Capital Gains Taxation in Japan
In Japan, capital gains are subject to taxation under the Income Tax Law. The law defines capital gains as profits derived from the transfer of assets, including:
- Real estate
- Stocks and bonds
- Business assets
The distinction between short-term and long-term capital gains is not relevant for tax purposes in Japan.
Calculating Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The acquisition cost includes the original purchase price, as well as any expenses incurred in acquiring the asset, such as brokerage fees or legal fees.
Adjustments or deductions may be allowed in the calculation of the gain, including:
- Expenses related to the sale, such as brokerage fees or legal fees
- Improvements made to the asset during ownership
Tax Rates
Capital gains are taxed at a flat rate of 20.315%, which includes a 15.315% national income tax and a 5% local inhabitant tax.
Legal Framework
The taxation of capital gains in Japan is governed by the following articles of the Income Tax Law:
- Article 33: Definition of capital gains
- Article 34: Calculation of taxable capital gains
- Article 37: Tax rates
Policy Objectives
The capital gains tax system in Japan aims to:
- Generate revenue for the government
- Ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals
- Promote investment by providing preferential tax treatment for certain types of capital gains
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