I hereby give My sanction to the Imperial Ordinance concerning the Revision of the Corporation Tax Law Enforcement Regulations and cause the same to be promulgated.
Signed: HIROHITO, Seal of the Emperor
This thirty-first day of the third month of the twenty-second year of Showa (March 31, 1947)
Countersigned: Prime Minister YOSHIDA Shigeru
Minister of Finance ISHIBASHI Tanzan
Imperial Ordinance No. 111
THE CORPORATION TAX LAW ENFORCEMENT REGULATIONS
Chapter I. General Provisions
Chapter II. Taxable Standards
Chapter V. Special Rules for a Family-corporation
Chapter VI. Reinvestigation
Chapter VII. Miscellaneous Provisions
CHAPTER I. GENERAL PROVISIONS
Article 1. The public bodies enumerated below shall not be imposed the corporation tax, by virtue of Art. 4 of the Corporation Tax Law (hereinafter be referred to as the Law):
1. Prefectural Associations; Metropolitan, city, town and village associations; town and village associations; wards in Tokyo-to; wards in city, town and village; bodies of same nature as towns or villages, which are located in areas where the Town and Village Regulation is not enforced; irrigation associations, federations or irrigation associations, and Hokkaido Public Works Association;
2. Arable land readjustment associations, federations of arable land readjustment associations and other bodies of similar natures.
Article 2. The staple products as referred to in Art. 6, par. 1 of the Law shall be defined as hereunder:
2. Lime-nitrogen, ammonium sulphate, burnt potassium, alum powder, burnt potassium quartz trachyte powder and super phosphate lime (including metamorphosis manure)
3. Gold minerals and placer minerals
4. Petroleum, coal, and peat
5. Potassium quartz trachyte.
Article 3. The expansion of the business equipments for the manufacture, mining or picking to which the provision of Art. 6, par. 2 of the Law may apply, shall be restricted to cases where the amount of products or capacity of production has increased by more than 30%, when compared to the same before the expansion.
Article 4. A corporation which succeeded or deemed to have succeeded the business of the manufacture, mining or picking as referred to in the preceding two Articles, may succeed the remainder of term for the exemption of the corporation tax, if any.
Article 5. The provision of Art. 6 of the Law, concerning the exemption of the corporation tax shall not apply unless so requested in the return filed pursuant to Arts. 18-22 of the Law.
CHAPTER II. TAXABLE STANDARDS
Article 6. The profits which have been carried over from the preceding accounting period, shall not be counted in the profits in the computation of the normal income of the present accounting period.
The loss which has been carried over from the preceding accounting period shall not be counted into the loss in the computation of the normal income of the present period, except the loss as referred to in par. 4 of Art. 9 of the Law.
Article 7. The amount which is not to be counted in loss in the computation of the normal income of a corporation in an accounting period in accordance with the main sentence of Art. 9, par. 3 of the Law, shall be the excess of total donations made in the accounting period over 50% of the total of 0.25% of the capital and 2.5% of the normal income in said accounting period.
The normal income as referred to in the preceding paragraph shall be computed pursuant to Art. 9, pars. 1 and 2 of the Law.
On computing the normal income referred to in the preceding paragraph, the donation made or to have been made by the corporation during the accounting period shall not be counted in 105.
Article 8. The donation to be counted in loss in the computation of the normal income of a corporation by virtue of the proviso of Art. 9, par. 3 of the Law, shall be donations as designated by the Minister of Finance.
The Minister of Finance, when made the designation pursuant to the provision of the preceding paragraph, shall notify the same to the public.
Article 9. The provision of the proviso of Art. 9, par, 3 of the Law, concerning the counting of donations as loss, shall not apply unless so requested by the corporation in the return referred to in Arts. 18-22 of the Law.
The superintendent of the taxation office may, in special cases, apply the proviso of Art. 9, par. 3 of the Law, even if the application referred to in the preceding paragraph has not been made.
Article 10. The amount of loss accrued during an accounting period beginning within one year prior to the beginning date of the present accounting period which is to be counted in loss in the computation of the normal income of the present accounting period pursuant to par. 4 of Art. 9 of the Law, shall be restricted to the amount of loss which has not yet been deducted from the profits in accounting periods subsequent to the accounting period in which the loss accrued.
Article 11. In case a corporation which was given national subsidies, prefectural subsidies or city, town or village subsidies for purposes of capital investments, has had the subsidies so invested, the amount so invested shall be counted in loss in the computation of the normal income in the accounting period, by virtue of Art. 9, par. 5 of the Law.
In case a corporation has counted the investment referred to in the preceding paragraph in its assets, the amount of the investment shall be deemed not to have been counted in the assets.
Article 12. The provision of par. 1 of the preceding article concerning the calcuration into loss of national subsidies, prefectural subsidies or city, town or village subsidies, shall not apply unless so requested by the corporation in the return filed pursuant to Arts. 18-22 of the Law.
The provision of Art. 9, par. 2 shall apply in respect to the case referred to in the preceding paragraph.
Article 13. The amount of the depreciation of fixed assets of a corporation shall be counted in loss in the computation of the normal income in each accounting period.
Necessary matters relating to the depreciation and fixed assets as referred to in the preceding paragraph shall be provided for by the Minister of Finance.
Article 14. The income tax upon the interests on public bonds or corporate debentures, or upon the dividends of profits or interests paid by other corporations or upon the distribution of surpluses paid by other corporations (shall hereinafter be called dividends of profits), as referred to under Art. 18 of the Income Tax Law, which is deductible from the corporation tax by virtue of Art. 10 of the Law, shall be limited to the income tax upon interests or dividends of profits accrued in the period while the principal thereof is actually held by the corporation.
The income tax upon the interests or dividends of profits accrued while the principals thereof is held shall be calculated as follows:
1. The income tax upon the interests accrued while the principal thereof is held, shall be computed by dividing the income tax paid, in proportion to the amount of interests accrued while the principal thereof viz. public bonds or corporate debentures is held, and to the interests accrued while the same is not held;
2. The income tax upon dividends of profits accrued while the principal thereof is help shall be counted by dividing the income tax paid, in proportion to the dividends of profits distributed during the term when the principal thereof is held and the dividends of profits distributed during the term when the same is not held.
Article 15. The provision of Art. 10 of the Law, concerning the deduction of the income tax from the corporation tax, shall not apply unless so requested by the corporation in the return referred to in Arts. 18-24 of the Law.
The superintendent of the taxation office may, in special cases, apply the provision of Art. 10 of the Law even if the application referred to in the preceding paragraph has not been made.
Article 16. Donations made by a corporation in liquidation which comes under the donations designated in accordance with Art. 8 by the Minister of Finance, shall be credited against the value of the liquidate assets, by virtue of Art. 14, par. 2 of the Law.
The provision of the preceding paragraph concerning the credit shall not apply unless so requested by the corporation in the return referred to in Art. 23 of the Law.
The provision of Art. 9, par. 2 shall apply in respect to the case referred to in the preceding paragraph.
Article 17. In case of the amalgamation of corporations, the amount equal to the corporation tax upon the income at liquidation, and liquidation, and the business tax and surtax thereof upon the net profits at liquidation, of the corporation which ceased to exist due to the amalgamation, shall be deemed the money delivered to the share holders or members of the corporation which ceased to exist due to the amalgamation, by the corporation which continues to exist after the amalgamation or has been newly established by the amalgamation.
Article 18. The number of months as referred to in Art. 15, par. 1 of the Law shall be computed according to the calender year, and a fraction of a month, if any, shall be deemed one month.
Article 19. The amount of capital in each accounting period of a religious corporation or an incorporated labour union shall be calculated as follows: The monthly average of the total value of assets held for profit making purposes or fixed or running assets held for profit making businesses minus the amount of debts belonging to the assets or the businesses concerned, shall be multiplied by the number of months in said accounting period and then divided by 12. The amount thus obtained shall be regarded as the capital in the accounting period;
The provision of the preceding Article shall apply in respect to the calculation of the number of months referred to in the preceding paragraph.
Article 20. The capital in each accounting period held by a corporation not having its head office and principal place of business within the enforcement area of the Law, shall be computed by multiplying the total capital by the ratio of the value of assets located within the enforcement area of the Law to the total value of its assets.
If the calculation of the capital made on the basis of the ratio of the assets mentioned above is deemed improper, the calculation may be made on the basis of the ratio of receipts or income or by other proper measures.
Article 21. If, in case of the amalgamation of corporations, the corporation which continues to exist due to the amalgamation has succeeded the reserves of the corporation which ceased to exist due to the amalgamation, the amount to be counted as follows shall be added to the amount of reserves as of the beginning date of each accounting period referred to in Art. 15, par. 1 of the Law, of the corporation which continues to exist due to the amalgamation: The reserves succeeded shall be multiplied by the number of months which belong to the accounting period in which the amalgamation took place, and which come after the date of the amalgamation, and then divided by the number of months in the accounting period concerned. The amount thus obtained shall be added to the reserves above;
The provision of Art. 18 shall apply in respect of the calculation of the number of months referred to in the preceding paragraph.
Article 22. The judgement whether the capital referred to in Art. 17, item 2 of the Law is exceeding 100,000 yen or not shall be made on the basis of the amount which is accounted as follows: The capital of each accounting period shall be multiplied by 12 and then 'divided by the number of months in the accounting period concerned. The amount thus obtained shall be the standard of the judgement;
The provision of Art. 18 shall apply in respect to the computation of the number of months referred to in the preceding paragraph.
Article 23. The provision of Art. 9 of the Law shall apply in respect to such income in the income at liquidation as is favoured the exemption of the corporation tax by virtue of the the Law or other statutes.
CHAPTER III. DECLARATION
Article 24. In the return made pursuant to Art. 18, par. 1. Art. 20, par. 1 (including Art. 20, par. 1 as applied in Art. 22, par. 3 of the Law) and Art. 22, par. 1 of the Law shall be stated matters as are enumerated hereunder and filed with the superintendent of a taxation office which administers the place of payment:
1. Name, name of a representative, and location of the head office or principal place of business, of a corporation liable to pay the tax;
2. In respect of a corporation not having its head office or principal business place within the enforcement area of the Law but having its assets or business within the enforcement area of the Law, the location of main assets or business within the enforcement area of the Law, besides the matters as are enumerated in the preceding number;
3. Matters concerning the exemption of the corporation tax by virtue of Art. 6 of the Law;
4. Matters concerning the amount of donations to be counted in loss, as referred to in Art. 9. par. 3, proviso of the Law;
5. Matters concerning national subsidies, prefectural subsidies, or city, town or village subsidies to be counted in loss pursuant to Art. 11, par. 1;
6. Matters concerning the deduction of the income tax as referred to in Art. 10 of the Law.
The superintendent of a taxation office, if deems necessary, may order the corporation which has filed the matters prescribed in No. 6 of the preceding paragraph, to present or submit books or documents attesting the filed matters.
Article 25. The return referred to in the preceding Article shall be accompanied by the documents which state therein matters enumerated hereunder and the detailed statement concerning the computation of corporation tax as designated by the superintendent of a taxation office:
1. As to par. 1, item 3 of the preceding Article, if there are incomes accrued from the businesses of the manufacture, mining or picking referred to in Art. 2 or Art. 3 and as well as other incomes, in the normal income of each accounting period, a statement on the separation of the incomes from businesses of manufacture, mining or picking referred to in Art. 2 or Art. 3 from other incomes;
2. As to par. 1, item 4 of the preceding Article, the documents stating therein the amount of donation, donee, the date of donation and other matters concerning the donation;
3. As to par. 1, item 5 of the preceding Article a detailed statement concerning the receipt and disbursement of national subsidies, prefectural subsidies, or city, town or village subsidies;
4. As to par. 1, item 6 of the preceding Article, a detailed statement on incomes from interests, dividends or distributed surplus, the amount of tax collected therefrom and the amount of tax to be deducted, respectively for each type of interests, dividends or quasi dividends as prescribed under Art. 18 of the Income Tax Law.
Article 26. The return referred to in Art. 19, par. 1 (including Art. 19, par. 1 as applied by virtue of Art. 21, par. 1 and Art. 22, par. 3 of the Law) of the Law shall be submitted with the superintendent of a taxation office which administers the place of payment, accompanied by a balance sheet as of the closing date of said accounting period and a statement of profit and loss as provisionally estimated.
The provisions of the preceding two Articles shall apply in respect to the filing of a return referred to in the preceding paragraph.
Article 27. In case a corporation in liquidation is going to distribute the excess of the liquidate assets over the amount of the paid-up shares or the amount of investment, the corporation shall, by the day prior to the date on which said liquidate assets are to be distributed, submit with the superintendent of a taxation office a return stating therein the amount of income at liquidation.
The return referred to in the preceding paragraph shall be accompanied by a detailed statement separating the amount composed of reserve and incomes on which the corporation tax is exempted by virtue of statues from other incomes, a detailed statement on income and outgo during the liquidation, documents which state matters enumerated hereunder and a detailed statement on the computation of the corporation tax as designated by the superintendent of a taxation office:
1. Name, name of a representative, and location of the head office or principal place of business of a corporation liable to pay the tax;
2. Matters concerning the deduction of the income tax referred to in Art. 10 of the Law;
3. Matters concerning the deduction of donations referred to in Art. 14, par. 2 of the Law.
Article 28. In case a dissolved corporation is going to distribute the excess of the liquidate assets over the amount of the paid up shares or the amount of investement in instalement, it shall file the return with the superintendent of a taxation office which administers the place of payment, stating therein the amount of income at liquidation, by the date before the distribution, in each time the distribution of liquidate assets takes place.
The provision of par. 2 of the preceding Article shall apply in respect to the preceding paragraph. In this case, "detailed statement on income and outgo during the period of liquidation" shall read "statement on income and outgo taking place from the date of dissolution to the day prior to the date on which the liquidate assets are to be distributed."
In case of par. 1, the amount of corporation tax imposable upon the income at liquidation shall be computed deeming the amount composed of reserve or income which is exempted from corporation tax by virtue of statutes as firstly distributed, and the other amount as secondly distributed.
The return to be filed in the case of par. 1 need not be accompanied by an inventory or a balance sheet at the time of dissolution, unless the return is filed for the first time.
CHAPTER IV. PAYMENT
Article 29. The corporation liable to pay the tax, shall, on making the payment of the corporation tax pursuant to Art. 26 of the Law, pay it to the principal office of the Bank of Japan or its branch offices or agencies, attaching thereto a note of payment according to the form as may be designated by the Minister of Finance.
CHAPTER V. SPECIAL RULES FOR A FAMILY CORPORATION
Article 30. Corporations specially related to a stockholder etc. of a family corporation as referred to under Art. 34, par. 2 of the Law, shall be such corporations as enumerated in the following numbers:
1. Corporations 50% or more of whose shares or equities are held by a shareholder or a member of a corporation (this corporation shall hereinafter be called "F" corporation in this Article) which is to be judged whether a family corporation or not;
2. Corporations 50% or more of whose shares or equities are held by investors in "F" corporation and by relative, employees or other individuals who are specially related to said investors and by corporations which are referred to under the preceding number;
3. Corporations 50% or more of whose shares are held by such corporations as are referred to under No. 1 or 2.
In case two or more of such corporations as are referred to in each number of the preceding paragraph are shareholders or members of "F" corporation, these corporations shall be deemed mutually to have interests as referred to in Art. 34, par. 2 of the Law.
Article 31. The translation of normal income in an accounting period to the annual to basis as referred to in Art. 35, par. 2 of the Law shall be made by multiplying the amount of said normal income by 12 and thereafter dividing the amount thus obtained into the number of months included in said accounting period.
The provisions of Art. 18 shall apply in respect to the computation of months referred to in the preceding paragraph.
Article 32. The provision of Art. 35. par. 1 of the Law shall not apply in respect to financial institutions, insurance companies, mujin (mutual loan) companies, trust companies local railway companies and local trolley companies, which are family corporations.
CHAPTER VI. REINVESTIGATION
Article 33. A corporation which desires to apply for the reinvestigation by virtue of Art. 36, par. 1 of the Law shall submit an application with the Director of the competent Local Financial Bureau stating the reason therefore and presenting the attesting documents, through the superintendent of a taxation office who has made the correction or determination of the taxable standards of the corporation (meaning the normal income, excess income or capital in each accounting period, or income at liquidation; the same goes hereinafter), or who has charged the tax in deficit or penalty tax.
In case of the preceding paragraph, when the superintendent of a taxation office referred to in the preceding paragraph has received the application, the application shall be deemed to have been submitted with the Director of the competent Local Financial Bureau.
Article 34. In case an application referred to in par. 1 of the preceding Article has been filed, the Director of a Local Financial Bureau may ask questions to the corporation which has filed the application, on matters necessary for the determination of reinvestigation, or request the corporation to submit a statement of accounts and other documents deemed necessary for the determination of reinvestigation.
CHAPTER VII. MISCELLANEOUS PROVISIONS
Article 35. A person who desires to inspect returns filed by a corporation liable to pay the tax, or documents regarding the correction, determination or revision of taxable standard, may so request to the superintendent of a taxation office which administers the place of payment of said corporation, after paying a charge as prescribed by Minister of Finance.
Article 36. A person who desires to give an information in accordance with Art. 40, par. 1 of the Law, shall inform the matters enumerated hereunder to Minister of Finance or to the Director of the Local Financial Bureau:
1. Name and address of the informer;
2. Details of the fact or of suspect that a corporation deemed liable to pay the tax has failed to file its return, or of suspect of an omission in the taxable amount of a corporation liable to pay the tax;
3. Name and location of the head office or principal business place of the corporation referred to in above numbers which are or deemed to be liable to pay the tax.
Article 37. The amount of a reward to be given to an informer by virtue of Art. 40, par. 1 of the Law shall be decided by the Director of the Local Financial Bureau on the basis of the value of the contribution the information made to the determination or correction of the taxable standard, within the extent not exceeding 10% of the tax recovered by the correction or determination (excluding the amount of the penalty tax to be collected pursuant to Art. 42 or 43 of the Law.)
The reward referred to in Art. 40, par. 1 of the Law shall be given by the Director of the Local Financial Bureau which administers the place of payment of the corporation liable to pay the tax.
Article 38. The amount of tax to be added to the tax pursuant to Art. 42, par, 1 of the Law, or the amount of penalty tax to be added to the corporation tax pursuant to Art. 33 of the Law as applied by virtue of Art. 42, par. 1 of the Law shall be computed, according to the number of days elapsed since the day following the filing date prescribed in Arts. 18-24 of the Law (the date shall hereinafter be referred to as the filing date) to the day prior to the date of payment by multiplying the amount of tax to be paid by virtue of Art. 26, par. 2 of the Law or of the penalty tax referred to in Art. 33 of the Law at the rate of 0.03% per diem.
The superintendent of a taxation office may, in unavoidable cases, abate or exempt the additional amount of tax referred to in par. 1, as provided for by the Minister of Finance.
Article 39. The amount of tax to be collected by virtue of Art. 43 of the Law, shall be computed, according to the term of time elapsed since the day following the filing date to the day on which the return is filed in case the taxable standard has been filed after the filing date, or to the day prior to the date on which the revision, correction or determination is made in case the taxable standard has been revised, corrected or determined, by multiplying the amount of tax to be paid by virtue of Art. 26, par. 2 of the Law or the amount of penalty tax referred to in Art. 33 of the Law at the rate of 5% for each month elapsed.
The provision of par. 2 of the preceding Article shall apply in respect to the case referred to in the preceding paragraph.
Article 40. A taxation official, when inspecting books, papers or other things relating thereto by virtue of Art. 45 or Art. 46 of the Law, shall take the inspector's pass with him.
Article 41. In Art. 24, par. 1, Art. 25, Arts. 28-32, Art. 34, par. 1 Art., 35, par. 1, Art. 36, par. 2, Art. 42, par. 2, Art. 44, Art. 48, par. 3 and Art. 52 of the Law, "the Government" shall mean "the superintendent of a competent taxation office," and in Art. 37, par. 1 of the Law, "the Government" shall mean "the Director of the competent Local Financial Bureau."
Supplementary Provisions:
Article 1. The present Ordinance shall come into force as from April 1, 1947.
Article 2. Areas which are to be excluded from the enforcement of the Law by virtue of Art. 2 of the Supplementary Provisions of the Law shall be as follows:
1. Shumushu-gun, Shinshiru-gun, Uruppe-shi, Kunashiri-gun, Shana-gun, Etraw-gun, Shikotan-gun, and Habomai-mura, Hanasaki-gun, Suisho-shima, Yuru-shima, Shiba-shima, Tara-shima and Akiyuru-shima, under the jurisdiction of Nemuro Branch Office, Hokkaido:
2. Beng islands, Tokyo-to;
3. Take-shima, Goka-mura under the jurisdiction of Oki Branch Office, Shimane Prefecture;
4. Oshima-gun, Kagoshima Prefecture (excluding Nakakuro-shima, Teshima-mura, Takeshima and Iwo-shima);
Article 3. The present Ordinance shall be applied, as to the corporation tax imposable upon the normal income, excess income and capital of a corporation, from the accounting period ending on or after April 1, 1947, and as to the corporation tax imposable upon the income at liquidation, as from the income arising out of dissolution or amalgamation taking place on or after April 1, 1947.
Article 4. The provision of Art. 26, par. 2, which prescribes the filing of the return referred to under Art. 21, par. 1 of the Law shall apply in respect of the accounting period which ends on or after April 1, 1947 and the date since six months from the beginning of said accounting period comes after the enforcement of the present Ordinance.
Article 5. In case the Director of the Local Financial Bureau has determined the taxable standard or the amount of additional tax by virtue of Art. 5, proviso of the Supplementary Provisions of the Law, he shall notify the same to the corporation liable to pay the tax.
Article 6. The classified income tax imposable upon the income from dividends and interests as prescribed in Art. 10 of the old Income Tax Law which was paid by a corporation during the accounting period ending after the enforcement of the present Ordinance or during the liquidation due to the dissolution taking place after the enforcement of the present Ordinance, shall be deemed the income tax referred to under Art, 18 of the Income Tax Law, for purposes of the application of Art. 14.