Fall Newsletter (No.18) as of
Special Tax Measures for Small and Medium Enterprises (“SMEs”)
(Effective from fiscal years beginning on April 1, 2010º)
Following the 2010 tax reform, domestic subsidiaries¹ with paid-in capital of JPY 100 million or less will no longer be eligible for certain special tax benefits previously available for SMEs, if the parent company (and/or the ultimate parent with wholly-owned interest) has paid-in capital² of JPY 500 million or more. Some of the major benefits are:
|Special Tax Benefits||Currently||New|
|Reduced corporate tax rate||22%³ up to JPY 8 million, 30% thereafter||30%|
|Exemption from special tax rate applicable to specified family corporations (“DOZOKU KAISHA”)||Exempted from special tax rate||Special tax rate of 10% to 20% on excess retained earnings|
|Deductibility of entertainment expenses||90% deduction was permitted up to JPY 6 million||No deduction is allowed|
|Carryback of NOLs||Permitted||Disallowed|
|Deductibility of bad debt provisions||Option to select from using prior years’ actual bad debt ratio or the standard industry ratios||Based solely on prior years’ actual bad debt ratio|
º Fiscal years beginning on January 1, 2011 for calendar year companies.
¹ Subsidiaries incorporated in Japan and all of the stock are directly or indirectly held by companies (including foreign companies).
² NEW “Paid-in capital” excludes additional paid-in capitals and will normally consist of common stock and preferred stock.
³ NEW For companies with fiscal years beginning April 1, 2010, the rate is18%.
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