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Tax system in japan History After World War II the Japanese tax system was rebuilt with American

n assistance. Amongst the various tax criteria most importance was placed on tax equity with the goal of making the Japanese tax system the best tax system in the world. However the income tax was to be complimented by a net worth tax and an inheritance tax The income tax base was to be broad thereby permitting low marginal tax rates. Corporations were to be treated as an aggregate of individuals rather than as independent taxable entities. Thus corporations tax was to be treated as an advance payment of individual tax. Observations It was observed that the Japanese tax system has some unique or, at least, extreme characteristics. The income tax imposed on individuals and companies. The Japanese tax system has traditionally featured low personal income tax. In fact, possibly 20% of employees do not pay income tax. Fringe benefits are largely untaxed. Individuals may adopt generous standard deductions or claim actual employment related expenses. To mitigate double taxation a credit is available for dividends received by both companies and individuals although with companies receiving a greater credit up to 100%. Features Firstly, in order to access many of the tax concessions taxpayers must register for and be approved to lodge a blue return. Secondly, the structure in which tax policy formulation occurs provides an interesting alternative Thirdly, Japan probably has the most developed withholding tax system in the World Tax systems should be comprehensive with low rates and the adoption of tax expenditure programs should be limited.

Finally, a significant feature of Japans income tax system policy of seeking to encourage the location of foreign businesses to the country, is the concept of nonpermanent residence which carries with it tax concessions. Withholding taxes Income categories in relation to which withholding taxes are used include: wages and salary, interest, dividends, royalties, capital gains on the sale of shares, gains from selling discount bonds, retirement income, remuneration for professional services, and remuneration for entertainment services. When to pay tax If you have to pay national income taxes for 2011, they had to be fully paid by March 15, 2012 (or April 20, 2012 in case of payment by automatic bank transfer), with the prepayments already paid in July and November 2011. Prefectural and municipal income taxes are paid in quarterly installments during the following year. For example, the 2011 taxes are paid in four installments due in June, August and October 2012 and January 2013.