Tax Benefit
Type A (company younger than 3 years old):
Benefit (#1) -> The investment will be deductible from gross taxable income (e.g. salary, business, property income) up to lesser of 40% of the gross income and 10,000,000 yen.
Benefit (#2) -> Capital loss from selling shares to a qualified company can be carried over for 3 years to offset against capital gain from stock. (Loss from selling a private company is not allowed to carry over by default.)
Type B (company younger than 10 years old):
Benefit (1) -> Invested amount will be deductible from capital gain from stocks in the same year.
Benefit (#2) -> Capital loss from selling shares to a qualified company can be carried over for 3 years to offset against capital gain from stock. (Loss from selling a private company is not allowed to carry over by default.)
Type A company:
It has to be younger than 3 years old.
It has to be an SME (paid-in capital less than 500,000,000 yen)
The following condition has to be met:
| Type A company | |
| Less than one year old and in the first FY | More than 2 full time employee and 10% in R&D or new business |
| Less than 1 year old and in the second FY | More than 2 full time employee and 10% in research or new business AND operating CF has to be negative until the last FY |
| 1 to 2 years old | R&D expense (including marketing) more than 3 % of revenue and operating CF is negative until the last FY. OR, employees in R&D are more than 2 and 10% of the total headcount and operating CF negative until the last FY. |
| 2-3 years | R&D expense (including marketing) more than 3 % of revenue and operating CF is negative until the last FY. OR growth rate in sales more than 25% and operating CF negative until the last FY. |
Type B company:
It has to be younger than 10 years old.
It has to be an SME (paid-in capital less than 500,000,000 yen)
The following condition has to be met:
| Type B company | |
| Less than one year | More than 2 full time employee and 10% in R&D new business |
| 1 to 2 years old | R&D expense (including marketing) more than 3 % of revenue, or employees in new business are more than 2 and 10% of the total headcount |
| 2-5 years | R&D expense (including marketing) more than 3 % of revenue or its growth rate in sales more than 25%. |
| 5-10 years | R&D expense (including marketing) more than 5 % of revenue. |