Setting up a subsidiary, you have to think of the amount of capital stock.
After the revision of the commercial law, 2006, you can set up a company (Kabusiki-Kaisha) by 1 yen, and under the Japanese Tax Law, there is usually smaller tax burden for small companies.
But you also have to think of 'Thin Capitalization Taxation', listed below.
Local per capita levy
Amount of capital | Number of employee | Tax amout |
Over 100 mil, less than 1000 mil |
More than 50
Less than 50
|
530,000
290,000 |
Over 10 mil, less than 100 mil |
More than 50
Less than 50 |
200,000
180,000
|
Less than 10 mil |
More than 50
Less than 50
|
140,000
70,000 |
In order to minimize the tax burden, it is advantagerous to keep capital at 10 million yen.
Ｔｈｅ ｒａｔｅ of cooporate income taxes
The original tax rate for cooporate income is generally 30%.
However, for companies with capital of 100 million yen or under, the rate is 22%, for the income up to 8 million yen.
Procedure of Entertainment expenses
Entertainment expenses are not be included as a cost, but firms with capital of 10 million yen or less can include 90% of up to 4 million yen for 1 year.
When a company, the amount of capital is 100million, incurs entertainment expense of 2million yen, the company cannnot inclued the 2 million yen as a cost.
However, when acompany ,the amount of capital is 10 million, the 90% of cost, 1.8million yen, can be included as cost!
Thin Capitalization taxation
As we described above, under the Japanese tax law, it is usually small tax burden for company with small capital stock.
So, some companies try to have the loans from foreign parent company, instead of capital stock.
But Interest is partly excluded from a company's deductible expenses when a corporation has borrowed miney exceeding three times the amount of its leading shereholders.
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