Corporation Tax Act (Hōjinzei Hō)
The Corporation Tax Act (Hōjinzei Hō) governs the taxation of corporations in Japan. Enacted in 1965, the Act establishes the framework for calculating corporate taxable income, tax rates, and various provisions for depreciation, reserves, and loss carryforwards. Japan’s corporate tax rate has been gradually reduced to enhance international competitiveness, with the effective combined national and local tax rate now approximately 30%.
Legal area: Law governing the assessment and collection of taxes.
Year enacted: 1965
Full text: https://elaws.e-gov.go.jp/document?lawid=japan-corporation-tax-act
Key Provisions
- Part I: General provisions (definition of corporation, taxable period)
- Part II: Taxable income (income, deductions, loss carryforward)
- Part III: Depreciation of assets (useful life, methods)
- Part IV: Special provisions (consolidated taxation, transfer pricing)
- Part V: Tax credits and incentives
- Part VI: Withholding and collection
Significance
The Corporation Tax Act has been a focus of economic policy in Japan, with rate reductions aimed at attracting and retaining corporate investment. The consolidated taxation system allows corporate groups to file combined returns. Transfer pricing rules address base erosion and profit shifting by multinational enterprises. The Act’s loss carryforward provisions (up to 10 years) support business recovery. Japan has implemented BEPS recommendations through amendments to the Act.