11. Various SMEs in Japan 中小法人と中小企業者等

The definitions of small and medium-sized enterprises ("SMEs") vary between tax reliefs. I have summarized such definitions for major tax reliefs below. (Source: National Tax Agency) 

For more about Japanese tax and accounting, click HERE:

1. SMEs for lower corporate tax rate and deduction of bad debt provision at the statutory rate 法人税率、貸倒引当金特例 

2. SMEs for R&D tax credits, income tax credit for wage increases, etc. 研究開発税制 

3. SMEs for capital investment relief, etc. 中小企業投資促進税制

4. SMEs for entertainment expense deduction 交際費損金不算入 

5. SMEs for refunds from tax loss carry-back 欠損金繰り戻しによる還付  

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Various definitions of SMEs as of 1 April 2020

1. SMEs for lower corporate tax rate and deduction of bad debt provision at statutory rate

SMEs for these reliefs are the following*:

* Note that a company is excluded from the definition of an SME for the purposes of the reliefs if, generally, its average income for the last three fiscal years exceeds JPY1.5 billion.

 

A. A company with stated capital or contributed capital of up to JPY100 million at fiscal year end

B. A company with no (contributed) capital at fiscal year end, excluding the following:

(1) A Japanese and foreign insurance company
(2) A company which is fully controlled by a "Large Company" as defined below  

      (a) A company with stated capital or contributed capital of JPY500 million or more 

      (b) A Japanese and foreign insurance company 

      (c) A corporate trustee

(3) A company that has fully controlling relationship with more than one Large Company where the company would be fully controlled by one of these Large Companies if the shares and contributed capital owned by these Large Companies were owned by only that one Large Company (excluding the company defined in (2))

(4) An investment company
(5) A Tokutei Mokuteki Kaisha ("TMK"), i.e., a special purpose company under Asset Securitization Act 
(6) A corporate trustee

2. SMEs for tax reliefs such as the following

• R&D tax credits
• Income tax credit for the acquisition of highly energy saving assets
• Income tax credit for the acquisition of assets for head office relocation
• Income tax credit for wage increases
• Write-off of small depreciable assets, etc. 

SMEs for these reliefs are the following*:

* Note that a company is excluded from the definition of an SME for the purposes of the reliefs if, generally, its average income for the last three fiscal years exceeds JPY1.5 billion.

A. A company with stated or contributed capital of up to JPY100 million, excluding the following: 

(1) A company of which at least 50% of the outstanding shares or contributed capital are owned by one Large-Sized Company (see below)** 
(2) A company of which at least two thirds of the outstanding shares or contributed capital are owned by more than one Large-Sized Company**, excluding the company defined in (1)
(3) A corporate trustee 

** A company is a Large-Sized Company if any of the following applies:  
(i) The company's stated capital or contributed capital exceeds JPY100 million. 
(ii) The company has no stated or contributed capital and has more than 1,000 regular employees.
(iii) The company is fully controlled by a Large Company as defined below.
       (a) A company with stated capital or contributed capital of JPY500 million or more
       (b) A Japanese or foreign insurance company with more than 1,000 regular employees
       (c) A corporate trustee 
(iv) A company that has fully controlling relationship with more than one Large Company where the company would be fully controlled by one of these Large Companies if the shares and contributed capital owned by these Large Companies were owned by only that one Large Company (excluding the company defined in (iii))

B. A company with no (contributed) capital which has up to 1,000 regular employees (excluding a corporate trustee) 

3. SMEs for capital investment relief and income tax credit for asset acquisition for improving productivity, profitability or digitization, etc. 

SMEs for these reliefs are the following*:

* Note that a company is excluded from the definition of an SME for the purposes of the reliefs if, generally, its average income for the last three fiscal years exceeds JPY1.5 billion.

A. A company with stated or contributed capital of up to JPY100 million, excluding the following:

(1) A company of which at least 50% of the outstanding shares or contributed capital are owned by one Large-Sized Company**  
(2) A company of which at least two thirds of the outstanding shares or contributed capital are owned by more than one Large-Sized Company**, excluding the company defined in (1)
(3) A corporate trustee 

** A company is a Large-Sized Company if any of the following applies: 
(1) The company's stated capital or contributed capital exceeds JPY100 million. 
(2) The company has no (contributed) capital and has more than 1,000 regular employees. 
(3) The company is fully controlled by a Large Company as defined below. 
      (i) A company with stated capital or contributed capital of JPY500 million or more 
      (ii) A Japanese or foreign insurance company with more than 1,000 regular employees
      (iii) A corporate trustee
(4) A company that has fully controlling relationship with more than one Large Company where the company would be fully controlled by one of these Large Companies if the shares and contributed capital owned by these Large Companies were owned by only that one Large Company (excluding the company defined in (3)) 

B. A company with no (contributed) capital which has up to 1,000 regular employees (excluding a corporate trustee) 

4. SMEs for entertainment expense deduction  

An SME for the relief is a company (excluding an investment company, a TMK, or a corporate trustee) which has stated or contributed capital of up to JPY100 million at fiscal year end, excluding the following: 

(1) A company fully controlled by a Large Company as defined below. 
     (a) A company with stated capital or contributed capital of JPY500 million or more
     (b) A Japanese or foreign insurance company
     (c) A corporate trustee
(2) A company that has fully controlling relationship with more than one Large Company where the company would be fully controlled by one of these Large Companies if the shares and contributed capital owned by these Large Companies were owned by only that one Large Company (excluding the company defined in (1)) 

5. SMEs for refunds from tax loss carry-back  

An SME for the relief is a company if it has stated capital or contributed capital of up to JPY100 million at fiscal year end, excluding the following:  

(1) A Japanese or foreign insurance company
(2) A company fully controlled by a Large Company as defined below.  
     (a) A company with stated capital or contributed capital of JPY500 million or more
     (b) A Japanese or foreign insurance company 
     (c) A corporate trustee
(3) A company that has fully controlling relationship with more than one Large Company where the company would be fully controlled by one of these Large Companies if the shares and contributed capital owned by these Large Companies were owned by only that one Large Company (excluding the company defined in (2)) 

(4) An investment company

(5) A TMK 
(6) A corporate trustee

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