If a corporation made a profit in the previous fiscal year but made a loss in the current fiscal year, it can claim a refund of corporate tax [Refund by carrying back losses]

Ideally, a company would stably record profits and pay taxes, but corporate management is not that easy.

There may be times in a business year when a company incurs a loss due to various factors such as sluggish sales, soaring costs, increased selling, general and administrative expenses, and extraordinary losses.

There is a system to rescue such loss-making corporations.

If your company have a current loss but paid corporate tax on the previous year’s profit, it can receive a refund of the previous year’s corporate tax.

However, there are conditions to use this system, so I will briefly introduce it.

Applicable corporations

The main targets are small and medium-sized enterprises whose capital is 100 million yen or less at the end of the business year.

However, this excludes corporations that are wholly controlled in capital by large corporations, such as subsidiaries of large corporations with capital of 500 million yen or more.

Applicable requirements

The following three requirements apply.

・Continuously submit blue tax returns.

・Submit the current year’s blue tax return by the submission deadline.

・ “refund request form for carrying back losses” must be attached to the current tax return.

Refund amount

The formula for calculating the refund amount is as follows.

Formula:

Previous fiscal year’s corporate tax amount × Current fiscal year’s loss* / Previous fiscal year’s profit amount

*The upper limit of the numerator amount is the denominator amount.

As a calculation example,

Assuming that

the previous year’s profit was 10 million yen,

the previous year’s corporate tax was 3 million yen,

and the current year’s loss was -5 million yen,

3 million yen × 5 million yen / 10 million yen = 1.5 million yen

The refund amount would be 1.5 million yen.

In conclusion

This time, I introduced the refund of corporate tax losses through carryback.

This is a system that you cannot apply if you do not know about it.

If your company has a net loss, please check to see if there was a profit in the previous year.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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