Act on Special Measures Concerning Taxation

If a corporation that files a blue return pays salary or other wages to domestic employees in a business year that begins during the period from April 1, 2024 to March 31, 2027 (excluding the business year of establishment, the business year that includes the date of dissolution (other than dissolution due to a merger) and business years during liquidation) and falls under a specified corporation at the end of that business year, and the ratio of the amount obtained by deducting the corporation's comparative amount of salary or other wages paid to continuing employees from its amount of salary or other wages paid to continuing employees in that business year to that comparative amount of salary or other wages paid to continuing employees (referred to as the "rate of increase in salary or other wages paid to continuing employees" in item (i)) is 4 percent or more (if, at the end of that business year, the amount of stated capital or the amount of contributions of the corporation is 1 billion yen or more and the number of employees regularly employed by the corporation is 1,000 or more, limited to the case specified by Cabinet Order as a case where the corporation has published the policy on raising the amount of salary or other wages paid, the policy on building appropriate relationships with small and medium-sized contractors prescribed in Article 2, paragraph (5) of the Act on the Promotion of Small and Medium-Sized Contractor Enterprises (Act No. 145 of 1970) and other business partners, and other matters specified by Cabinet Order), the amount calculated by multiplying the corporation's credit-eligible increase in salaries, etc. paid to employees for that business year by 10 percent (if the corporation meets the requirements listed in the following items in that business year, the rate obtained by adding to 10 percent the rate specified in each of those items (if the corporation meets all of the requirements listed in the following items in that business year, the sum of the rates specified in those items)) (hereinafter referred to as the "maximum tax credit" in this paragraph) is deducted from the corporation tax before adjustment of the corporation on the income for that business year (meaning the corporation tax before adjustment prescribed in Article 42-4, paragraph (19), item (ii); the same applies hereinafter in this Article). In this case, if the maximum tax credit exceeds the amount equivalent to 20 percent of the corporation tax before adjustment of the corporation on the income for that business year, the amount to be deducted is limited to the amount equivalent to that 20 percent.

the rate of increase in salary or other wages paid to continuing employees being 5 percent or more: 5 percent (15 percent if the rate of increase in salary or other wages paid to continuing employees is 6 percent or more);

any of the following requirements being met: 5 percent.

falling under a specially certified general employer prescribed in Article 15-3, paragraph (1) of the Act on Advancement of Measures to Support Raising Next-Generation Children at the end of that business year;

having obtained the certification referred to in Article 9 of the Act on the Promotion of Women's Active Engagement in Professional Life in that business year (limited to the case specified by Order of the Ministry of Finance as one in which the status of the provision of opportunities relating to professional life to female workers referred to in Article 4 of that Act and of the improvement of the employment environment referred to in that Article is particularly good);

falling under a specially certified general employer prescribed in Article 13, paragraph (1) of the Act on the Promotion of Women's Active Engagement in Professional Life at the end of that business year.

If a small and medium sized enterprise prescribed in Article 42-4, paragraph (19), item (vii) (excluding one that falls under an excluded business operator prescribed in item (viii) of that paragraph or a group tax sharing excluded business operator prescribed in item (viii)-2 of that paragraph) or an agricultural cooperative, etc. prescribed in item (ix) of that paragraph, that files a blue return (hereinafter referred to as a "small and medium sized enterprise, etc." in this paragraph), pays salary or other wages to domestic employees in a business year that begins during the period from April 1, 2018 to March 31, 2027 (excluding a business year for which the provisions of the preceding paragraph are applied, the business year of establishment, the business year that includes the date of dissolution (other than dissolution due to a merger) and business years during liquidation), and the ratio of the amount obtained by deducting the comparative amount of salaries, etc. paid to employees of the small and medium sized enterprise, etc. from its amount of salaries, etc. paid to employees in that business year to that comparative amount of salaries, etc. paid to employees (referred to as the "rate of increase in salaries, etc. paid to employees" in item (i)) is 1.5 percent or more, the amount calculated by multiplying the credit-eligible increase in salaries, etc. paid to employees of the small and medium sized enterprise, etc. for that business year by 15 percent (if the small and medium sized enterprise, etc. meets the requirements listed in the following items in that business year, the rate obtained by adding to 15 percent the rate specified in each of those items (if it meets all of the requirements listed in the following items in that business year, the sum of the rates specified in those items)) (hereinafter referred to as the "maximum credit for small and medium sized enterprises, etc." in this paragraph and paragraph (4), item (x)) is deducted from the corporation tax before adjustment of the small and medium sized enterprise, etc. on the income for that business year. In this case, if the maximum credit for small and medium sized enterprises, etc. exceeds the amount equivalent to 20 percent of the corporation tax before adjustment of the small and medium sized enterprise, etc. on the income for that business year, the amount to be deducted is limited to the amount equivalent to that 20 percent.

the rate of increase in salaries, etc. paid to employees being 2.5 percent or more: 15 percent;

any of the following requirements being met: 5 percent.

having obtained the certification referred to in Article 13 of the Act on Advancement of Measures to Support Raising Next-Generation Children in that business year (limited to the case specified by Order of the Ministry of Finance as one in which the status of the implementation of measures to support raising next-generation children prescribed in Article 2 of that Act is good);

falling under a specially certified general employer prescribed in Article 15-3, paragraph (1) of the Act on Advancement of Measures to Support Raising Next-Generation Children at the end of that business year;

having obtained the certification referred to in Article 9 of the Act on the Promotion of Women's Active Engagement in Professional Life in that business year (limited to the case specified by Order of the Ministry of Finance as one in which the status of the provision of opportunities relating to professional life to female workers referred to in Article 4 of that Act and of the improvement of the employment environment referred to in that Article is good);

falling under a specially certified general employer prescribed in Article 13, paragraph (1) of the Act on the Promotion of Women's Active Engagement in Professional Life at the end of that business year.

If, in a business year (excluding the business year that includes the date of dissolution (other than dissolution due to a merger) and business years during liquidation) of a corporation that files a blue return, the amount of salaries, etc. paid to employees of the corporation exceeds its comparative amount of salaries, etc. paid to employees, and the corporation has a carried-over excess of the tax credit limit, the amount equivalent to that carried-over excess of the tax credit limit is deducted from the corporation tax before adjustment on the income for that business year. In this case, if the carried-over excess of the tax credit limit of the corporation for that business year exceeds the amount equivalent to 20 percent of the corporation tax before adjustment of the corporation on the income for that business year (if there is an amount to be deducted from the corporation tax before adjustment on the income for that business year pursuant to the provisions of the preceding two paragraphs in that business year, the remaining amount after deducting that amount), the amount to be deducted is limited to the amount equivalent to that 20 percent.

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

business year of establishment: The business year that includes the date of establishment (for the corporations listed below, the date specified respectively below);

a foreign corporation prescribed in Article 2, item (iv) of the Corporation Tax Act: the date on which it came to have a permanent establishment;

a public interest corporation, etc. or an association or foundation without juridical personality that has newly commenced a profit-making business: the date on which it commenced that business;

a public interest corporation, etc. conducting a profit-making business that was a public service corporation: the date on which it became that public interest corporation, etc.;

an ordinary corporation or a cooperative, etc. that was a public service corporation or a public interest corporation, etc. not conducting a profit-making business: the date on which it became that ordinary corporation or cooperative, etc.

domestic employee: An employee of a corporation (excluding a person who has a special relationship specified by Cabinet Order with an officer of the corporation (meaning an officer prescribed in Article 2, item (xv) of the Corporation Tax Act; the same applies hereinafter in this item), and an officer who has duties as an employee of the corporation) who falls under the employees working at a business establishment of the corporation in Japan as specified by Cabinet Order;

salary or other wage: A salary or other wage prescribed in Article 28, paragraph (1) of the Income Tax Act;

specified corporation: A corporation whose number of regular employees is 2,000 or less (excluding a corporation where the total number of regular employees of the corporation and of other corporations with which the corporation has a controlling relationship, by the corporation, prescribed in Article 2, item (xii)-7-5 of the Corporation Tax Act exceeds 10,000);

amount of salary or other wages paid to continuing employees: The amount specified by Cabinet Order as the amount of salary or other wages paid for the applicable business year to continuing employees (meaning domestic employees specified by Cabinet Order as having received payment of salary or other wages from the corporation for each month within the periods of each business year of the corporation (hereinafter referred to as the "applicable business year" in this paragraph) and of the business year that includes the day before the first day of that applicable business year (referred to as the "previous business year" in the following item and item (ix)); the same applies in the following item) (if there is an amount received from another person (including, where the corporation is a foreign corporation, the head office, etc. prescribed in Article 138, paragraph (1), item (i) of the Corporation Tax Act) to cover the salary or other wages (excluding the amount of subsidies paid as the program listed in Article 62, paragraph (1), item (i) of the Employment Insurance Act received from the State or a local government and other similar amounts, and amounts received as consideration for the provision of services; hereinafter referred to as the "amount received to cover" in this item), the amount obtained by deducting the amount received to cover; the same applies hereinafter in this paragraph);

comparative amount of salary or other wages paid to continuing employees: The amount specified by Cabinet Order as the amount of salary or other wages paid for the previous business year to the continuing employees of the corporation referred to in the preceding item;

credit-eligible increase in salaries, etc. paid to employees: The amount obtained by deducting a corporation's comparative amount of salaries, etc. paid to employees from its amount of salaries, etc. paid to employees (if that amount exceeds the corporation's adjusted increase in salaries, etc. paid to employees (meaning the amount obtained by deducting the amount listed in (b) from the amount listed in (a)), that adjusted increase in salaries, etc. paid to employees);

the amount of salaries, etc. paid to employees (if there is an amount of employment stabilization subsidies (meaning the amount of subsidies paid as the program listed in Article 62, paragraph (1), item (i) of the Employment Insurance Act received from the State or a local government and other similar amounts; the same applies hereinafter in this item) to cover the salary or other wages serving as the basis for the calculation of that amount of salaries, etc. paid to employees, the amount obtained by deducting that amount of employment stabilization subsidies);

the comparative amount of salaries, etc. paid to employees (if there is an amount of employment stabilization subsidies to cover the salary or other wages serving as the basis for the calculation of that comparative amount of salaries, etc. paid to employees, the amount obtained by deducting that amount of employment stabilization subsidies).

amount of salaries, etc. paid to employees: The amount of salary or other wages paid to domestic employees that is included in deductible expenses in calculating the amount of income of a corporation for the applicable business year;

comparative amount of salaries, etc. paid to employees: The amount of salary or other wages paid to domestic employees that is included in deductible expenses in calculating the amount of income of a corporation for the previous business year (if the number of months in the previous business year differs from the number of months in the applicable business year, the amount calculated pursuant to the provisions of Cabinet Order according to those numbers of months);

carried-over excess of the tax credit limit: The sum of the amounts, out of the maximum credit for small and medium sized enterprises, etc. of a corporation for each business year that began within five years before the first day of the applicable business year (limited to each business year in which the corporation has filed blue returns continuously up to the applicable business year), that could not be fully deducted even after the deduction under paragraph (2) (if there is an amount already deducted from the corporation tax before adjustment in each such business year pursuant to the provisions of the preceding paragraph, the remaining amount after deducting that amount).

The number of months referred to in item (ix) of the preceding paragraph is calculated in accordance with the calendar, and any fraction of less than one month is counted as one month.

The provisions of paragraphs (1) and (2) apply only if a document stating the credit-eligible increase in salaries, etc. paid to employees (including, if the application of the provisions of paragraph (1) is sought, the amount of salary or other wages paid to continuing employees and the comparative amount of salary or other wages paid to continuing employees), the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under those provisions, is attached to the final return, etc. (including an amended return form or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to those provisions). In this case, the credit-eligible increase in salaries, etc. paid to employees serving as the basis for the calculation of the amount to be deducted pursuant to paragraph (1) or (2) is limited to the credit-eligible increase in salaries, etc. paid to employees stated in the document attached to the final return, etc.

The provisions of paragraph (3) apply only if a written statement of the carried-over excess of the tax credit limit is attached to the tax return prescribed in Article 2, item (xxxi) of the Corporation Tax Act for each business year from the business year for which the provisions of paragraph (2) were applied onward, and a document stating the carried-over excess of the tax credit limit, the amount to be deducted, and the details of the calculation of that amount, which are subject to the deduction under paragraph (3), is attached to the final return, etc. for the business year for which the application of the provisions of paragraph (3) is sought (including an amended return form or written request for reassessment, if one is filed to increase the amount to be deducted pursuant to the provisions of that paragraph).

Beyond what is provided for in paragraph (4) through the preceding paragraph, the calculation of the comparative amount of salaries, etc. paid to employees in the case where a corporation seeking the application of the provisions of paragraphs (1) through (3) is a merging corporation, a splitting corporation or a succeeding corporation in a company split, a corporation making a capital contribution in kind or a corporation receiving a capital contribution in kind, or a corporation making a distribution in kind or a corporation receiving a distribution in kind, the determination of whether the requirements prescribed in those provisions are satisfied in the case where the comparative amount of salary or other wages paid to continuing employees or the comparative amount of salaries, etc. paid to employees is zero, and other necessary matters concerning the application of those provisions are specified by Cabinet Order.

The provisions of Article 42-4, paragraphs (23) and (24) apply mutatis mutandis where the provisions of paragraphs (1) through (3) are applied. In this case, the phrase "paragraphs (1), (4), (7) and (14)" in paragraph (23) of that Article is deemed to be replaced with "Article 42-12-5, paragraphs (1) through (3)".