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What exactly does small-medium businesses mean? (small-medium business preferential tax system)

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Under Japanese tax code, small-medium sized businesses are defined as “companies with equity of 100 million yen or under”. Under this definition 99% of all companies in Japan are considered small-medium sized.
Small-medium sized businesses in Japan receive various preferential tax incentives.

  Normal Corporation Small-medium Business Small-medium Business
Corporate Tax Rate 26% 25.5% tax on profits over 8 million yen 15% tax on profits under 8 million yen
Tax Effect of Entertainment Expenses Full amount non-deductible A fixed amount is deductible
Losses carried forward 9 year carry-forward period
80% of profit
9 year carry-forward period
100% of profit
Depreciation For assets less than 300,000 yen, full amount is deductible

Note: the above corporate effective tax rates are after the April 2011 revision

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