Is there a special tax on large companies?
Large companies with a stated capital of more than JPY100 million at the end of the fiscal year are subject to pro forma taxation.
Size-based Business Tax is a kind of business tax to pay to prefectural governments, which is applied to a company with a capital stock of over JPY 100 million at the end of fiscal year. It is a system that levies taxes based not only on the amount of income, but also on the size of the corporation. Therefore, even when the company runs a loss, it shall be subject to Size-based Business Tax.
Size-based Business Tax consists of value added-based tax, capital-based tax and income-based tax. Value added-based tax is calculated by a formula totaling the amounts of salaries, net interest paid, net rent paid and taxable income for the year. Capital-based tax is calculated by a formula totaling a capital stock and capital reserve.
A branch of foreign corporation is also subject to Size-based Business Tax if paid-in capital of the head office is over JPY 100 million. However, capital-based tax is levied only on the ratio of Japanese employees to global employees.
If a major company has a small branch in Japan, it is subject to Size-based Business Tax. Therefore, it is recommended to set up subsidiaries instead of branches to avoid taxation.
Size-based Business Tax is currently applied only to large companies with capital stock of over JPY 100 million, but the Japanese government has discussed whether or not to adopt it for SMEs.