare its income regardless of the country where it is earned. Both of headquarters and branch have to prepare and maintain the necessary documents for clarification of nature and prices of internal transactions, such as contract and purchase order, so that the attributable income can be determined.

 Since Japan branch is required to declare foreign income which is attributed to itself, it is allowed for branch to take a foreign tax credit to avoid double taxation.

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

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Question: 外国法人の日本支店に対する課税について教えて下さい。

Answer: 税制改正により、2016年から、日本における支店については国内・国外で稼いだ所得のうち支店に帰属する分に法人税が課されています。外国法人の本店が日本で直接稼いだ所得については、法人税は別途計算されます。



(旧)   総合主義:  本店・支店のどちらに帰属するかに関わらず、日本で生じた所得についてすべて課税。

(新)  帰属主義:   国内・国外で生じた所得のうち日本支店に帰属するものについて、支店の所得として課税。