Chapter II — Classified Income Tax
Article 10.
Classified income tax shall be imposed in respect of the following incomes:
Number one—Real property incomes:
Incomes accruing from the loaning of immovables, rights relating to immovables or ships (including the creation of emphyteusis or superficies and all other cases wherein other persons are allowed to use immovables, rights relating to immovables or ships, same context following), provided, however, that that which belongs to Class A business incomes shall be excluded;
Number two—Incomes from dividends and interest:
Class A: Interest on public bonds, corporation debentures or deposits (limited to deposits in juristic persons) and profits by the joint-operation-trust the payment whereof is received within the area where the present law is in force, as well as dividends of profit or interest or distribution of surplus funds received from a juristic person with head office or principal place of business within the area where the present law is in force;
Class B: Interest on non-business loans as well as interest on public bonds, corporation debentures or deposits, profits by the joint-operation-trust and dividends of profit or interest or distribution of surplus funds received from juristic persons, which do not belong to Class A;
Number three—Incomes from businesses:
Class A: Incomes from businesses enumerated below:
1. Business of selling commodities (including the selling of animals, plants and that which are not commonly called commodities); 2. Money-lending business; 3. Business of lending commodities (including the loaning of animals, plants and that which are not commonly called commodities); 4. Manufacturing business (including the supply of gas or electricity and the working-up or repairing of goods); 5. Transportation business, including the conduct of affairs relative to transportation or the acceptance of that which is to be transported);
6. Warehousing business; 7. Business of contractors; 8. Printing business; 9. Publishing business; 10. Photographing business; 11. Business of letting rooms; 12. Hotel business; 13. Restaurant business; 14. Employment agency business; 15. Business of agents; 16. Brokerage business; 17. Commission agency business; 18. Mining enterprises; 19. Placer-mining enterprises; 20. Public bath business; 21. Hair-dressing and/or beauty-culture business; 22. Other businesses as designated by Ordinance.
Class B: Incomes from farming, stock-raising, fishery, etc., incomes of physicians, lawyers, etc. and all other incomes which do not belong to other classes or items;
Number four—Earned incomes:
Class A: Salaries, wages, annual allowances, compensation for expenses, annuities, pensions (excluding the single-sum pension) and bonuses as well as allowances of the nature of those which have been referred to, provided, however, that the payment whereof is received from individuals as designated by Ordinance, shall be excluded;
Class B: Salaries, wages, annual allowances, compensation for expenses annuities, pensions (excluding the single-sum pension) and bonuses, and allowances of the nature of those which have been referred to, which do not belong to Class A;
Number five—Incomes from forests;
Number six—Retirement incomes;
Class A: Single-sum pension and retiring allowance as well as allowances of the nature of those which have been referred to, the payment whereof is received within the area where the present law is in force;
Class B: Single-sum pension and retiring allowance as well as allowances of the nature of those which have been referred to, which do not belong to Class A.
Article 11.
No classified income tax shall be imposed in respect of the incomes which come within the purview of any of the following numbers:
1. Salaries, allowances and bonuses of men in the fighting services or civilians attached thereto who are at the front;
2. Pensions of the wounded or the sick as well as pensions and annuities of bereaved families; 3. Travelling expenses, school expenses and legal allowances; 4. Interest on postal savings and interest on current deposits as designated by Ordinance; 5. Interest on savings deposited in a bank, the principal whereof does not exceed 3,000 yen, interest on deposits in a cooperative association and interest on other deposits as designated by Ordinance; 6. Any portion of Class B business income which is a temporary income other than that accruing from continual activity for the purpose of profit-making; 7. Incomes of a person who is not of Japanese nationality, which accrue from assets, businesses or occupations outside the area where the present law is in force.
The principal as referred to in Clause 5 of the preceding paragraph shall be calculated as prescribed by Ordinance.
Article 12.
Incomes which are subject to the imposition of classified income tax shall be calculated in accordance with the provisions of the following numbers:
1. As for real property incomes, an amount which is calculated by deducting necessary expenses (including interest on debts incurred in order to secure incomes, same context following) from the total amount of incomes during the preceding year; 2. As for Class A incomes from dividends and interest, the amount of payment to be received, provided, however, that it shall be an amount which is calculated by deducting one-tenth from the amount of payment to be received in the case of dividends of profit or interest or a distribution of surplus funds received from a juristic person; 3. As for Class B incomes from dividends and interest, the amount of incomes from March 1 of the preceding year up to the end of February of the year concerned in the case of dividends of profit or interest or distribution of surplus funds received from juristic persons, or the amount of incomes during the preceding year (in other cases in respect of dividends on uninscribed shares as well as interest on uninscribed public bonds and corporation debentures, the amount of payments received); 4. As for business incomes, an amount which is calculated by deducting necessary expenses from the total amount of incomes during the preceding year, provided, however, that it shall be an amount which is calculated on the basis of the average of the total amount of incomes minus necessary expenses for each of the preceding three years as prescribed by Ordinance in the case of incomes from fishery enterprises; 5. As for Class A earned incomes, the amount of payments to be received;
6. As for Class B earned incomes, the amount of incomes during the preceding year; 7. As for incomes from forests, an amount which is calculated by deducting necessary expenses from the total amount of incomes during the preceding year; 8. As for Class A retirement incomes, an amount which is calculated by deducting 10,000 yen per one payer from the amount of payments to be received; 9. As for Class B retirement incomes, an amount which is calculated by deducting 10,000 yen per one payer from the amount of incomes during the preceding year.
Income tax and excess profit tax shall not be included in the calculation of the necessary expenses as referred to in Numbers 1, 4 and 7 of the preceding paragraph.
The amount of excess profit tax on business profits is to be deducted from the amount of Class A business incomes for the year in which the said excess profit tax is to be imposed.
In cases where there are Class A business incomes which are subject to income tax and other Class A business incomes, the excess profit tax to be deducted in accordance with the provisions of the preceding paragraph shall be calculated as prescribed by Ordinance.
With regard to real property incomes, the incomes from dividends and interest and the incomes from forests, the incomes of the predecessor shall be deemed as the incomes of the successor; while in respect to assets or businesses which have been inherited, the successor shall be deemed as continuing to be in possession of the same, and the incomes concerned shall be calculated as such.
Article 13.
If a person other than the possessor of the principal receives payment of interest in respect of public bonds or corporation debentures, the possessor of the principal shall be deemed as the person receiving the said payment in the calculation of Class B incomes from dividends and interest, provided, however, that when changes occur in the possessors of the principal during the interest bearing period, the final possessor shall be deemed as the person receiving the payment of interest.
Article 14.
On real property incomes no classified income tax shall be imposed unless such incomes amount to 250 yen.
The real property incomes of the head of a house and of members of the house living with him shall be added together, and the provisions of the preceding paragraph shall apply in respect of the total amount; the same shall hold good in respect of the real property incomes of two or more members of the house who live separately from the head of the house.
Article 15.
On Class B incomes from dividends and interest no classified income tax
shall be imposed unless such incomes amount to 100 yen.
The provisions of Paragraph 2 of the preceding article shall apply with necessary modifications in respect of the preceding paragraph.
Article 16.
With regard to Class A earned incomes, an amount which has been calculated according to the period of payment of the remunerations at the rate of 720 yen per annum shall be deducted from the remunerations as prescribed by Ordinance.
In the case of a person who receives both a bonus and an allowance of the nature of a bonus and other remunerations from one and the same payer, the deduction as referred to in the preceding paragraph shall be made first in respect of remunerations other than the bonus or the allowance of the nature of a bonus, and if and when there is a deficit, be extended to the bonus or the allowance of the nature of a bonus, as prescribed by Ordinance.
With regard to a person who receives Class A earned incomes from two or more payers, the deduction as based on the provisions of the preceding two paragraphs shall be made as prescribed by Ordinance.
Article 17.
With regard to business incomes and Class B earned incomes, the following amounts of money shall be deducted from the incomes as prescribed by Ordinance:
1. In respect of business incomes 500 yen; 2. In respect of Class B earned incomes 720 yen.
No deduction in virtue of the provisions of Number 1 of the preceding paragraph shall be made in respect of business incomes of a person who has both business incomes and Class B earned incomes, provided, however, that an amount representing the difference between 500 yen and an amount corresponding to 5/7.2 [printed as a fraction, 5 over 7.2] of Class B earned incomes shall be deducted from business incomes, when Class B earned incomes amount to less than 720 yen, as prescribed by Ordinance.
Article 18.
With regard to business incomes or Class B earned incomes of a person who obtained a deduction in virtue of the provisions of Paragraph 1 of Article 16 during the preceding year in respect of Class A earned incomes, no deduction in virtue of the provisions of the preceding article shall be made, provided, however, that when the amount which was deducted in accordance with the provisions of Paragraph 1 of Article 16 during the preceding year in respect of Class A earned incomes is less than 720 yen, the following amounts of money shall be deducted from the incomes as prescribed by Ordinance:
1. An amount representing the difference between 500 yen and an
amount corresponding to 5/7.2 [printed as a fraction] of the amount deducted in accordance with the provisions of Paragraph 1 of Article 16, in the case of business incomes; 2. An amount representing the difference between 720 yen and the amount deducted in accordance with the provisions of Paragraph 1 of Article 16, in the case of Class B earned incomes; 3. An amount determined by Ordinance in respect of incomes in cases where there are incomes as referred to in the preceding two numbers.
Article 19.
In the case where the head of a house and two or more members of the house who live together have business incomes, the total of the amounts to be deducted from such incomes in accordance with the provisions of the preceding two articles shall not exceed 500 yen; the same shall hold good in respect of the business incomes of two or more members of the house who live together but apart from the head of the house.
In the case of the application of the provisions of the preceding paragraph, the amount to be deducted in accordance with the provisions of the preceding two articles shall be deducted from the incomes of one or several of the persons liable for the payment of taxes as prescribed by Ordinance.
Article 20.
With regard to incomes from forests, 500 yen shall be deducted from such incomes.
The provisions of the preceding article shall apply with necessary modifications in respect of the case in the preceding paragraph.
Article 21.
Classified income tax shall be imposed at the following rates:
Number one—Real property incomes: 10 per cent;
Number two—Incomes from dividends and interest:
Class A:
1. Interest on national bonds: 4 per cent; 2. Interest on public bonds other than national bonds: 9 per cent; 3. Others: 10 per cent;
Class B: 10 per cent;
Number three—Business incomes:
Class A: 8.5 per cent;
Class B: 7.5 per cent;
Number four—Earned incomes: 6 per cent;
Number five—Incomes from forests:
The amount of incomes shall be divided into the following grades and the varying rates shall be applied as follows:
Amount not exceeding 1,600 yen: 5 per cent:
Amount exceeding 1,600 yen: 7.5 per cent;
Number six—Retirement incomes:
The amount of incomes shall be divided into the following grades for each different payer and the corresponding rates of tax shall be applied as follows:
Amount not exceeding 20,000 yen: 6 per cent;
Amount exceeding 20,000 yen: 12 per cent;
Amount exceeding 100,000 yen: 25 per cent;
Amount exceeding 500,000 yen: 40 per cent.
With regard to interest on savings deposited in banks, deposits in cooperative associations and other deposits as designated by Ordinance and distribution of surplus funds received from juristic persons as designated by Ordinance, such as cooperative, industrial and commercial associations, the 10 per cent rate of tax as provided for in Number 3 of Class A incomes from dividend and interest of the preceding paragraph shall be changed to 5 per cent.
If the amount of business incomes, as it stands prior to the deduction in virtue of the provisions of Article 17 or Article 18, is less than 1,000 yen, the 8.5 per cent and 7.5 per cent rates of tax as provided for in Paragraph 1 in respect of Classes A and B business incomes shall each be changed to 6 per cent.
The business incomes of the head of a house and of members of the house who live together shall be added together, and the provisions of the preceding paragraph shall apply to the total; the same shall hold good in respect of the business incomes of two or more members of a house living together but apart from the head of the house.
Article 22.
Classified income tax on Class A incomes from dividends and interest of an individual who does not come within the purview of the provisions of Article 1 or a juristic person having no head office or principal place of business within the area where the present law is in force shall, notwithstanding the provisions of the preceding article, be imposed at the following rates:
1. Interest on national bonds: 9 per cent; 2. Interest on public bonds other than national bonds: 14 per cent; 3. Interest on deposits as provided for in Paragraph 2 of the preceding article and distribution of surplus funds: 10 per cent. 4. Others: 15 per cent.
Classified income tax on the bonus or allowance of the nature of a bonus which is paid by way of disposal of profits or surplus funds and which is received by an individual who does not come within the purview of the provisions of Article 1 from a juristic person having its head office or principal place of business within the area where the present law is in force shall, notwithstanding the provisions of the preceding article, be imposed at the rate of 15 per cent.
Article 23.
The amount of the classified income tax on Class A incomes from dividends and interest which a trust company has paid in respect of the trust property comprising the joint-operation-trust which it has accepted, shall be deducted, as prescribed by Ordinance, from the amount of the classified income tax on the profits accruing from the said trust.
Classified income tax on Class A incomes from dividends and interest which is to be deducted in the case of the preceding paragraph, shall be added to the profits accruing from the said joint-operation-trust in calculating Class A incomes from dividends and interest.
Article 24.
With regard to the classified income tax on Class A earned incomes, an amount of money corresponding to 8 per cent of an amount which has been calculated according to the period of payment of remunerations at the rate of 150 yen per annum for each member of a house actually being supported on January 1 of the year concerned shall be deducted from the amount of the classified income tax as prescribed by Ordinance.
In the case of a person receiving both a bonus or an allowance of the nature of a bonus and other remunerations from one and the same payer, the deduction as referred to in the preceding paragraph shall be made first in respect of the classified income tax on remunerations other than the bonus or the allowance of the nature of a bonus, and if and when there is a deficit, it shall be extended to the classified income tax on the bonus or the allowance of the nature of a bonus as prescribed by Ordinance.
With regard to a person who receives Class A earned incomes from two or more payers, the deduction in virtue of the provisions of the preceding two paragraphs shall be as prescribed by Ordinance.
In the case where a member of a house being supported, as referred to in Paragraph 1, has Class A earned incomes during the preceding year or has business incomes, Class B earned incomes or incomes from forests for the year concerned, no deduction in virtue of the provisions of Paragraph 1 shall be made in respect to the said member of the house being supported, if the total of the amounts for deduction from the incomes in accordance with the provisions of Paragraph 1 of Articles 16, 17 and 18 or Paragraph 1 of Article 20 exceeds 150 yen.
When the deduction in virtue of the provisions of Paragraph 1 of Article 25 is made in respect to a member of the house being supported as referred to in Paragraph 1, no deduction in virtue of the provisions of Paragraph 1 shall be made in respect to the said member of the house being supported.
When a person who has Class A earned incomes is a person subject to the imposition of the composite income tax, no deduction in virtue of the provisions of Paragraph 1 shall be made in respect of the remunerations received from July 1 of the year in which he is subject to the imposition up to June 30 of the following year.
Article 25.
With regard to classified income tax on real property incomes, business incomes, Class B earned incomes or income from forests, an amount corresponding to 8 per cent of 150 yen per one member of the house actually being supported on January 1 of the year concerned shall be deducted from the amount of the classified income tax as prescribed by Ordinance.
The provisions of Paragraph 4 of the preceding article shall apply with necessary modifications in respect of the preceding paragraph.
When the deduction in virtue of the provisions of Paragraph 1 of the preceding article is made in respect to a member of the house being supported as referred to in Paragraph 1, no deduction in virtue of the provisions of Paragraph 1 shall be made in respect to the said member of the house being supported.
Classified income tax on the head of a house and on members of the house living together shall be added together, and the provisions of Paragraph 1 shall apply in respect of the total; the same shall hold good in respect of the classified income tax on two or more members of a house who live together but apart from the head of the house.
The amount of money to be deducted in the case of the preceding paragraph shall be deducted from the classified income tax on one or several of the persons liable for the payment of taxes as prescribed by Ordinance.
When a person who has incomes as referred to in Paragraph 1 is a person subject to the imposition of the composite income tax, no deduction in virtue of the provisions of the said paragraph shall be made.
Article 26.
"A member of the house being supported" within the meaning of the present law is the wife who, belonging to the person with the incomes concerned, lives with him, or the head of the house or any member of the house who is 18 years of age and downward or 60 years of age and upward, or those crippled or disabled who are living with the said person.
The crippled or disabled persons as provided for in the preceding paragraph shall be prescribed by Ordinance.
Article 26 (2).
If there are insurance premiums which have been paid for a life insurance policy with the payer himself or his family or his successor as the beneficiary, an amount corresponding to 6 per cent of an amount prescribed by Ordinance within the limits of 200 yen per annum, out of the insurance premiums, shall be deducted from the amount of classified income tax on real property, business, earned or forestry incomes, as prescribed by Ordinance.
Article 27.
The provisions of Articles 24 and 25 and of the preceding article shall not apply in respect of a person liable for the payment of taxes in virtue of the provisions of Article 2.
Corrigendum
Volume III, No. 12, page 493, Income Tax Law (Chapter I). General Provisions, Article 2, No. 4, penultimate line:
For "retiring allowance or grants of the nature of . . ."
Read: retiring allowance or allowances of the nature of . . .