(Hōzin-Zei Hō)
Law No. 25 of March 29th of the 15th Year of Syōwa (1940)
Article 1. Juristic persons having a head office or principal place of business in the area where the present law is in force, and juristic persons owning property or enterprises in the area where the present law is in force shall be liable to pay juristic person tax in accordance with the provisions of the present law.
Article 2. The juristic person tax shall be levied on the total income and capital of juristic persons having a head office or principal place of business in the area where the present law is in force, and only in respect of income accruing from the property or enterprises and the capital related thereto in the area where the present law is in force in the case of juristic persons not having a head office or principal place of business in the area where the present law is in force.
Article 3. The juristic person tax shall be imposed in accordance with the provisions of the preceding article on income and capital as follows :
1. Income obtained during each business year ;
2. Liquidation income ;
3. Capital as at the end of each business year.
Article 4. The calculation of income for each business year of juristic persons having a head office or principal place of business in the area where the present law is in force shall be made by deducting gross losses from gross profits during each business year ; but in the case of mutual insurance companies or bourses on membership basis, such calculation shall be made on the basis of the surpluses for each business year.
In the calculation of income referred to in the preceding paragraph the amount which has been or is to be paid by a juristic person in each business year as juristic person tax or excess profit tax shall not be included in the loss account.
In the calculation of income referred to in paragraph 1, losses sustained during business years which began within three years preceding the date of the beginning of the current business year of juristic persons, and as prescribed by Ordinance, shall be included in the loss account.
The provisions of the preceding two paragraphs apply with necessary modifications to the calculation of surplus funds of mutual insurance companies or bourses on membership basis.
The provisions of the preceding four paragraphs apply with necessary modifications to the calculation of income accruing from assets or enterprises during each business year of juristic persons not having a head office or principal place of business in the area where the present law is in force.
Article 5. The provisions of Articles 6 and 7 of the Income Tax Law apply with necessary modifications to the imposition of juristic person tax.
In the calculation of income acquired during each business year by trust companies, the receipts and disbursements in respect of the joint-operation-trust shall be deducted from gross profits and gross losses respectively.
Article 6. In the case of the dissolution of a juristic person where the value of the surplus assets exceeds the paid-up amount of the shares or the total amount of the contributions and reserves at the time of the dissolution, such excess amount shall be the liquidation income of the juristic person.
In the case of the merger of juristic persons where the paid-up amount of the shares or the aggregate amount of the contributions and money which is acquired by the shareholders or partners of the extinguished juristic person from the juristic person continuing to be in existence exceeds the paid-up amount of the shares or the total amount of the contributions and reserves at the time of merger of the juristic person extinguished by the merger, such excess amount shall be deemed as the liquidation income of the juristic person extinguished by the merger.
Article 7. The capital in each business year of juristic persons having a head office or principal place of business in the area where the present law is in force shall be determined by multiplying the monthly average
of the remainder of the paid-up amount of shares, the amount of contributions, the amount of funds, or the amount of collections and reserves as at the end of each month of each business year after deducting the amount of losses brought forward at the end of each month, by the number of months included in the business year concerned, and dividing the result by twelve.
The capital of juristic persons not having a head office or principal place of business in the area where the present law is in force in each business year shall be determined by the applying with necessary modifications the provisions of the preceding paragraph and as prescribed by Ordinance in respect of their assets or enterprises in the area where the present law is in force.
Article 8. When a juristic person has been dissolved or extinguished by merger in the course of a business year, the period of time from the beginning of such business year untill the dissolution or merger shall be reckoned as one business year.
Article 9. "Reserves" within the meaning of the present law include any amounts held back as reserves or under any other name out of the income of a juristic person during each business year.
The amount payable as juristic person tax and excess profit tax shall not be included in the amounts held back as referred to in the preceding paragraph.
Article 10. A juristic person continuing to be in existence after merger or a juristic person formed by merger shall be liable to pay juristic person tax in respect of the income and capital of the juristic person extinguished by the merger.
Article 11. No juristic person tax shall be imposed on Hokkaido1 and prefectures, cities, towns, villages and other public bodies as designated by Ordinance, shrines, and juristic persons formed in accordance with the provisions of Article 34 of the Civil Code.
1 As an administrative entity.
Article 12. A juristic person engaged in the manufacture, mining or gathering of staple products designated by Ordinance shall be exempted from juristic person tax in respect of income accruing from such business during the initial year of operation and the three years that follow.
Article 13. In the calculation of annual income of juristic persons in accordance with the provisions of Article 4, an amount representing 70 per cent of the amount of the interest on national bonds received for the period of holding, should any be held by such juristic person, shall be deducted, as prescribed by Ordinance, from the income of such juristic person. But if interest on such national bonds is subject to the special tax on foreign currency securities or special tax on dividends or profit or interest, the said deduction shall be an amount representing 70 per cent of the remainder of the interest received during the period of holding the national bonds after deducting the amount of either of the said special taxes imposed on such interest.
The provisions of the preceding paragraph apply with necessary modifications to the calculation of liquidation income of juristic persons.
Article 14. The amount of excess profit tax for any business year of juristic persons shall be deducted from the income of the business year concerned.
The amount of excess profit tax deductable from the income of a juristic person having income subject to juristic person tax and other income shall be calculated as prescribed by Ordinance.
Article 15. When income obtained by a juristic person in the course of liquidation or by merger is of the nature that juristic person tax shall not be imposed in accordance with the provisions of the present law or other laws, the amount of such income shall be deducted from income of the juristic person in liquidation.
Article 16. The rates of juristic person tax shall be as follows :—
1. On income of each business year :
In the case of juristic persons having a head office or principal place of business in the area where the present law is in force,
18 per cent of the amount of the income.
In the case of juristic persons not having a head office or principal place of business in the area where the present law is in force,
28 per cent of the amount of the income.
2. On liquidation income :
18 per cent of the amount of the income.
3. On the capital in each business year, 0.15 per cent of the capital.
The amount which has been paid by a juristic person in each business year as classified income tax on dividends of profit of interest in accordance with the provisions of Article 10 of the Income Tax Law shall be deducted as prescribed by Ordinance from the amount of juristic person tax payable by such juristic person in the business year concerned.
The amount of classified income tax on dividends of profits or interest as provided in Article 10 of the Income Tax Law deductable as referred to in the preceding paragraph shall not be included in the loss account in the calculation of the income of juristic persons.
The preceding two paragraphs shall apply with necessary modifications to the juristic person tax on liquidation income.
If the amount of juristic person tax on capital in each business year calculated in accordance with the provisions of paragraph 1 is less than 10 yen per annum, the amount of juristic person tax shall be determined as 10 yen per annum.
In the case of a juristic person not having any amount of income subject to juristic person tax as a result of calculation in accordance with the provisions of Article 4, no juristic person tax shall be imposed on capital in the business year concerned of such juristic person. When the amount of juristic person tax on capital in each business year, calculated in accordance with the provisions of paragraphs 1 and 5, exceeds the remainder of income during the business year concerned after deducting the amount of juristic person tax on such income payable in the business year concerned, no juristic person tax shall be imposed on capital for each business year in which there is such excess amount. (To be concluded)
JURISTIC PERSON TAX LAW1
Article 17. If the amount of money held back by a family company during each business year includes the amount falling under either one of the following numbers, the Government may find the percentage of the sum total of the results obtained by multiplying the amount less than 50,000 yen by 20/100, the amount less than 100,000 yen by 30/100, the amount less than 500,000 yen by 40/100, the amount less than 1,000,000 yen by 50/100, and the amount of 1,000,000 yen and up by 65/100, which comprise the annual income of such family company calculated on the basis of income during its business year, to the total amount of such annual income; it may make such percentage the rate of juristic person tax to be imposed on the sum falling under either one of the following numbers (if it falls under both of them, the one greater in amount); and then may add the amount of juristic person tax thus obtained to the other portion of juristic person tax imposed on income of such family company acquired during each business year:
1. When the amount held back from income during each business year exceeds an amount representing three-tenths of income during the business year concerned, the excess amount.
2. When the aggregate amount of the remainder of the amount held back from income during each business year, after deducting an amount representing one-tenth of incomes during the business year concerned and reserves as at the end of the business year concerned exceeds an amount equivalent to one-half of the amount paid up on shares or contributions as at the end of the business year concerned, the excess amount; provided that if the amount of reserves as at the end of the business year concerned exceeds one-half of the amount paid up on shares or contributions, such excess amount shall be deducted.
The amount of income during each business year and the money held back out of such income, referred to in the preceding paragraph, shall be the remainder of the amount of income during each business year and the money held back out of such income after deducting from both of them an amount payable as juristic person tax on income and capital in the business year concerned (not includ-
1 Continued from the December, 1940, issue of Tokyo Gazette.
ing the additional tax referred to in the preceding paragraph) and an amount payable as excess profit tax deductible in accordance with the provisions of Article 14.
"Family company" within the meaning of the present law is a juristic person having an amount of shares or having made contributions as a shareholder or partner and those who have special relations with such company as relatives, employees and juristic persons connected with it in making contributions as prescribed by Ordinance, equivalent to or more than one-half of its total amount of shares or contributions.
Article 18. Juristic persons liable to pay juristic person tax shall declare to the Government the amount of income and capital, affixing a list of items of property, the balance sheet, the profit and loss accounts or the computation table in regard to liquidation or merger and detailed description of income and capital calculated in accordance with the provisions of Articles 4 to 9. Juristic persons not having a head office or principal place of business in the area where the present law is in force shall affix to such declaration in addition to the documents mentioned above detailed description of income including profit and loss accounts arising from assets or enterprises in the area where the present law is in force and detailed description of assets or capital for enterprises in the area where the present law is in force.
The provisions of the preceding paragraph shall apply with necessary modifications to the case where there is no income or capital subject to juristic person tax payable by juristic persons referred to in Article 1.
Article 19. The amount of income and capital shall be determined on the basis of the declaration under the preceding article. In default of such declaration, or should the declaration be deemed improper, it shall be determined on the basis of investigations by the Government.
Article 20. If it is necessary for the purpose of investigation, the Chief of each Tax Office or his deputy may question juristic persons liable or deemed to be liable to pay the tax or may examine their books, documents and things.
Article 21. If it is necessary for the purpose of investigation, the Chief of each Tax Office or his deputy may question persons deemed to be under obligations in money or things for or persons deemed to have claims in money or things against juristic persons liable or deemed to be liable to pay the tax, in respect to the amount, number or volume, prices and the date of payment.
Article 22. When the amounts of income and capital have been determined in accordance with the provisions of Article 19 or the addition of the tax has been determined in accordance with the provisions of Article 17, the Government shall notify the juristic person liable to pay the tax thereof.
Article 23. Should the juristic person liable to pay the tax be dissatisfied with the amounts of income and capital or the additional tax notified by the Government in accordance with the provisions of the preceding article, it may, within 20 days from the day of receipt of such notice, apply to the Government for a reinvestigation, stating the cause of its dissatisfaction.
Even in cases where application has been made under the preceding paragraph, the Government shall not defer the collection of the tax.
Article 24. When an application has been made under paragraph 1 of the preceding article, decision shall be made by the Government on the basis of a resolution by the Income Reinvestigation Committee under the Income Tax Law.
The provisions of Article 38 and Article 68, paragraph 2 of the Income Tax Law shall apply with necessary modifications to the preceding paragraph.
Article 25. Juristic persons dissatisfied with the decision under paragraph 1 of the preceding article may file a petition, or bring an action in the Court of Administrative Litigation.
Article 26. The juristic person tax shall be collected in each business year;
provided that juristic person tax on liquidation income shall be collected at the time of liquidation or merger.
Article 27. In the case where a dissolved juristic person has distributed the remaining property without paying juristic person tax on income or capital in each business year or juristic person tax on liquidation income the liquidators are jointly liable to pay the tax.
Article 28. Should the acts or accounts of a family company be found to have as their object the evasion of juristic person tax, the Government may, despite such acts or accounts, calculate the amount of income and capital according to its findings.
Article 29. Persons who have evaded juristic person tax by fraud or other illegal act shall be liable to a fine or minor fine of three times the amount of tax evaded, and the amount of tax involved shall be collected forthwith; provided that the offence shall not be prosecuted in the case of persons who have denounced themselves or who have informed the Chief of the Tax Office.
Article 30. Persons who have refused, impeded or evaded the examination of books, documents and things as prescribed by Article 20, or persons who have submitted books and documents containing false entries shall be liable to a fine not exceeding 1,000 yen.
Article 31. If persons who are or have been engaged in the duty of investigating or reinvestigating income or capital of juristic persons, divulge, without justifiable cause, any secret of which they have gained knowledge by virtue of such investigation or reinvestigation, they shall be liable to a fine not exceeding 1,000 yen.
Article 32. The provisions of the proviso to Article 38, paragraph 3, Article 39, paragraph 2, Article 40, Article 41, Article 48, paragraph 2, Article 63 and Article 66 of the Criminal Code shall not apply to persons
who have committed the offence of Article 29 of the present law.
Article 33. Hokkaido and prefectures, cities, towns, villages, and other public bodies may not surtax on the basis of juristic person tax.
Supplementary Provisions
Article 34. The present law shall be put in force as from April 1, 1940.
Article 35. The present law shall apply in respect of juristic person tax on income and capital in each business year beginning with the income obtained and the capital existing in the business year ending on or after April 1, 1940; and in respect of juristic person tax on liquidation income, beginning with the income obtained from dissolution or merger on or after April 1, 1940.
Article 36. Class 1 income tax, surtax thereto, juristic person capital tax and the tax corresponding to surtax to Class 1 income tax as prescribed by Ordinance, payable for the business year immediately preceding that which includes April 1, 1940, shall be deemed as juristic person tax, and [as such] the provisions of Article 4, paragraph 2 shall apply thereto; the same shall apply, in the case of a juristic person mergered before the enforcement of the present law, in respect of Class 1 income tax and surtax thereto, juristic person capital tax and the tax corresponding to surtax to Class 1 income tax, as prescribed by Ordinance, and Class 1 income tax, and surtax thereto imposed on liquidation income in the last business year of the juristic person extinguished by merger, should the business year inclusive of the day of merger, of the juristic person continuing to be in existence after the merger or the juristic person formed by the merger end after the day of enforcement of the present law.
Article 37. Excess profit tax payable for each business year before the business year immediately preceding the business year which includes April 1, 1940, shall be put into loss account in the calculation of the amount of income of juristic persons in each business year, notwithstanding the provisions of Article 4, paragraph 2.
Article 38. The provisions of Article 16, paragraphs 2 to 4 shall apply to the amount of income tax on the Class 2 income and capital interest tax which has been paid by juristic persons in the business year ending after the enforcement of the present law or in course of liquidation caused by dissolution after the enforcement of the present law, being deemed to be the amount of classified tax on dividends from profit or interest as provided in Article 10 of the Income Tax Law.
Article 39. A part or the whole of the amount of tax on mineral products, special tax on mineral products or tax on bourses which has been paid by juristic persons in the business year ending after the enforcement of the present law, shall be deducted from the amount of juristic person tax on income during the business year concerned.
Article 40. When juristic persons possess national bonds subject to tax on interest on public bonds and corporation debentures, the provisions of Article 13 shall apply to the tax on interest on public bonds and corporation debentures imposed on interest for the period of holding such national bonds, being deemed as special tax on dividends from profit or interest.
Article 41. The phrase "and juristic person tax" shall be inserted below the phrase "income tax" in Article 22 of the Religious Organizations Law.2
No juristic person tax shall be imposed in respect of "Buddhist establishments" as provided in Article 35, paragraph 1 of the Religious Organizations Law.
2 Article 22, paragraph 1 of the Religious Organizations Law, Law No. 77 of April 8, 1940, reads: Religious organizations shall be exempt from income tax as prescribed by Ordinance.