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Angel Investment Taxation in Japan

person holding blue ballpoint pen on white notebook 669610 - Angel Investment Taxation in Japan

Tax Benefits

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 the 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 gains 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 gains 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 gains from stock. (Loss from selling a private company is not allowed to carry over by default.)

Type A company:

Must be younger than 3 years old.

Must be an SME (paid-in capital less than 500,000,000 yen)

The following conditions must be met:

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:

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.