Japanese Tax Blog in English

日本の税務情報を英語で書くブログ by みなと国際会計事務所

Angel Taxation

time 2019/06/15

Angel Taxation is very convenient for people in the higher tax bracket. Investment into a start-up will be deductible directly from your progressive taxable income or capital gain. For example, if you invest 1,000,000 yen into your friend venture and if your original income is 8,000,000 yen, it will be 7,000,000 yen. The maximum amount that you can invest and deduct is the lesser of 40% of your gross taxable income (total/net of your salary, property income/loss, business income/loss, pension etc) or 10,000,000 yen if the company is younger than 3 years old. Or you can offset your angel investment against your capital gain if the company is younger than 10 years.

Today that I’m writing this is June 2019. It is about time we receive a resident tax bill. Have you been shocked? You are not alone. If you are an employee, you will receive a payslip with a different resident tax amount from this month. You might have wondered if there was any way to reduce this tax.

A great thing about the Angel (Investor) Taxation is that what you invest to a venture company will be directly deductible from your taxable income. It is the same effect on your taxable income as a donation to Red Cross or to an organization to help people hit by natural disasters.

Tax saving techniques available to individuals are like the following:

Homeland donation (Furusato Nozei)
Investment in second handed properties
Investment into venture companies.

If you know someone who run their own venture business, ask them if you can investment in their companies! If you are one that runs one, there may be people around there who would like to invest in your company if you are qualified.

There are conditions for a company to get qualified for Angel Taxation. Because the conditions are very detailed and sometime not very clear, it will be better to ask a qualified tax accountant.

(Company requirements)
#1 No particular shareholder and her family member owns more than 5/6 of its shares
要件1 特定の株主グループからの投資の合計が5/6を超えないこと
#1 The company is not owned by a large sized corporation.
要件2 大規模法人グループの所有に属さないこと
#3 It has to be non-public company and not in the sex industry.
要件3 未上場・未登録の株式会社で、風俗営業等に該当しないこと
#4 It has to be a SME.
要件4 中小企業であること
#5 It has to meet the conditions based on its age of the company.
要件5 企業の設立経過年数に応じた要件をみたすこと
(Requirements for individual investors )
#6 She has to invest cash into the company and obtain shares in exchange.
要件6 金銭の払込みにより、対象企業の株式を取得していること
#7 She should not belong to a family groups when it counts the total of the shares of the top 3 groups and their total reache 50% in first time.

要件7  対象企業が同族会社である場合、所有割合(株式数および議決権数)の大きいものから第3位までの株主(およびその親族や関係会社等)の所有割合を順に加算し、その割合がはじめて50%超になる時における株主に属していないこと

How do they look like? They may look a lot but I guess you agree that they are very standard.

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