Withholding Tax

Dividends

A 20% of withholding tax normally is levied on dividends paid to a nonresident, unless tha rate is reduced under a tax treaty. A 2.1% surtax increases the rate to 20.42%. The withholding tax on dividends received from listed companies, including the surtax, is 15.315% for a nonresident and 20.315% for a resident (including the 5 % local tax that is applicable only for Japanese residents).

Interest

Interest on loans paid to nonresident corporation generally is subject to a 20% withholding tax, while the rate on deposits and bonds is 15%(usually reduced to 10% in Japan's tax treaties). Due to the 2.1% surtax, the rates are 20.42% and 15.315%, respectively.

Royalties

Royalties paid to a nonresident for patents, trademarks, know-how or copyrights and service fees are subject to a 20% withholding tax, unless reduced under a tax treaty. Due to the 2.1% surtax, the effective rate is 20.42%.

Branch remittance tax

Japan does not impose a branch remittance tax.

Wage tax/social security contributions

The employer must withhold the employee's contribution and make its own contributions to social security, which has several components and income caps. The employer portion (assuming general business rates for labor insurance apply) may be up to 16.283%, and the employee's portion up to 15.451% .

Other

A 20.42% withholding tax is imposed on partnership income attributable to nonresident partners of a partnership that conducts business in Japan. Nonresident partners that have a permanent establishment through means other than the partnership interest may be exempt from the withholding tax because they are required to file Japanese income tax returns.