Corporations wrapping AI
What is appropriate as [Corporations wrapping AI
I was narrowing my vision to corporations under Japanese domestic law, but I wonder if a more workable system could be created in Estonia or Taiwan, for example.
Proposal 1: Japanese General Incorporated Association or General Incorporated Foundation
Profit sharing is prohibited.
DR.iconUse of non-profit corporation/foundation: If the purpose of AI is not profit-making, but more like a public purpose, there is an option to use a foundation. For example, if you want AI to make decisions in the public interest, you could establish a general incorporated foundation by contributing initial funds (basic assets) to AI, and position AI systems and funds as its basic assets.
problem
70,000 yen per year for corporate tax equalization alone
GPT-4.5.iconTax Advantages of Estonian Corporations
Zero corporate tax as long as profits are retained
It is not taxed as long as the profits continue to be reinvested.
GPT-4.5.icon
As a general rule for international taxation, even if a corporation's place of registration is overseas, if substantial business management and decision-making takes place in Japan, the corporation is liable to taxation in Japan (the residence rule under the Corporation Tax Act).
What is an okay case (not taxable in Japan)? : All business management and decision-making of the corporation is conducted overseas (either locally in Estonia or in another country).
We could have an AI outside of Japan do all the decision making.nishio.icon
nishio.iconFor example, you could own 100% of the stock of a stock company and not pay dividends or increase in value.
GPT-4.5.iconThe idea is reasonable.
As you suggested,
100% ownership of stock in the corporation
No dividend at all (no dividend)
Do not sell shares (do not gain in price)
If the condition that "the individual is not liable for taxation as an individual" is met, there is no transfer of profit to the individual, and therefore no tax liability as an individual.
However, a word of caution:
In this case, the tax liability at the corporate level still exists with respect to income (profit) earned as a corporation.
In particular, if a Japanese resident makes substantive decisions and manages the corporation from within Japan, the foreign corporation itself may be liable for tax in Japan.
Seriously?nishio.icon
Then you'd have to give up paying corporate taxes.
No, wait, you don't have to pay if you are losing money in the first place.
GPT-4.5.iconThat's right. To sum it up simply:
As long as the company engages in "activities not for profit" as a corporation, it will not make a profit and will not have to pay corporate income taxes.
The minimum expenses required to maintain the corporation can be covered by investments or loans from individuals.
However, it is necessary to clarify that there is a certain "actual activity" and "business purpose" because "what is the point of establishing and maintaining a corporation overseas (e.g., in Estonia) that does unprofitable work in the first place?" Therefore, it is necessary to clarify that the corporation has certain "actual activities" and "business purposes.
Nevertheless, this method minimizes tax risks.
Since the goal is not to not pay, we should not aim to make money, but rather pay if we make money and not pay if we don't.
GPT-4.5.iconThe "per capita" inhabitant tax (corporate inhabitant tax) is always levied even if the company is in the red.
That's no good!nishio.icon
GPT-4.5.iconEstonian corporations are not subject to the equal portion of Japan's corporate inhabitant tax unless they have a "branch" or "office" in Japan.
However, if you establish a substantial business presence in Japan, you may also be subject to equalization.
nishio.iconWhat is a business location?
GPT-4.5.icon
If there is a physical location and business activities are conducted there on an ongoing basis, it is considered a "business location.
Even if you run a business from your home, it is a "business location" if you use it permanently for business purposes.
Simply put:
Completely online (no locations including home) → no equalization
Permanent use of home for business use → Equal share (for domestic corporations)
I guess I can't do it.nishio.icon
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