Japan tax alert | 19 December 2017

2018 Japan tax reform outline

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Seminar information: 2018 Japan Inbound tax reform seminar
Date and Time: Thursday, 1 February 2018, 9:30-11:00
Location: Tokyo, Japan

Go to detailed newsletter released on 22 January 2018

On 14 December 2017, Japan’s ruling party released the 2018 Tax Reform Outline (the Outline). Below is an overview of the major amendments and revised items contained in the Outline. Please note that some items may be revised, deleted or added during Diet deliberations with regards to the reform bill.

Corporate taxation

1) Tax package incentivizing wage increases and productivity enhancements

a) The revision and expansion of tax credit incentive given for salary growth

The rules will change such that, in the event that an entity increases wages or equipment investment by more than a certain ratio, the entity will enjoy a 15% tax credit of salary increases. Furthermore, an entity will enjoy a 20% tax credit in the event that it meets requirements for increased training costs. Small or medium-sized entities meeting certain requirements will see the tax credit raised to a maximum of 25% of salary increases. The tax credit is a temporary measure lasting for a period of three years beginning 1 April 2018.

b) Creation of tax incentives related to the promotion of information-sharing

A new measure allowing, in the event that an entity has made information-sharing investments meeting certain requirements for the enhancement of productivity through internal and external data sharing and advanced applications of such data, the special depreciation (30%) or tax credit (5% or 3%) of the acquisition costs of qualified equipment will be introduced. (Temporary measure lasting for a period of three years.)

c) Revision of conditions for the application of special measures concerning taxation

The application of tax credits relating to productivity enhancement (R&D tax credit incentives, etc.) will not be allowed for large enterprises which, despite increases in taxable income, have made few wage increases or equipment investment. (Temporary measure lasting for a period of three years.)

d) Equipment investment support for small and medium enterprises

A special measure, lasting for a period of three years, enabling the reduction of fixed asset tax by 50 to 100 percent for equipment investments meeting certain requirements made by small and medium enterprises will be introduced.

2) Creation of special income calculation relating to transfers of shares in which shares are treated as consideration (stock-consideration M&A)

In accordance with “Special Business Restructurings under the Industrial Competitiveness Enhancement Act” (official term TBD), the recognition of capital gain derived from a certain share transfer where the consideration paid to the seller is in the form of shares of the buyer will be deferred (temporary measure lasting three years).

* Please see the following PDF for the full contents.

Individual income taxation, business succession taxation, asset taxation
International taxation
Other amendments and revisions

Download this tax alert as a PDF file.