The income calculated for each business year is used as the tax base for determining these corporate taxes to be levied on a corporation's income. Other corporate taxes include corporate taxes on reserves for retirement pensions, etc. (suspended in the case of business years commencing by March 31, 2017).
The tax rates for corporate tax, corporate inhabitant tax and enterprise tax on income (tax burden on corporate income) and per capita levy on corporate inhabitant tax for each taxable year are shown below (a small company in Tokyo is used as an example). The rates for local taxes may vary somewhat depending on the scale of the business and the local government under whose jurisdiction it is located.
Please note that applicable tax rates will vary according to the timing.

(Note) The above corporate income tax rate will apply for three business years from the business year beginning between October 1, 2014, and March 31, 2015.
The rates for corporate inhabitant tax and corporate enterprise tax are shown using Tokyo as an example. The following conditions apply:

When a Japanese corporation or a branch office is newly established in Japan in accordance with Japanese law (i.e., where 3.3.3 1. applies), tax notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment.  In the case of a branch office etc, different rule will apply depending on the timing of the commencement of business year as described below.

(Note) Establishment of Japanese branches, etc. of foreign corporation and tax notification (business year commencing by March 31, 2016)

When a Japanese branch office etc is newly established in Japan, tax notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. Tax notification must also be submitted when a foreign corporation generates income subject to corporate tax in Japan without establishing a branch office or when carrying out business activities through locations or parties meeting the conditions below instead of opening a branch office.

Cases where a foreign corporation carrying out activities without establishing a branch office is required to submit tax notification:

(Note) Establishment of Japanese branches, etc. of foreign corporation and tax notification (business year commencing on or after April 1, 2016)

When a Japanese branch office etc is newly established in Japan (i.e., where 1. of 3.3.3 applies), tax notification pertaining to start-up must be submitted to tax authorities within a prescribed period after establishment. Tax notification must also be submitted when a foreign corporation generates income subject to corporate tax in Japan without establishing a branch office (i.e., where 2. of 3.3.3 applies).

The income of corporations established in Japan is subject to taxation in Japan regardless of where it was sourced. Corporations established in foreign countries are grouped into one of the following tax classifications according to when the business year started, and the respective domestic-source income specified in 3.2.1 or 3.2.2 is subject to corporate tax, corporate inhabitant tax and enterprise tax in Japan corresponding to their classifications. (Note, however, that corporations under category 3. of the following or 2. are not subject to corporate inhabitant tax and enterprise tax.)

Relationship between a foreign corporation's mode of activity in Japan and its taxable income (business year commencing by March 31, 2016):

*Locations, sites, agents, and so on falling under 1. and 2. above are called "permanent establishments."

Relationship between a foreign corporation's mode of activity in Japan and its taxable income (business year commencing on or after April 1, 2016):

1. Foreign corporations having permanent establishments in Japan.
   -    The domestic-sourced income attributable to permanent establishment described in 3.2.2 1. above and the domestic-sourced income not attributable to permanent establishment described in 3.2.2 2. - 6. above
2. Foreign corporations having no permanent establishments in Japan.
   -    The domestic-sourced income described in 3.2.2 2. - 6. above

Representative offices, etc., through which a foreign corporation engages in business in Japan are not supposed to derive any income subject to corporation tax from publicity/advertising, information provision, market surveys, basic study and other activities auxiliary to the performance of its business (see 3.3.3).

The amount of income used as the tax base for corporate taxes on income for each taxable year is determined by making the necessary tax adjustments to corporate profits calculated using accounting standards generally accepted as fair and appropriate. Costs and expenses incurred in earning profits are deductible, except in certain exceptional instances (examples provided below).
Foreign corporations face no restrictions on the locations in which costs and expenses deductible from Japan-sourced taxable income may be incurred. However, detailed statements of costs and expenses incurred overseas and deducted from income in Japan must be prepared, and these costs and expenses must be allocated fairly in the prescribed manner.

Examples of items for which there are limits on deductible costs and expenses:

Remittances made by subsidiary companies to their parent company arise from business-to-business transactions, and so are generally regarded as payments of costs/expenses, distributions of profits, loans (or repayments of loans), and so forth depending on the nature of the transaction concerned. Certain of these costs/expenses are deducted when calculating the income of the payer subsidiary companies. Some of the payments regarded as income of the parent company (e.g., payments of interest, dividends or usage fees) require withholding of income tax at the source at the time of payment (see 3.4.4).
On the other hand, tax treatment on the remittances made by a branch of a foreign corporation to its head office varies depending on the business year. In case of the business year commencing by March 31, 2016, the remittances cannot as a general rule be treated as expenses by the payer branch when calculating the taxable income of the branch. In case of the business year commencing on or after April 1, 2016, as mentioned in 3.1.1, the profits/losses from the internal transactions are to be recognized based on the presumption  that the Japanese branch is a corporation which is independent from the head office.

A Japanese corporation that is a family corporation and meets certain conditions is subject to taxation of retained earnings as well as corporate tax on ordinary income. Taxation of retained earnings is calculating by multiplying the taxable amount of retained earnings (obtained by subtracting the retained earnings deductible from the amount of retained earnings in each business year) by the special tax rate. The special tax rate varies according to the taxable earnings. If the annual taxable earnings does not exceed 30 million yen, it is subject to a tax rate of 10%. However, if the taxable earnings exceeds this amount, a rate of 15% is charged on the amount in excess of 30 million yen and up to 100 million yen, and any amount in excess of 100 million yen is taxed at a rate of 20%.

Net losses under income in each business year are carried forward for the next nine years (or ten years in the case of losses arising during the business years beginning on or after April 1, 2017). Losses may only be carried forward in this way if a blue form tax return is filed for the business year in which the loss arose, and a final tax return is then filed every subsequent year. Note that if a corporation has capital in excess of 100 million yen or is a wholly owned subsidiary of a large corporation with capital of at least 500 million yen (including foreign corporations), the amount of loss that may be deducted from income cannot exceed 80% of income. Certain corporations, such as prescribed small and medium-sized enterprises that file a blue return, are also allowed to carry back a loss to the business year commencing not more than one year prior to the date of commencement of the business year in which the loss arose, and receive a full or partial refund of the amount of corporate tax in the business year in which the loss was carried back.
As mentioned above, if a corporation has capital in excess of 100 million yen or is a wholly owned subsidiary of a large corporation with capital of at least 500 million yen, the deductible percentage of the amount of loss that can be deducted from income is 80%. However, in case of the business years commencing between April 1, 2015 and March 31, 2017, the deductible percentage is 65%, and in case of the business years commencing on or after April 1, 2017, it will decrease to 50%. However the deductible percentage is 100% for a certain period if the corporation is an unlisted company, undergoing reconstruction, etc.

If a corporation transfers assets as a result of a split, merger, or investment in kind ("reorganization"), gain or loss from the transferred assets is as a rule subject to taxation. However, reorganizations meeting certain conditions, such as certain reorganizations between corporations that are wholly owned/owning directly or indirectly in ownership or those between corporations that are owned/owning 50% directly or indirectly in ownership, undertaken for the purpose of a joint venture, are treated as "qualified reorganizations," and qualify for deferment of taxation of gain or loss on the transferred assets.

Corporations whose capital or investment exceeds 100 million yen are taxed on a pro forma basis using income, added value, and capital as the taxable base. The standard tax rates for income, added value and capital are as follows.