Income Tax (Tables)

12 Months Ended

Mar. 31, 2026

Schedule of Major Movements of Deferred Tax Assets and Liabilities

The major movements of deferred tax assets and liabilities are as follows:

For the year ended March 31, 2025


								(In millions of yen)
	Balance as of April 1, 2024		Amounts recorded under profit or loss			Amounts recognized under other comprehensive loss		Other			Balance as of March 31, 2025
Deferred tax assets
Operating loss carryforwards		4,846		(2,052	)		—		—			2,794
Loss allowance		15,378		6,191			—		—			21,569
Impairment		2,184		(819	)		—		—			1,365
Assets revaluation of acquired business		9,258		(2,647	)		—		—			6,611
Lease liabilities		2,456		2,789			—		—			5,245
Accrued liabilities		1,000		(567	)		—		—			433
Deposits		65		12,668			—		—			12,733
Securities		1,098		184			1,501		—			2,783
Asset retirement obligation		564		494			—		—			1,058
Loans and advances to customers		1,872		1,004			—		—			2,876
Other		1,495		822			—		10			2,327
Subtotal		40,216		18,067			1,501		10			59,794
Deferred tax liabilities
Capitalized card acquisition cost		1,359		(492	)		—		—			867
Right-of-use assets		2,841		1,961			—		—			4,802
Lease receivables		—		1,422			—		—			1,422
Accounts receivable		540		1,472			—		—			2,012
Other		1,313		(570	)		—		933			1,676
Subtotal		6,053		3,793			—		933			10,779
Deferred tax, net		34,163		14,274			1,501		(923	)		49,015

The amounts of deferred tax assets and deferred tax liabilities on the Consolidated Statements of Financial Position are as follows:


	(In millions of yen)
	March 31, 2025
Deferred tax assets		49,392
Deferred tax liabilities		377
Deferred tax, net		49,015

For the year ended March 31, 2026


								(In millions of yen)
	Balance as of April 1, 2025		Amounts recorded under profit or loss			Amounts recognized under other comprehensive loss		Other			Balance as of March 31, 2026
Deferred tax assets
Operating loss carryforwards		2,794		29,196			—		—			31,990
Loss allowance		21,569		(325	)		—		—			21,244
Impairment		1,365		(488	)		—		—			877
Assets revaluation of acquired business		6,611		(2,752	)		—		—			3,859
Lease liabilities		5,245		(2,430	)		—		—			2,815
Accrued liabilities		433		2,624			—		0			3,057
Deposits		12,733		19,593			—		—			32,326
Securities		2,783		—			1,751		—			4,534
Asset retirement obligation		1,058		(39	)		—		—			1,019
Loans and advances to customers		2,876		1,432			—		—			4,308
PayPay Trademark		—		5,142			—		—			5,142
Other		2,327		1,749			—		(53	)		4,023
Subtotal		59,794		53,702			1,751		(53	)		115,194
Deferred tax liabilities
Capitalized card acquisition cost		867		(453	)		—		—			414
Right-of-use assets		4,802		(919	)		—		—			3,883
Lease receivables		1,422		(1,422	)		—		—			—
Accounts receivable		2,012		194			—		—			2,206
Other		1,676		(54	)		—		—			1,622
Subtotal		10,779		(2,654	)		—		—			8,125
Deferred tax, net		49,015		56,356			1,751		(53	)		107,069

The amounts of deferred tax assets and deferred tax liabilities on the Consolidated Statements of Financial Position are as follows:


	(In millions of yen)
	March 31, 2026
Deferred tax assets		107,275
Deferred tax liabilities		206
Deferred tax, net		107,069

Summary of Deductible Temporary Differences and Carryforward of Unused Tax Losses for which Deferred Tax Assets are not Recognized

Deductible temporary differences and carryforward of unused tax losses for which deferred tax assets are not recognized are as follows:


	(In millions of yen)
	March 31, 2025		March 31, 2026
Deductible temporary differences		135,389		59,507
Carryforward of unused tax losses		141,868		20,350
Total		277,257		79,857

Breakdown of Carryforward of Unused Tax Losses by Expiry date for which Deferred Tax Assets are not Recognized

Breakdown of carryforward of unused tax losses by expiry date for which deferred tax assets are not recognized are as follows:


	(In millions of yen)
	March 31, 2025		March 31, 2026
Within 1 year		315		1,529
Between 1 year and 2 years		887		—
Between 2 years and 3 years		1,529		1,559
Between 3 years and 4 years		—		1,882
Between 4 years and 5 years		—		1,829
5 years and after		139,137		13,551
Total		141,868		20,350

Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) are as follows:


				(In millions of yen)
	For the year ended
	March 31, 2024			March 31, 2025			March 31, 2026
Current tax expense (1)		5,306			10,078			18,491
Deferred tax expense (benefit)		(4,465	)		(14,274	)		(56,356	)
Changes related to origination and reversal of temporary differences (2)(3)		(4,628	)		(13,095	)		(57,017	)
Changes in the tax rate (4)		163			(1,179	)		661
Total		841			(4,196	)		(37,865	)


				(In millions of yen)
	For the year ended
	March 31, 2024			March 31, 2025			March 31, 2026
Income tax recognized directly in equity		—			—			(460	)
Income tax recognized in other comprehensive income		(521	)		(1,501	)		(1,751	)

(1)

For the years ended March 31, 2024, 2025 and 2026, current tax expense includes benefits arising from tax losses and temporary differences of prior periods that had not previously been recognized. As a result, current tax expense decreased by nil, 37,159 million yen and 32,504 million yen, respectively.

(2)

For the year ended March 31, 2026, the Company reassessed the recoverability of its deferred tax assets in light of projections of future taxable profit. As a result, the Company recognized additional deferred tax assets relating to deductible temporary differences and carryforward of unused tax losses that had not been previously recognized. The basis for this conclusion is as follows:

•

It has become probable that taxable profit will be generated for two consecutive fiscal years at the end of the current fiscal year.

•

The unused tax losses resulted from identifiable causes that are unlikely to recur in the future.

•

Based on a critical assessment of historical performance and approved business plans for the next three years, the Company concluded that sufficient taxable profit is expected to be generated during the periods in which the carryforward of unused tax losses can be utilized.

For the years ended March 31, 2025 and 2026, deferred tax expense includes benefits arising from the recognition of deferred tax assets related to tax losses and temporary differences of prior periods following the reassessment of their recoverability. As a result, deferred tax expense decreased by 12,737 million yen and 57,536 million yen, respectively. No such benefits were recognized for the year ended March 31, 2024, as the recognition criteria for deferred tax assets were not met.

(3)

For details, refer to the changes in deferred tax assets and liabilities at the section (1) above.

(4)

Amendments to the Japanese tax regulations were enacted into law on March 31, 2025. As a result of these amendments, the Japanese statutory effective tax rate is scheduled to be increased from 31.46% to approximately 32.34% effective from the year ending March 31, 2027. The Group measured deferred tax assets and deferred tax liabilities at the tax rates that are expected to apply to the period when the assets are realized or the liabilities are settled.

Reconciliation of Statutory Effective Tax Rate and the Actual Effective Tax Rate

The reconciliation of the statutory effective tax rate and the actual effective tax rate are as follows:


	For the year ended
	March 31, 2024			March 31, 2025			March 31, 2026
Japanese statutory effective tax rate (1)		31.46	%		31.46	%		31.46	%
Permanent non-deductible items		877.15			(0.46	)		(0.05	)
Assessment of the recoverability of deferred tax assets		10,522.38			(41.39	)		(79.80	)
Additional taxable profit (2)		341.31			1.23			0.46
Change in tax rate (3)		1,441.10			(3.37	)		0.83
Tax credits		(2,773.17	)		(0.92	)		(0.65	)
Share of loss of investments accounted for using the equity method		—		0.49				0.05
Tax rate difference between subsidiaries		(989.88	)		0.58			0.30
Other		(2,004.09	)		0.38			0.04
Actual effective tax rate		7,446.26	%		(12.00	)%		(47.36	)%

(1)

Japanese statutory effective tax rate is calculated based on corporate tax, inhabitant tax and enterprise tax applicable to the Group.

(2)

For added value component of the enterprise tax, there are certain additional taxable items such as employee benefit expenses that are included in taxable profit and loss carryforward cannot be utilized.

(3)

Due to tax reform enacted during the year ended March 31, 2024, a certain subsidiary will apply the size-based enterprise tax from the year ending March 31, 2027. Amendments to the Japanese tax regulations were enacted into law on March 31, 2025. As a result of these amendments, the Japanese statutory effective tax rate is scheduled to be increased from 31.46% to approximately 32.34% effective from the year ending March 31, 2027. The Group measured deferred tax assets and deferred tax liabilities at the tax rates that are expected to apply to the period when the assets are realized or the liabilities are settled.