Japan: Tax reform proposals outlined for 2018 | KPMG | GLOBAL

Japan: Tax reform proposals outlined for 2018

Japan: Tax reform proposals outlined for 2018

The ruling coalition (the Liberal Democratic Party and New Komeito) on 14 December 2017 agreed on an outline of tax reform proposals for 2018.


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Details of the tax reform provisions are expected to be subsequently unveiled in bills and succeeding tax law amendments, cabinet orders, and ministerial ordinances, with the final version of tax reform depending on the outcome of discussions in the Diet.

Among the corporate tax measures included in the tax reform outline are measures concerning:

  • Tax credits for salary growth—to promote domestic capital investment, investment in human resources, and sustainable pay raises
  • Special measures for promotion of investment in information collaboration—tax incentives for assets such as software used for data collaboration
  • Restrictions to special tax measures for certain eligible companies—restrict large companies from applying certain types of special tax measures when they do not take “positive actions” for pay raises and capital investments
  • Amendments in revenue recognition rules—clarifying the timing when taxable income is realized on sales of goods and services
  • Deferral of recognition of capital gains on shares under specified business restructuring—deferred capital gains on shares surrendered by shareholder companies and individuals who accept exchange tender offers 
  • Taxation of reorganizations—a spin-off transaction in which a “preparatory company” is established in order to obtain permits or licenses that are necessary for business, in advance, could be treated as a tax-qualified reorganization

In the area of international taxation, there are provisions concerning permanent establishments (generally implementing recommendations of the OECD’s base erosion and profit shifting (BEPS) project) and additional amendments to the anti-tax haven (CFC) regime.

Other proposals would affect real estate holding companies, would provide an exemption from interest on margins for over-the-counter derivatives, and would affect individual income tax measures.


Read a December 2017 report [PDF 329 KB] prepared by the KPMG member firm in Japan

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