How dividend tax works in Japan
Dividends received by an individual from listed shares are generally subject to 15.315% national income tax, including the reconstruction surtax, plus 5% local inhabitant tax when the recipient is below the major-shareholder threshold. The combined source withholding is 20.315%.
Dividends from unlisted shares, and dividends from listed shares received by an individual who owns 3% or more of the issued shares, are generally withheld at 20.42% for national income tax and reconstruction surtax, with no local tax withheld at source under that rule.
Residents can have choices for listed dividends, including a withholding-only route, aggregate taxation or separate self-assessment taxation. Separate taxation can be useful when coordinating qualifying listed-share losses, while aggregate taxation can be relevant where the dividend tax credit is valuable.
Dividends received by Japanese companies are governed by a corporate received-dividend deduction regime. The deductible percentage depends on the relationship between payer and recipient, so a corporate shareholder should not assume that an individual 20.315% rate is the final company tax result.
Non-residents are generally subject to Japanese withholding on Japanese-source dividends, commonly 15.315% for qualifying listed-share dividends and 20.42% for other dividends. A tax treaty can reduce the rate or provide an exemption if the required application is filed in time.
Tax rates at a glance
- Listed shares below 3%
- 20.315%Common withholding
- Unlisted shares
- 20.42%
- Listed shares at or above 3%
- 20.42%
- National portion on listed shares
- 15.315%
- Local portion on listed shares
- 5%
- NISA dividends
- 0%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
InvestorsFoundersShareholdersFamily officesCross-border investors
Watch out for
- 20.315% is the usual source-tax figure for qualifying listed-share dividends, not necessarily the final liability. A tax return, local tax, dividend tax credit, loss offset, foreign tax credit or treaty claim can change the result.
- The 3% major-shareholder threshold is important. A large listed holding can move dividends out of the ordinary listed-share withholding regime and into the 20.42% national withholding and aggregate-income rules.
- NISA is an account-based exemption, not a general exemption for Japanese residents' investment income. The security, account, annual limit and receipt method must satisfy the NISA rules.
- Foreign dividends can carry foreign withholding before the Japanese assessment. Keep payer statements and treaty documentation because the foreign-tax-credit calculation is separate from Japanese withholding.
- A corporate shareholder is not simply taxed like an individual. The received-dividend deduction, ownership level, payer type and cross-border withholding should be reviewed before deciding how much profit to distribute.
Frequently asked questions
How are listed dividends taxed in Japan?
Listed-share dividends received by an individual below the 3% major-shareholder threshold are commonly withheld at 20.315%, consisting of 15.315% national tax and 5% local tax. Other filing choices may be available.
What is Japan's dividend withholding rate for unlisted shares?
Unlisted dividends are generally subject to 20.42% national withholding for income tax and the reconstruction surtax. The final resident tax and return position depend on the recipient and the applicable declaration method.
Can dividends be tax-free in Japan?
Qualifying dividends held through the NISA system can be exempt, subject to the account, security, annual-limit and receipt conditions. Dividends outside NISA remain subject to the ordinary rules.