Japan tax newsletter 8 October 2020
The profound impact of the coronavirus disease 2019 (COVID-19) pandemic extends beyond the Japanese economy and is affecting the global economy itself. Concerns are rising that this impact may impede the research and development (R&D) activities that impacts the future of corporations. Since large investments are required to develop new products, technologies and services, securing research funding becomes an issue in the face of declining revenue. In times like these, an effective way of minimizing the corresponding financial burden is to make the most of the R&D tax credits.
In this article, we introduce the tax credit for special open innovation R&D expenses (hereinafter, the “open innovation incentive”), an R&D tax credit whose use is increasing in recent years. Even corporations that are only making use of the tax credit for general R&D expenses (hereinafter, the “general R&D incentive”) and not using any of the other available R&D tax credits are highly likely to have the option to utilize the open innovation incentive. It is advisable for corporations to proactively utilize the open innovation incentive to ensure that their R&D activities do not stagnate after the post-COVID-19 era.