With the continuous changes in the global economy and the increasing proportion of the service industry in the national economy, the Japanese government’s tax policies for the service industry have become increasingly complex and diversified. As the world’s third-largest economy, Japan’s tax policies not only affect the operating costs of enterprises but also directly determine their competitiveness in the market. The service industry covers a wide range of fields, including catering, tourism, information technology, healthcare, and education. To promote the sustainable development of these industries, the government has introduced a series of tax preferential policies covering various aspects of corporate income tax, consumption tax, and local taxes.
This guide aims to provide an in-depth analysis of Japan’s service industry tax policies, helping enterprises understand various preferential policies and their applicable conditions, ensuring that enterprises can fully utilize existing tax incentives while operating in compliance, and minimizing operating costs to the greatest extent. Whether it’s small and medium-sized enterprises or high-tech companies at the forefront of innovation, through reasonable tax planning, enterprises can achieve significant development in fierce market competition.
Overview of Japan’s Service Industry Taxation
1.1 Overall Economic Contribution of Japan’s Service Industry
The service industry in Japan dominates the Gross Domestic Product (GDP), accounting for about 70% of the national GDP and is an important force driving Japan’s economic growth. Major sectors include catering, hotels, healthcare, education, information technology, and financial services. Japan’s service industry also contributes significantly to employment, providing over 70% of job opportunities. Therefore, the tax policies for the service industry not only affect the operating costs of enterprises but also relate to the healthy development of Japan’s overall economy.
1.2 Overview of Japan’s Main Tax Types
The main types of taxes applicable to the service industry in Japan include corporate income tax, consumption tax, capital gains tax, local taxes, and special taxes for specific industries. For example, corporate income tax is a tax that all enterprises must pay, with a rate usually at 23.2%, but small and medium-sized enterprises and specific industries can enjoy lower preferential tax rates. The consumption tax has been increased to 10% since October 2019, with differentiated tax rates adopted in certain industries such as the catering industry. Japan also offers a series of tax preferential policies for different regions and industries.
1.3 Legal Framework of Service Industry Tax Policies
Japan’s tax system is based on multiple laws and regulations, including the Income Tax Act, Consumption Tax Act, Companies Act, Local Tax Act, and others. These laws establish tax rules for various industries and provide reductions and preferences in specific situations. For example, the Income Tax Act stipulates the taxation methods for different types of income, while the Consumption Tax Act regulates the scope and rates of consumption tax. Service industry enterprises need to comply with these laws to ensure compliance.
1.4 Overall Analysis of Government Support and Preferential Policies for the Service Industry
To encourage the development of the service industry, the Japanese government has adopted a series of tax incentive measures, especially preferential policies for small and medium-sized enterprises and innovative enterprises. For example, for enterprises in emerging technologies and environmental protection projects, the government encourages long-term development through tax reductions and exemptions. In addition, enterprises in different regions can also enjoy preferential policies provided by local governments, such as land rent reductions and local tax reductions.
Tax Policies for the Catering Service Industry
2.1 Corporate Income Tax for the Catering Service Industry
The catering service industry in Japan is a labor-intensive sector, facing fierce market competition and constantly changing consumer trends. Enterprises need to rely on multiple government policy supports in tax planning. According to the Japanese Corporate Tax Act, the catering service industry, like other industries, is required to pay corporate income tax at a standard rate of 23.2%. However, small and medium-sized enterprises in the catering industry can enjoy preferential tax rates for annual income not exceeding 800 million yen, with the corporate income tax rate reduced to 15%. This preferential policy effectively reduces the tax burden on catering enterprises, especially start-ups, encouraging more small catering service enterprises to enter the market and expand their operations.
For example, if a catering service enterprise has an annual taxable income of 500 million yen and meets the requirements for small and medium-sized enterprise tax preferences, its corporate income tax would be: 500 million yen × 15% = 75 million yen. If the enterprise did not enjoy the small and medium-sized enterprise preferential policy, its corporate income tax would be: 500 million yen × 23.2% = 116 million yen. By enjoying the preferential tax rate, the corporate income tax burden is significantly reduced.
In addition, the Japanese government provides some additional tax reduction and exemption policies for eligible catering enterprises. For example, according to the Small and Medium-sized Enterprise Tax Law, catering enterprises can apply for equipment investment deductions when investing in equipment or renovating shops. The implementation of this policy encourages the catering industry to improve its facility standards, enhance competitiveness, and thus provide better service experiences for customers. This preferential policy is particularly applicable to those catering enterprises planning to expand their stores or update modern equipment.
2.2 Consumption Tax for Catering Services
Consumption tax is one of the most important types of taxes in the catering service industry. According to the Consumption Tax Act, the standard consumption tax rate applicable to the catering service industry is 10%. However, to adapt to diverse catering needs and consumption patterns, the government introduced differentiated consumption tax rates in 2019. Dine-in services are subject to the standard consumption tax rate of 10%, while takeaway food and beverages are subject to a preferential rate of 8%. This policy adjustment not only provides consumers with more flexible choices but also helps catering enterprises optimize their sales models. For example, restaurants providing takeaway services can improve their product market competitiveness through reduced tax rates.
According to this policy, enterprises need to distinguish between dine-in and takeaway businesses when calculating taxes. For example, if a catering enterprise has monthly dine-in revenue of 10 million yen and takeaway revenue of 5 million yen, its consumption tax calculation would be as follows:
Dine-in: 10 million yen × 10% = 1 million yen; Takeaway: 5 million yen × 8% = 0.4 million yen. Therefore, the total consumption tax payable for this enterprise is 1.4 million yen. If takeaway revenue accounts for a larger proportion, catering enterprises can effectively reduce their consumption tax burden and increase profit margins.
It is worth noting that small catering enterprises with annual turnover below 10 million yen can apply for exemption from consumption tax according to the Consumption Tax Act. This is a very important tax preferential policy for small restaurants and takeaway stores, helping to reduce operational pressure for emerging enterprises in their early stages. In addition, catering enterprises can also deduct input tax from consumption tax based on their cost structure, further reducing the actual tax burden.
2.3 Local Taxes and Subsidy Policies
Local tax policies in Japan vary according to the economic development needs of different regions. For the catering service industry, some local governments have introduced special tax reduction and subsidy policies to attract enterprises to invest and operate locally. Taking Hokkaido and Okinawa as examples, these regions encourage catering enterprises to enter and develop in the area by reducing local corporate taxes and providing rent subsidies. According to the Local Tax Law, the rate of local corporate tax is usually between 3% and 5%, with the specific amount determined by local governments. For example, the local corporate tax in Tokyo is 4%, while in some economically less developed regions, such as parts of Kyushu, the rate may be as low as 3%.
Taking Hokkaido as an example, the local government has introduced a two-year local corporate tax exemption policy to attract new catering enterprises, applicable to catering enterprises with annual turnover not exceeding 200 million yen. In addition, local governments also provide subsidies for shop rentals, especially for catering enterprises opening in tourist areas and popular commercial districts. This policy helps enterprises reduce fixed costs in the early stages and improve profitability. For example, if a catering shop opened in Hokkaido has an annual rent of 5 million yen, according to the subsidy policy, the local government can provide up to 20% rent subsidy, with the reduction amount being: 5 million yen × 20% = 1 million yen. This means that the annual rental cost for the catering enterprise will be reduced to 4 million yen.
Furthermore, local governments further support the development of the industry through catering service training and technical support programs. For example, Osaka City’s “Catering Enterprise Skill Enhancement Plan” not only provides tax preferences but also offers professional technical guidance for new catering enterprises, helping them improve operational efficiency and enhance customer service. Such comprehensive support plans help catering enterprises maintain long-term competitiveness in the fierce market competition while improving local economic development levels.
Tax Policies for Tourism and Accommodation Service Industries
3.1 Corporate Income Tax for Tourism and Accommodation Industries
In Japan, the tourism and accommodation service industries are important components of the national economy, especially against the backdrop of increasing foreign tourists and booming domestic tourism. The government’s support for these industries continues to strengthen. Like other industries, the tourism and accommodation sectors are subject to corporate income tax as stipulated in Japan’s Corporate Tax Act, with a standard rate of 23.2%. However, to promote local economic development, especially in regions with developed tourism industries, the government has introduced multiple tax preferential policies to reduce the tax burden on enterprises.
For corporate income tax preferential policies targeting the tourism and accommodation industries, many local governments provide special reductions or exemptions based on the Regional Economic Revitalization Act. For instance, newly built or renovated accommodation facilities in specific tourist areas can enjoy corporate income tax reductions or deferred payments. The specific implementation of this policy varies by region, especially in tourist destinations like Hokkaido, Okinawa, and Nagano, where local governments actively attract new investors by supporting the development of tourism through corporate income tax reductions.
For example, in a local project in Hokkaido, new hotel construction projects can enjoy a three-year tax exemption period for corporate income tax. Suppose an accommodation enterprise has an annual income of 1 billion yen, subject to the standard tax rate of 23.2%, the original tax payable would be 232 million yen. However, through the region’s corporate income tax exemption policy, the enterprise can completely exempt this portion of tax for three years. This preferential policy is particularly attractive and financially beneficial for companies investing in large-scale hotel or resort construction.
Furthermore, the government also provides additional income tax benefits for small tourism and accommodation enterprises through the Small and Medium-sized Enterprise Promotion Act, helping small and medium-sized enterprises seize business opportunities amid the tourism boom. For example, small accommodation enterprises with annual revenue not exceeding 800 million yen can enjoy a preferential tax rate of 15%, thereby reducing tax burdens and enhancing profitability.
3.2 Consumption Tax for Tourism Services
The tourism and accommodation service industries not only face the burden of corporate income tax but also need to pay consumption tax. According to the provisions of the Consumption Tax Act, tourism-related services are usually subject to the standard consumption tax rate of 10%. However, to promote the development of the domestic tourism market, the government has provided tax preferential policies for specific tourism service industries. Taking accommodation services as an example, many accommodation services (such as hotels, hot spring inns, etc.) enjoy lower tax rates or tax reductions for some service items, especially for sales to long-stay customers or family travel packages, which usually have lower tax burdens.
For instance, for certain specific travel packages, to encourage more family outings, the Japanese government allows some accommodation and dining packages to be subject to only an 8% preferential tax rate. For enterprises providing tourism accommodation and package services, enjoying such preferential policies helps increase their market competitiveness while reducing tax burdens and improving profitability. Suppose an inn has monthly accommodation income of 50 million yen, calculated at an 8% consumption tax rate, its consumption tax payable would be: 50 million yen × 8% = 4 million yen. Compared to the standard 10% tax rate, its consumption tax burden is reduced by 1 million yen. This policy is particularly beneficial for accommodation enterprises whose main customer groups are families or groups.
In addition, certain specific tourism-related services, such as tour guide services and specific travel agency services, can also enjoy the government’s tax preferential policies, especially in projects promoting domestic tourism. The consumption tax rates for these services often vary depending on the region and type of service. For example, in the “Go To Travel” campaign launched after the pandemic, the government indirectly provided substantial consumption tax reduction benefits to accommodation and tourism enterprises by directly subsidizing consumers, thereby reducing the tax burden on businesses.
3.3 Local Government Tax Incentives
Local governments play a crucial role in promoting the development of tourism and accommodation industries. To attract investment and boost local economic growth, especially in regions with developed tourism but relatively underdeveloped infrastructure, local governments have provided various tax incentive policies for the tourism and accommodation industries. According to the Local Tax Law, many local governments promote investment by tourism and accommodation enterprises in the area through reducing local corporate taxes, providing land use tax exemptions, and various investment subsidies.
For example, in Okinawa, the local government provides a five-year local corporate tax exemption for newly built or renovated hotels and resorts. This policy aims to attract external capital to invest in developing tourism facilities in the region, thereby enhancing the international competitiveness of local tourism services. Suppose a tourism enterprise builds a new resort in Okinawa with an annual income of 200 million yen, subject to the standard local corporate tax rate of 4%, its tax payable would be: 200 million yen × 4% = 8 million yen. By enjoying the five-year tax exemption policy, the enterprise can save up to 40 million yen in taxes during this period, greatly reducing investment costs.
Moreover, as the concepts of environmental protection and sustainable development gradually take root, green tourism and eco-friendly tourism enterprises have received special tax support policies. According to the Environmental Industry Promotion Act, the government provides a certain percentage of tax credits for enterprises using environmentally friendly materials and promoting low-carbon tourism. For example, if a green tourism company purchases 50 million yen worth of eco-friendly equipment, it can enjoy a 10% equipment investment tax credit, saving tax of: 50 million yen × 10% = 5 million yen. This tax incentive policy not only promotes the development of sustainable tourism but also helps local governments achieve their environmental protection goals.
In some key tourist areas, such as around Mount Fuji and ski resorts in Nagano, local governments further reduce the land operating costs for tourism and accommodation enterprises by providing land use tax exemption policies. For instance, in Nagano City, enterprises building new ski resorts can enjoy land tax exemptions for up to ten years. Such long-term preferential policies provide financial stability for enterprises, facilitating long-term investment planning.
Through these tax incentives and support policies, local governments not only promote the sustainable development of tourism and accommodation industries but also enhance the competitiveness of local tourism industries while achieving a balance between economic and environmental goals.
Medical and Health Services Industry Tax Policies
4.1 Corporate Income Tax for Medical Service Enterprises
The medical and health services industry has a special legal status in Japan because it directly relates to the health and social welfare of citizens. According to the provisions of the Corporate Tax Act, medical service enterprises are also required to pay corporate income tax at the standard rate of 23.2%. However, to support the operation of medical institutions, especially those providing basic medical and nursing care services, the Japanese government has implemented a series of tax reduction and exemption policies. For example, according to the Social Medical Corporation Tax Act, medical corporations that meet non-profit criteria can be exempted from a certain proportion of corporate income tax, thereby reducing their operational burden. This policy is particularly applicable to medical institutions providing long-term care insurance services for an aging society, effectively lowering the tax burden of these institutions.
In addition, for private hospitals, nursing homes, and other institutions, the government has also established tax incentive policies for equipment investment. According to the Special Medical Institution Tax Promotion Act, investments in medical equipment can enjoy additional tax deductions. This type of tax deduction applies to the purchase of high-tech medical equipment, intelligent nursing equipment, and other facilities. Suppose a hospital purchases medical equipment worth 100 million yen in a year; according to this law, the enterprise can receive a 10% tax deduction, saving 10 million yen in corporate income tax. This policy is particularly important for hospitals and medical institutions undergoing technological upgrades and equipment updates, helping to promote the improvement of medical service quality.
4.2 Consumption Tax on Medical and Nursing Services
To reduce the medical burden on citizens, the Japanese government has implemented a policy of exempting medical and nursing services from consumption tax. According to Article 6 of the Consumption Tax Act, many medical services (such as surgery, hospitalization, treatment, routine health checks, etc.) are exempt from consumption tax. Through this tax exemption policy, medical institutions can directly reduce the payment pressure on consumers, especially in the context of an aging population where the demand for nursing services has increased significantly. The tax-free policy has effectively controlled nursing costs. This policy applies not only to hospitals but also covers nursing homes, elderly care facilities, and other long-term care institutions.
However, exemption from consumption tax does not mean that medical institutions cannot enjoy tax benefits in equipment procurement. On the contrary, according to the relevant provisions of the Consumption Tax Act, medical institutions can still deduct input tax when purchasing equipment related to medical services. For example, if a medical institution purchases diagnostic equipment worth 50 million yen, and this equipment falls within the scope of medical devices stipulated by the Specified Medical Devices Act, the medical institution can deduct the input tax, thereby further reducing operating costs.
The equipment investment deduction policy is mainly to encourage medical institutions to improve their service capabilities, especially in terms of technological innovation and equipment upgrades. The government reduces the tax pressure on medical institutions in large-scale equipment procurement through tax deductions. For example, if a hospital purchases a CT scanner worth 100 million yen, with an applicable consumption tax rate of 10%, the hospital can enjoy a 10% input tax deduction, thus saving 10 million yen in taxes. In this way, medical institutions can effectively control capital expenditure while ensuring high-quality medical services.
4.3 Local Government Support for the Medical Industry
Local governments also play a crucial role in supporting the development of the medical and health services industry, especially in areas with relatively scarce resources. Local governments support the sustainable development of the medical service industry through various means such as reducing local enterprise tax, providing land tax reductions, and direct financial subsidies. According to the Local Tax Act, local enterprise tax usually applies to most businesses at rates of about 3%-5%. However, to attract high-quality medical institutions, local governments often provide tax reductions for newly built medical institutions or facilities. For example, in some prefectures in the Kyushu region, new hospitals can enjoy a five-year local enterprise tax exemption policy. This policy is particularly beneficial for medical institutions planning to expand services in local areas, effectively reducing the initial financial burden.
Taking Nagano Prefecture as an example, the local government has provided a land tax reduction policy for newly built medical facilities. According to this policy, medical facilities can be exempted from land tax for the first five years after construction, especially applicable to large hospitals and nursing centers built in remote areas. For example, if a hospital purchases a piece of land worth 200 million yen in Nagano Prefecture, with an applicable land tax rate of 1.5%, it should pay an annual land tax of 3 million yen. However, by enjoying the five-year tax exemption policy, the hospital can save up to 15 million yen in taxes over these five years, providing significant financial support for the initial operation of large medical facilities.
At the same time, the government also encourages medical institutions to invest and build in specific policy-oriented areas. For example, in remote areas and islands with low population density, the government provides special financial subsidies to attract medical institutions to provide more convenient medical services to local residents. These subsidies are not only reflected in tax reductions but also include construction subsidies, equipment procurement subsidies, etc., helping medical institutions to expand at lower costs.
For medical facilities that promote green and environmental protection, local governments also provide special tax incentive policies. According to the Environmental Medical Facility Promotion Act, medical institutions built using green energy or environmentally friendly materials can enjoy additional tax credits for equipment investments. Suppose a hospital installs a solar power generation system worth 30 million yen; according to this policy, the hospital can receive a 5% equipment investment tax deduction, thus saving 1.5 million yen in corporate income tax. This policy not only promotes the sustainable development of medical institutions but also helps local governments achieve green and environmental protection goals.
Through these local tax reductions and financial subsidy policies, the medical service industry has been able to steadily expand in different regions, especially in resource-poor and remote areas. Government support helps improve the accessibility and quality of medical services. This policy orientation also reflects the Japanese government’s long-term strategy in promoting the modernization of the medical industry and addressing the needs of an aging society.
Information Technology and Innovative Services Industry Tax Policies
5.1 Corporate Income Tax Incentives for Information Technology Enterprises
Information Technology (IT) and innovative services industry occupy an important position in the Japanese economy, especially in promoting the digital economy and industrial innovation. To promote the continuous development of this industry, the Japanese government has provided a series of corporate income tax incentive policies for information technology enterprises. According to the Japanese Corporate Tax Act, the standard corporate income tax rate is 23.2%, but small and medium-sized information technology enterprises can enjoy a lower preferential tax rate. Specifically, small and medium enterprises with annual income not exceeding 800 million yen are subject to a 15% corporate income tax rate. The implementation of this policy has significantly reduced the tax burden on small and medium enterprises, encouraging more innovative enterprises to enter the market.
In addition, the Japanese government has also provided tax deduction policies for research and development expenses in the information technology field to promote enterprise investment in technological innovation and R&D. According to the Research and Development Tax Credit Act, enterprises can directly deduct part of their R&D expenses from corporate income tax, with a maximum deduction rate of 25%. For example, if an information technology enterprise has annual R&D expenditure of 100 million yen, and applies a 25% deduction rate, the deductible tax amount for this enterprise is 25 million yen. This tax deduction policy for R&D expenses not only promotes enterprises to increase R&D investment but also enhances their innovation capability and competitiveness. Especially in high-tech fields such as artificial intelligence, big data, and cloud computing, this policy greatly reduces the R&D burden on enterprises.
5.2 Application and Reduction of Consumption Tax
The scope of consumption tax application in the information technology and innovative services industry varies according to the content of services. According to the Consumption Tax Law, most information technology services, such as software development, data analysis, cloud services, etc., are subject to the standard consumption tax rate of 10%. However, for some specific innovative service areas, the government has implemented consumption tax reduction or preferential policies to support the development of the digital economy. For example, certain digital services involving cross-border transactions, such as software development and IT consulting services provided to overseas customers, may enjoy consumption tax exemption policies. According to the Cross-Border Electronic Services Tax Law, Japanese enterprises can apply for consumption tax exemption when providing electronic services to non-residents.
Furthermore, in the process of digital transformation, the Japanese government has implemented a series of tax incentives to support the digital upgrade of domestic enterprises. For example, enterprises that use digital tools for operational optimization, such as introducing automated systems or data management platforms, can enjoy equipment investment tax deductions according to the Digital Technology Promotion Act. Suppose an enterprise invests 50 million yen in purchasing a cloud service system to optimize its information management system; according to this policy, the enterprise can receive a 5% equipment investment tax deduction, thus saving 2.5 million yen in corporate income tax. The implementation of this policy helps enterprises reduce cost burdens in the process of digital upgrades and promotes technological innovation and development of enterprises.
5.3 Local Government Support for Information Technology Enterprises
In addition to national-level policy support, local governments have also played an important role in promoting the development of information technology enterprises. According to the Local Tax Law, various regions provide different levels of tax incentives for technology-based service enterprises to attract high-tech companies. For example, technologically advanced areas such as Tokyo and Kyoto offer local enterprise tax reduction policies for newly established information technology enterprises. Taking Tokyo as an example, newly established high-tech enterprises can enjoy a 50% reduction in local enterprise tax for the first three years. Suppose an information technology enterprise in Tokyo has an annual income of 200 million yen; calculating at a 4% local enterprise tax rate, the annual local enterprise tax amount for the enterprise would be 8 million yen. By enjoying a 50% reduction, the actual tax paid by the enterprise is 4 million yen, greatly reducing the enterprise’s tax burden.
Moreover, local governments also support the operation and expansion of information technology enterprises through special subsidies and policy incentives. For example, Fukuoka City has launched a “Startup and Innovation Subsidy Program” to provide operating funds and equipment procurement subsidies for newly established information technology companies. According to the Startup Support Act, eligible enterprises can receive subsidies of up to 10 million yen for initial company operations or technology equipment procurement. This financial subsidy policy not only helps new enterprises start quickly but also promotes the prosperity and development of local technology-based industries.
In the fields of green technology and environmental innovation, local governments also provide special incentives for information technology enterprises. According to the Environmental Technology Innovation Tax Act, if enterprises adopt green technologies or sustainable development innovative solutions in their R&D process, they can enjoy additional tax credits. For example, if an information technology enterprise develops an energy-saving data center management system and invests 30 million yen in equipment and R&D expenses, according to this policy, the enterprise can receive a 10% tax credit, thus saving 3 million yen in taxes. The implementation of this policy not only promotes the application of environmental protection technologies but also helps enterprises gain more financial support in the innovation process.
Through multiple tax incentive policies and fiscal incentives from national and local governments, information technology and innovative service enterprises in Japan have received comprehensive support. This policy environment provides a stable financial foundation for the long-term development of enterprises and also promotes Japan’s position in global technological innovation competition.
Education and Training Services Industry Tax Policies
6.1 Corporate Income Tax for Education and Training Services
In Japan, the education and training services industry is a highly valued sector, especially in promoting skill enhancement, employment, and re-employment. The government has provided extensive tax support for this industry. According to the Japanese Corporate Tax Act, all education and training institutions operating within Japan are required to pay corporate income tax at the standard rate of 23.2%. However, the government has formulated a series of tax incentive policies to support non-profit educational institutions and service enterprises providing vocational skills training and re-employment training.
According to the Education Promotion Act, some eligible education service enterprises can enjoy corporate income tax reductions. For example, non-profit educational institutions, such as private schools and vocational skills training centers, can apply for partial or full exemption from corporate income tax if they meet certain conditions. Vocational training enterprises especially benefit from government incentive policies. According to the Vocational Training Law, the government will provide tax incentives when enterprises provide training services for unemployed groups, low-income groups, or specific industries. For example, if a vocational training company has an annual income of 300 million yen, it should originally pay corporate income tax of: 300 million yen × 23.2% = 69.6 million yen. By enjoying the government’s tax incentive policy, the enterprise’s tax burden can be reduced by 15%-25%, with the specific reduction ratio depending on the type of training provided and the beneficiary group. This incentive policy not only helps training enterprises reduce operating costs but also promotes the cultivation of skilled labor and stimulates the overall Japanese employment market.
6.2 Consumption Tax Exemption for Educational Services
In terms of consumption tax, Japan implements a tax-free policy for most educational services. According to the Consumption Tax Law, non-profit educational institutions, such as private schools and vocational skills training institutions, can be exempt from consumption tax on their tuition income. This tax exemption policy aims to reduce the education cost burden on families and individuals while supporting the continuous operation of educational institutions. The tuition fee tax exemption policy covers a wide range, including primary and secondary schools, higher education institutions, and specific types of training institutions.
For example, if a private school has an annual income of 200 million yen, mainly from student tuition fees and other educational services, if the school did not enjoy the tax exemption policy, it should pay consumption tax of: 200 million yen × 10% = 20 million yen. Through the tax exemption policy, the school can save this part of the tax and thus have more funds to invest in improving teaching facilities and increasing teacher salaries.
In addition, the government also provides additional tax reduction policies for some specific educational institutions, such as language training schools and IT training centers. These training institutions can apply for consumption tax reductions according to the Specific Educational Institutions Promotion Act when providing services to specific groups. For example, if a language training school specifically provides re-employment training for the unemployed, according to the provisions of this act, the institution’s training income can be exempt from consumption tax. This policy not only helps training institutions reduce operating costs but also to some extent reduces the economic burden on trainees, promoting the healthy development of the education industry.
6.3 Local Government Support for the Education Industry
In addition to the tax incentive policies at the central government level, local governments also support the development of the education and training service industry through various tax reductions and fiscal incentive measures. According to the Local Tax Act, local governments can provide local enterprise tax reduction policies based on local economic development needs. For example, many local governments offer local enterprise tax exemptions or reductions to newly established educational institutions to promote balanced development of educational resources, especially in rural or remote areas. Taking Hokkaido as an example, the local government provides a three-year local enterprise tax exemption policy for newly established training institutions. Suppose a training institution has an annual income of 50 million yen and the local enterprise tax rate is 4%, its tax payable would be: 50 million yen × 4% = 2 million yen. Through local tax reduction policies, the enterprise can be exempted from 6 million yen in taxes over three years, which significantly reduces the financial pressure for start-up training institutions.
Furthermore, some local governments encourage educational institutions to operate in specific areas by providing direct financial subsidies. For instance, Fukuoka City launched an “Education Innovation Support Plan” that provides initial construction subsidies and operational funding support for newly established higher education institutions in the city, helping these institutions quickly achieve stable operations. According to the Local Education Revitalization Act, eligible educational institutions can receive subsidies of up to 10 million yen for infrastructure construction and equipment purchases. Such policies greatly promote the development and innovation of local educational resources.
In some special regions, such as Okinawa and Hokkaido, local governments also provide land tax reduction policies for educational and training institutions. Taking Okinawa as an example, the local government offers a five-year land tax reduction for higher education institutions established in the region. Suppose a university purchases a piece of land worth 100 million yen, with an applicable land tax rate of 1.5%, its annual land tax payable would be: 100 million yen × 1.5% = 1.5 million yen. By enjoying the five-year land tax reduction policy, the university can save up to 7.5 million yen in taxes over five years. These preferential policies not only reduce the capital expenditure of educational institutions but also effectively promote the balanced distribution of educational resources, especially in remote and underdeveloped areas.
Through multi-level tax incentive policies from central and local governments, the education and training industry in Japan has received comprehensive support. These policies not only help educational institutions reduce their financial burden but also promote educational innovation and balanced resource development, improving Japan’s overall education level.
Conclusions and Recommendations
7.1 Summary of Overall Tax Policy Trends in Japan’s Service Industry
Japan’s tax policies for the service industry generally show trends of supporting innovation, assisting small and medium-sized enterprises, and promoting local economic development. Through the implementation of the Japanese Corporate Tax Act and Consumption Tax Act, service industry enterprises must face major taxes such as corporate income tax and consumption tax. However, to encourage the development of specific industries such as information technology, medical services, and education and training, the Japanese government has introduced various reduction and deduction policies for corporate income tax and consumption tax. Furthermore, with the digital transformation of the global economy and the increasing pressure of Japan’s aging society, the government has increased tax incentives for industries such as information technology and medical care services, promoting related enterprises to invest in equipment, technological innovation, and sustainable development.
Local governments, based on central tax policies, have also played an important role by attracting service industry enterprises, especially innovative ones, to establish and operate locally through measures such as local tax reductions and financial subsidies. These policies not only promote the balanced development of Japan’s economy but also increase local economic vitality and employment opportunities. Especially in remote areas and economically underdeveloped regions, local governments’ tax incentive policies have effectively promoted the growth of key industries such as tourism, healthcare, and education.
7.2 Tax Planning Recommendations for Different Types of Service Industries
Based on the characteristics of different types of service industries, enterprises can adopt targeted tax planning strategies to fully utilize the government’s tax incentive policies. Firstly, for information technology and innovative service enterprises, it is recommended to strengthen R&D investment to ensure compliance with the deduction conditions in the R&D Tax System. This not only helps enterprises gain advantages in technological innovation but also significantly reduces the corporate income tax burden. Enterprises should actively apply for tax deductions on R&D expenses, especially those engaged in high-tech R&D, artificial intelligence, big data, and other fields.
Secondly, catering services and tourism enterprises can fully utilize the Small and Medium-sized Enterprise Tax System and differentiated consumption tax policies. When designing business models, it is recommended that enterprises pay special attention to the different tax rates for takeaway and dine-in services, optimizing sales structure through takeaway channels to enjoy the preferential tax rate of 8%. In addition, enterprises can reduce operating costs in popular tourist areas through local government subsidy policies.
Enterprises in the medical and health services industry should focus on investment deductions for medical equipment and consumption tax exemption policies. For example, hospitals and nursing institutions can enjoy equipment investment tax reductions under the Special Medical Institution Tax Promotion Act by investing in intelligent medical equipment or environmental protection facilities, thereby reducing capital expenditure. Such investments not only comply with the government’s tax incentive conditions but also enhance service quality and competitiveness.
7.3 How to Effectively Utilize the Japanese Government’s Tax Incentive Policies
To maximize the use of Japanese government tax incentive policies, enterprises should first thoroughly understand the applicable conditions of various laws and regulations and plan related tax arrangements in advance. For information technology enterprises, they can ensure compliance with the deduction requirements of the R&D Tax System through reasonable planning and declaration of R&D expenses. In addition, in terms of equipment procurement and new technology investment, enterprises should pay attention to government subsidy programs and tax credit policies, reasonably allocate resources, and optimize tax burdens.
In specific operations, enterprises can ensure compliance with the declaration requirements of various preferential policies through cooperation with tax advisors or accountants. Regular tax audits and compliance checks should be conducted to ensure that R&D expenses, equipment investments, etc., in financial reports can obtain legal tax deductions. For cross-border businesses, especially enterprises in the digital services and information technology fields, they can further utilize the tax-free policies in the Cross-border Electronic Services Tax Law to reduce tax burdens in international markets.
Small and medium-sized enterprises, especially start-up service companies, can also obtain initial tax incentives and financial subsidies through government entrepreneurship support programs. Such policies are crucial in the initial development stage of enterprises, helping to enhance liquidity and market competitiveness.
7.4 Tax Compliance and Tax Saving Strategies for Enterprises in Various Industries in the Japanese Market
For tax compliance and tax saving in the Japanese market for enterprises in various industries, the key lies in accurately grasping policy dynamics and timely adjusting tax strategies. Firstly, enterprises must ensure financial transparency in their operations and strictly report according to the requirements of the Corporate Tax Act and Consumption Tax Act to avoid tax penalties due to negligence. In terms of tax-saving strategies, enterprises should fully utilize policies such as equipment investment and R&D expense deductions, making capital expenditures in a timely manner according to business growth needs to enjoy tax incentives for equipment investment deductions.
Information technology enterprises can adjust R&D budgets to ensure compliance with tax deduction requirements, while applying for government R&D funding subsidies when developing new products and technologies. Tourism and catering enterprises should pay attention to local tax reduction policies, especially when investing in new facilities, expanding business, or entering new markets, understanding the policy support of relevant regions to reduce operating costs through local government subsidies and tax reductions.
Finally, enterprises should continuously pay attention to changes in tax policies, especially in the context of Japan’s service industry gradually being affected by digital transformation, where the government may introduce more tax incentive measures for specific areas. Through cooperation with government agencies and tax advisors, enterprises can ensure tax saving to the maximum extent on the basis of compliance, enhancing market competitiveness and sustainable development capabilities.
