Local Tax Act

The tax base of the income levy is the gross income, the amount of retirement income and the amount of timber income calculated for the income of the previous year.

Except where this Act or a Cabinet Order under this Act provides otherwise, the gross income, the amount of retirement income or the amount of timber income referred to in the preceding paragraph is to be calculated, respectively, in accordance with the rules for calculating the gross income, the amount of retirement income or the amount of timber income under Article 22, paragraph (2) or (3) of the Income Tax Act as provided by the Income Tax Act and other laws and regulations relating to income tax; provided, however, that the rules under Articles 60-2 through 60-4 of that Act are not followed.

Where a spouse or other relative (excluding a person under 15 years of age) whose living expenses are paid from the same resources as a person liable for the income levy who has received approval from the national tax office to submit a blue return prescribed in Article 2, paragraph (1), item (xl) of the Income Tax Act (referred to as a "blue return" in paragraph (8) and paragraph (1) of the following Article), and who is engaged exclusively in the business prescribed in Article 56 of that Act carried on by that person liable for tax (hereinafter in this paragraph referred to as a "relative employed only by a blue-return filer"), has received payment of salary from that business in accordance with the method stated in the document referred to in Article 57, paragraph (2) of the Income Tax Act and within the range of the amount stated therein, the amount of real property income, the amount of business income or the amount of timber income of that person liable for tax and the amount of salary income of that relative employed only by a blue-return filer are to be calculated in accordance with the rules for the calculation under Article 57, paragraph (1) of the Income Tax Act. The same applies where a relative employed only by a blue-return filer of a person liable for the income levy who has not submitted the document referred to in Article 57, paragraph (2) of the Income Tax Act for reasons specified by Cabinet Order, such as having been found not to bear tax liability for income tax for the previous year, has received payment of salary from that business and has submitted the return relating to prefectural inhabitant tax under Article 45-2, paragraph (1) stating the matters listed in item (ii) of that paragraph (including one for which the mayor of the municipality finds that there are unavoidable circumstances for the absence of those matters) (including where it has been submitted after its deadline for filing but by the time the tax notice for prefectural inhabitant tax is served), and also where, pursuant to the proviso to Article 45-2, paragraph (1), there is no obligation to submit a return relating to prefectural inhabitant tax.

Where a person liable for the income levy (excluding a person who falls under the preceding paragraph) operates a business prescribed in Article 56 of the Income Tax Act and there is a spouse or other relative (excluding a person under 15 years of age) whose living expenses are paid from the same resources as that person liable for tax and who is engaged exclusively in that business (hereinafter in this Section referred to as a "relative employed only in the business"), then, for each relative employed only in the business, the lower of the amounts listed in the following items is deemed to be necessary expenses in the calculation of the amount of real property income, the amount of business income or the amount of timber income relating to that business:

the amount prescribed in each of the following clauses for the category of relative employed only in the business set forth in the clause:

a relative employed only in the business who is the spouse of that person liable for tax: 860,000 yen;

a relative employed only in the business other than the person set forth in (a): 500,000 yen.

The amount obtained by dividing the amount of real property income, the amount of business income or the amount of timber income arising from the business (the amount calculated without applying this paragraph) by the number obtained by adding one to the number of relatives employed only in the business.

The amount deemed to be necessary expenses under the preceding paragraph (referred to as the "deduction for a relative employed only in the business" in this Section) is deemed to be revenue relating to the salary income of the relative employed only in the business.

The provisions of paragraph (4) do not apply where the return concerning prefectural inhabitant tax under Article 45-2, paragraph (1) (including one filed by the time the tax notice for prefectural inhabitant tax is served after the deadline for filing) does not state the matters listed in item (ii) of that paragraph; provided, however, that this does not apply where there is no obligation to file a return concerning prefectural inhabitant tax under the proviso to that paragraph, or where the mayor of the municipality finds that there are unavoidable circumstances for the absence of those matters from the return.

In the case of paragraph (3) or (4), whether the age of a relative prescribed in those provisions is under 15 is determined by the situation as of December 31 of the previous year (or, where that person dies in the course of the previous year, at the time of death).

Where the gross income, the amount of retirement income or the amount of timber income of a person liable for the income levy is calculated under paragraph (2) through the preceding paragraph, the amount of net loss (excluding those deducted before the previous year pursuant to this paragraph) under Article 2, paragraph (1), item (xxv) of the Income Tax Act that arose in calculating the gross income, the amount of retirement income or the amount of timber income of that person liable for tax in the three years prior to the previous year is to be deducted in calculating the gross income, the amount of retirement income or the amount of timber income of that person liable for tax only if the person has filed a blue return for the income tax for the year in which that net loss arose, and has continuously filed the return concerning prefectural inhabitant tax under Article 45-2, paragraph (1) or (3) for prefectural inhabitant tax for the fiscal years on or after the fiscal year after the following fiscal year of the fiscal year that includes the last day of the year in which that net loss arose.

Even where the preceding paragraph does not apply, of the amount of net loss under that paragraph (excluding those deducted before the previous year pursuant to that paragraph) that arose in each year of the three years prior to the previous year in calculating the gross income, the amount of retirement income or the amount of timber income of a person liable for the income levy, those that relate to the amount of loss arising in calculating the amount of fluctuating income (meaning income specified by Cabinet Order, from among income arising from fishing, income relating to copyright royalties and other income that fluctuates markedly from year to year) arising in each of those years or to the amount of loss on disaster-damaged business assets and are specified by Cabinet Order, or the amount of casualty loss that arose in each year of the three years prior to the previous year of that person liable for tax (meaning, in the cases listed in Article 34, paragraph (1), item (i), (a), (b) or (c), the amount in excess of the amount provided respectively in (a), (b) or (c) of that item, and excluding those deducted before the previous year pursuant to this paragraph or paragraph (1) of that Article), is to be deducted in calculating the gross income, the amount of retirement income or the amount of timber income of that person liable for tax only if the person has filed the return concerning prefectural inhabitant tax under Article 45-2, paragraph (1) or (3) for prefectural inhabitant tax for the fiscal year following the fiscal year that includes the last day of the year in which that net loss or casualty loss arose, and has continuously filed those returns for prefectural inhabitant tax for the subsequent fiscal years.

The "amount of loss on disaster-damaged business assets" in the preceding paragraph means the amount of loss arising from a disaster (meaning an earthquake, storm, flood, fire or other disaster specified by Cabinet Order; the same applies hereinafter in this Subsection) to inventory assets (meaning goods, products, semi-finished goods, work in process, raw materials and other assets (excluding securities and timber) relating to a business generating business income that are specified by Cabinet Order as subject to inventory-taking), to fixed assets used for a business generating real property income, business income or timber income and other assets equivalent thereto that are specified by Cabinet Order, or to timber (including the amount of unavoidable expenditure related to that disaster that is specified by Cabinet Order, and excluding the portion covered by insurance benefits, compensation for damage or the like), and that does not fall under the amount of loss arising in calculating the amount of fluctuating income in that paragraph.

With regard to a person liable for the income levy who bears no tax liability for the income tax for the previous year, where the total of the amounts of specified expenditures prescribed in Article 57-2, paragraph (2) of the Income Tax Act for the previous year exceeds the amount equivalent to one-half of the amount of the deduction for salary income prescribed in Article 28, paragraph (2) of that Act, only when a return under Article 45-2, paragraph (1) stating to the effect that the person receives the application of this paragraph and the total of the amounts of those specified expenditures has been filed with the necessary documents specified by Order of the Ministry of Internal Affairs and Communications, such as a detailed statement concerning those specified expenditures, attached, the amount of the excess portion is to be deducted in calculating the salary income of that person liable for tax, in accordance with the rules of Article 57-2, paragraph (1) of that Act.

The gross income of a person who has income relating to specified dividends, etc. (excluding those listed in Article 23, paragraph (1), item (xv), (b); the same applies hereinafter in this paragraph) is to be calculated excluding the amount of income relating to the specified dividends, etc.

The provisions of the preceding paragraph do not apply to the amount of income relating to specified dividends, etc. where the final return prescribed in Article 45-3, paragraph (1) relating to the income tax for the previous year states the matters concerning the details of the income relating to the specified dividends, etc. and other matters specified by Order of the Ministry of Internal Affairs and Communications.

The gross income of a person who has income relating to the amount of capital gains from specified shares, etc. is to be calculated excluding the amount of income relating to the amount of capital gains from specified shares, etc.

The provisions of the preceding paragraph do not apply to the amount of income relating to the amount of capital gains from specified shares, etc. where the final return prescribed in Article 45-3, paragraph (1) relating to the income tax for the previous year states the matters concerning the details of the income relating to the amount of capital gains from specified shares, etc. and other matters specified by Order of the Ministry of Internal Affairs and Communications.

In addition to what is provided in paragraph (2) through the preceding paragraph, matters necessary for calculating the gross income, the amount of retirement income or the amount of timber income are specified by Cabinet Order.