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Japan vs. Spain, where are taxes lower?
Don’t miss this comparison of taxation in Japan vs. Spain for businesses and individuals. Find out about their tax systems.
If you’re considering living, working, or investing in either country and need to understand key tax aspects to identify which system suits you best, this article explains it. We are going to take an in-depth look at the comparison of taxes in Japan versus Spain, for both individuals and businesses.
There are significant differences in taxes such as income tax, VAT, social contributions, and other business charges. Moreover, you should consider deductions, tax brackets, and available tax benefits to reduce your burden. Don’t miss this comparative guide, as it may affect your personal finances or business profitability.
Taxes for businesses or legal entities
When comparing taxes in Japan versus Spain to start a new business, you must carefully analyse each country’s tax system, as it directly impacts profitability and required investment. Both tax systems are complex, including local taxes, social contributions, and indirect charges.
Although both aim to attract foreign investment, they use different approaches. Taxes in Japan focus on incentives for innovation, digitalisation, and global expansion. Meanwhile, Spain offers tax benefits for new businesses, startups, and strategic sectors. Let’s explore key taxes in more detail so you can decide which suits you best.
1. Differences in corporate tax in Japan versus Spain
The main tax on company profits is corporate tax. In Japan, the general rate ranges between 23% and 30%, depending on company size and region, as national and local taxes combine. However, small and medium businesses enjoy a reduced 15% rate on the first $49,800 (€43,087) of annual profit.
In Spain, the general rate stands at 25%, while SMEs earning under €10 million pay 23%. Microbusinesses also benefit from a reduced 19% on the first $57,789 (€50,000) of profit. Additionally, new companies or startups can apply a 15% rate during their first four years.
2. VAT rates in both countries
The second tax in this Japan versus Spain comparison is VAT, known as consumption tax in Japan. This indirect tax affects final prices, as businesses collect it and later pay it to tax authorities. At first glance, Spain’s standard rate is much higher than Japan’s. However, Spain offers an additional reduced category for specific sectors. We’ve detailed it in the table below:
| VAT Type | Japan (rate) | Examples | Spain (rate) | Examples |
| General | 10% | Electronics, clothing, transport | 21% | Electronics, clothing, tobacco |
| Reduced | 8% | Food, non-alcoholic drinks | 10% | Hospitality, transport, new housing. |
| Super Reduced | Not available | Not available | 4% | Bread, milk, eggs, medicine. |
| Exempt | 0% | Healthcare, education, residential rent | 0% | Education, healthcare, financial services. |
To manage your tax obligations efficiently, you need a reliable internet connection to submit returns online. We recommend the eSIM for Japan or the eSIM for Spain from Holafly. These work perfectly for short stays, as you only pay for the days you need. Alternatively, choose the Holafly monthly plans, with 5G coverage and unlimited data from €46,50 ($50.50) per month, with no contracts.
3. Employer’s social contributions
Without a doubt, one of the biggest costs for businesses is having to pay a percentage of each employee’s gross salary every month as a contribution to Social Security. In this regard, in Japan it is much cheaper to hire staff, as the rates charged range from 14% to 16%, depending on the type of insurance and the region. In contrast, Spanish companies must pay around 30%, which significantly increases labour costs.
4. Local taxes and business fees
In addition to the taxes in Japan versus Spain we have analysed so far, there are also other local taxes and fees applied to business activity, commercial properties, and business registrations. Overall, Spain shows higher initial costs and more complex procedures to start a business, while Japan offers a more flexible system without licensing fees. The table below helps you compare these local taxes more clearly:
| Local tax type | Japan (rate) | Spain (rate) |
|---|---|---|
| Business activity tax | 3.5% – 7%, depending on profits | from $0 -3,467 (€0-3,000), some exempt |
| Property Taxes | approx. 0.3% of property value | 0.4% – 1.1% of cadastral value |
| License Fees | Not available | $346-3,467 (€2,300-3,000) |
Taxes for individuals or natural persons
Natural persons are individuals who pay taxes personally, such as employees, freelancers, students, digital nomads, or any resident who earns income, owns assets, or consumes goods. Unlike companies, tax burdens do not depend only on profits, but also on income level, marital status, and residence. Let’s analyze the main taxes in Japan versus Spain that affect individual.
1. VAT on your consumption in Japan and Spain
This tax directly impacts your daily spending in both destinations, as you pay it through higher final prices of goods and services. As mentioned earlier, Japan applies a 10% standard rate, with an 8% reduced rate for essentials like food. Spain applies a 21% standard rate, 10% for hospitality or transport, and 4% for basic food. In short, Japan offers a more favourable consumption tax environment, as its standard rate is half of Spain’s.
2. Where do you pay less personal income tax?
Another key tax in Japan versus Spain is personal income tax. Both countries use a progressive system, but another key tax in Japan vs Japan starts at 5%, while Spain starts at 19%, showing a significant difference. Overall, Japan is more competitive for low and middle incomes, while both systems converge at higher income levels.
| Annual income bracket approx. | Japan (Income Tax) | Spain (IRPF) (approx) |
|---|---|---|
| Up to $15,600 (€13,497) | 5% | 19% |
| $15,600 – 25,000 (€13,497 – 21,630) | 10% | 24% |
| $25,000 – 43,700 (€21,630 – 37,809) | 20% | 30% |
| $43,700 – 75,000 (€37,809 – 64,890) | 23% | 37% |
| $75,000 – 156,000 (€64,890 – 134,972) | 33% | 45% |
| More than $156,000 (€134,972) | 45% | 47% |
3. Social security contributions for workers in Japan and Spain
Just as companies contribute for each employee, individuals also pay social security contributions to access benefits such as unemployment support, sick leave, and pensions. In Spain, contributions range between 6% and 7% of gross salary, while in Japan they range between 14% and 15%. Therefore, Spain offers a lighter burden for employees.
4. Tax on heritage
Here we find a key difference in taxes in Japan versus Spain, as Japan does not apply any wealth tax, resulting in significant savings for high-net-worth individuals. In Spain, however, you may pay up to 2.5% on total assets, with an exemption threshold of up to $810,000 (€700,000). Some regions such as Madrid and Andalusia offer up to 100% exemptions.
5. Inheritance and succession tax
The final tax in this Japan versus Spain analysis relates to inheritance. If you inherit money in Spain, you will pay between 7.65% and 34%, although regional bonuses can reduce this to 0%. In Japan, rates range from 10% to 55%, depending on the inherited amount, making it one of the most demanding systems in this area.
Tax Comparison in Japan versus Spain
So far, we have analysed the main taxes in Japan versus Spain for both companies and individuals. Spain for businesses and individuals. Is it still not clear to you? If you still find it unclear, don’t worry, as we have summarised everything in two comparison tables so you can easily identify key differences and advantages of each country.
1. Tax comparison in Japan versus Spain for businesses
| Tax | Japan rate approx. | Spain rate approx. |
|---|---|---|
| Corporate income tax | 23–50% | 15–25% |
| VAT | 8–10% | 4–21% |
| Employer’s social contributions | 14–16% | 30% |
| Property Tax | 0.3% | 0.4%–1.1% (municipal) |
| Business licence fees | Not available | $2,700-3,467 (€2,300-3,000) |
| Municipal Tax on Activities | 3.5–7% | from $0-3,467 (€0-3,000), some exempt |
2. Tax comparison in Japan versus Taxes for individuals
| Tax | Japan rate | Spain rate |
|---|---|---|
| Income Tax | 5–45% | 19–47% |
| VAT | 8–10% | 4–21% |
| Employee social security | 14–15% | 6–7% |
Wealth Tax | 0% | 0% – 3.5% (cadastral value) |
| Inheritance tax | 10%–55% | 7%–34% |
In conclusion, Japan stands out for its lower consumption taxes, lower property-related taxes, and lower employer contributions. On the other hand, taxes in Spain offer advantages such as lower employee contributions, reduced rates for new businesses, and possible exemptions on inheritance or wealth tax. The best choice depends on your personal tax profile, as both countries offer advantages and disadvantages depending on the tax type. We recommend reviewing the comparison tables again to make an informed decision.
