3.3 Overview of corporate income taxes
(corporate tax, corporate inhabitant tax, enterprise tax)

When a Japanese corporation or a branch office is newly established in Japan in accordance with Japanese law, tax notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. In the case of a branch office etc., they are treated as described below.

When a Japanese branch office etc. is newly established in Japan (i.e., where (1) of 3.3.4 Table 3-5 applies), tax notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. Tax notification must also be submitted when a foreign corporation generates income subject to corporate tax in Japan without establishing a branch office (i.e., where (2) of 3.3.4 Table 3-5 applies).

The taxes levied in Japan on income generated by the activities of a corporation include corporate tax (national tax), local corporate tax (national tax), corporate inhabitant tax (local tax), enterprise tax (local tax), and special corporate enterprise tax (a national tax, although filings and payments are made to local governments along with enterprise tax) (hereinafter collectively referred to as “corporate taxes”). Except in instances requiring exceptional treatment, the scope of income subject to corporate inhabitant tax and enterprise tax is (including special corporate enterprise tax; the same applies below) determined and the taxable income is calculated in accordance with the provisions for corporate tax. Corporate inhabitant taxes are levied not only on income but also on a per capita basis using the amount カジノ ブラック ジャックhe corporation’s capital, etc. and the number of its employees as the tax base. Corporations having paid-in capital of more than 100 million yen are subject to enterprise tax on a pro forma basis (see 3.3.3).

The income calculated for each business year is used as the tax base for determining these corporate taxes to be levied on a corporation's income. Other corporate taxes include corporate taxes on reserves for retirement pensions, etc. (suspended in the case of business years commencing by March 31, 2026).

The tax rates for corporate tax, corporate inhabitant tax and enterprise tax on income (tax burden on corporate income) and per capita levy on corporate inhabitant tax for each taxable year are shown below. The rates for local taxes may vary somewhat depending on the scale カジノ ブラック ジャックhe business and the local government under whose jurisdiction it is located.

Please note that applicable カジノ ブラック ジャックates will vary according to the timing.

Corporations whose share capital or contributed capital exceeds 100 million yen(*) are taxed on a pro forma basis using income, added value, and capital as the taxable base. The standard カジノ ブラック ジャックates for income, added value and capital are as the Table 3-4 below.

The income of corporations established in Japan is subject to taxation in Japan regardless of where it was sourced. Corporations established in foreign countries are grouped, and the respective domestic-source income specified in 3.2.1 is subject to corporate tax, local corporate tax, corporate inhabitant tax, enterprise tax and special corporate enterprise tax in Japan corresponding to their classifications. (Note, however, that foreign corporations without PE in (2) カジノ ブラック ジャックable 3-5 are not subject to corporate inhabitant tax, enterprise tax and special corporate enterprise tax.)

Representative offices, etc., through which a foreign corporation engages in business in Japan are not supposed to derive any income subject to corporation tax from storing, displaying, and delivery, or collecting information on goods, etc. and other activities auxiliary to the performance of its business (see 3.3.4). Business year commencing on or after January 1, 2019, certain activities which constitute preliminary and complementary functions that are part of a cohesive business operation provided by a person who has a special relationship with the foreign corporation or foreign corporation will be regarded as PE.

The amount of income used as the tax base for corporate taxes on income for each taxable year is determined by making the necessary tax adjustments to corporate profits calculated using accounting standards generally accepted as fair and appropriate. Costs and expenses incurred in earning profits are deductible, except in certain exceptional instances (examples provided below).

Foreign corporations face no restrictions on the locations in which costs and expenses deductible from Japan-sourced taxable income may be incurred. However, detailed statements of costs and expenses incurred overseas and deducted from income in Japan must be prepared, and these costs and expenses must be allocated fairly in the prescribed manner.

Small and medium enterprises that increase salary payments in the financial years starting between April 1, 2024, and March 31, 2027, from the previous year can deduct part カジノ ブラック ジャックhe increase from corporate tax. If the amount of employee salary payment increases by 1.5% or more カジノ ブラック ジャックhe prior year, 15% カジノ ブラック ジャックhe salary payment increase to applicable employees is deducible from corporate tax. If the salary payment amount increases by 2.5% or more, another 15% カジノ ブラック ジャックhe increase is deductible. Also, small and medium enterprises that expand spending on education and training by 5% or more from the previous year and the education and training expenses are more than 0.05% カジノ ブラック ジャックhe amount of salary payment, etc. can claim a further 10% カジノ ブラック ジャックhe salary payment increase as a credit against corporate tax, and if certain requirements are met, the tax credit rate can be increased by 5%. The tax credit will be capped at 20% カジノ ブラック ジャックhe corporate tax amount.

A Japanese corporation that is a family corporation and meets certain conditions is subject to taxation of retained earnings as well as corporate tax on ordinary income. Taxation of retained earnings is calculated by multiplying the taxable amount of retained earnings (obtained by subtracting the retained earnings deductible from the amount of retained earnings in each business year) by the special カジノ ブラック ジャックate. The special カジノ ブラック ジャックate varies according to the taxable earnings. If the annual taxable earnings do not exceed 30 million yen, it is subject to a カジノ ブラック ジャックate of 10%. However, if the taxable earnings exceed this amount, a rate of 15% is charged on the amount in excess of 30 million yen and up to 100 million yen, and any amount in excess of 100 million yen is taxed at a rate of 20%.

Net losses under income in each business year are carried forward for the next nine years (or ten years in the case of losses arising during the business years beginning on or after April 1, 2018). Losses may only be carried forward in this way if a blue form tax return is filed for the business year in which the loss arose, and a final tax return is then filed every subsequent year. Note that if a corporation has paid-in capital in excess of 100 million yen or is a wholly owned subsidiary of a large corporation with paid-in capital of at least 500 million yen (including foreign corporations), the amount of loss that may be deducted from income cannot exceed 50% of income. Certain corporations, such as prescribed small and medium-sized enterprises that file a blue form return, are also allowed to carry back a loss to the business year commencing not more than one year prior to the date of commencement カジノ ブラック ジャックhe business year in which the loss arose, and are allowed to receive a full or partial refund カジノ ブラック ジャックhe amount of corporate tax in the business year in which the loss was carried back.

However the deductible percentage is 100% for a certain period if the corporation is an unlisted company, undergoing reconstruction, etc.

If a corporation transfers assets as a result of a split, merger, or investment in kind ("reorganization”), gain or loss from the transferred assets is subject to taxation in principle. However, reorganizations meeting certain conditions, such as certain reorganizations between corporations that are wholly owned/owning directly or indirectly in ownership, certain reorganizations between corporations that are owned/owning 50% directly or indirectly in ownership, or those undertaken for the purpose of a joint venture, are treated as "qualified reorganizations," and qualify for deferment カジノ ブラック ジャックaxation of gain or loss on the transferred assets.

Remittances made by subsidiary companies to their parent company arise from business-to-business transactions, and so are generally regarded as payments of costs/expenses, distributions of profits, loans (or repayments of loans), and so forth depending on the nature カジノ ブラック ジャックhe transaction concerned. Certain カジノ ブラック ジャックhese costs/expenses are deducted when calculating the income カジノ ブラック ジャックhe payer subsidiary companies. Some カジノ ブラック ジャックhe payments regarded as income カジノ ブラック ジャックhe parent company (e.g., payments of interest, dividends or usage fees) require withholding of income tax at the source at the time of payment (see 3.4.4).

On the other hand, in tax treatment on the remittances made by a branch of a foreign corporation to its head office as mentioned in 3.1.1, the profits/losses from the internal transactions are to be recognized based on the presumption that the Japanese branch is a corporation which is independent from the head office. Please note that funding for opening a branch from the head office to the branch and repatriation of profit, etc. to the head office are categorized as capital transaction, and profits/losses do not occur. In addition, internal transactions are not subject to withholding income tax.