Dividends vs salary: effective tax rates, the dividend credit, and differing opinions

Tax on dividends from one's own company is a flat 20.42%, but it applies after corporate tax has already been paid on the profit (around 30%), so the combined effective rate works out to roughly 44%, per the formula 1-(1-0.3)×(1-0.2). A director's salary (役員報酬) is a company expense that reduces its taxable base, but is subject to progressive income tax, municipal tax, and social insurance; dividends are not a company expense and are levied after corporate tax is already paid. A separate dividend tax credit (配当控除) exists — for individuals with taxable income up to 6.95 million yen, taking dividends can be more tax-efficient by effective rate than salary; this is an opinion from the chat, not fully verified, since the calculation details are complex and individual. Opinions in the chat on whether salary or dividends is better diverge: one practicing accountant (auditor) thought optimizing salary was better than paying out dividends in the specific case discussed; another view held that, absent dependents, income above roughly 1 million yen a month is more efficient as dividends, below that threshold more efficient as salary; for typical community-sized amounts (up to roughly 10 million yen), a director's bonus was called more tax-efficient than dividends. The consensus: above roughly 10 million yen of company turnover, good practice is to bring in a 税理士 for optimization, since the questions are highly individual (co-founders, dependents, etc.) and it is not legally appropriate to give specific advice without a qualified zeirishi's involvement. Source: https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/1250.htm — Official NTA explanation of the dividend tax credit (haito kojo)..