Local Tax Reforms for FY2014
As we mentioned in the second “News”, the number of corporations ending fiscal years in March is the largest in Japan. Corporations ending accounting periods in September come to the next, which is 10.9% of all corporations with yearly settlement of accounts. (283,268 companies settled in September / 2,590,950 in total)
The companies ending fiscal years in September should consider the following tax reforms because they come into effect from fiscal year beginning on or after October 1, 2014.
● Revision of Inhabitant Tax rates on corporations
● Introduction of Local Corporation Tax
● Revision of Enterprise Tax rates on corporations
● Revision of Special Local Corporation Tax rates
Also, please note that the explanations below are based on the premise of corporations whose headquarters are located in Tokyo.
2. Revision of Inhabitant Tax rates on corporations
The revision is aimed for reducing unbalance of tax resources and minimizing the gaps of financial power between urban and local regions. The tax rates are reduced as follows:
(*) The maximum rate is applied to companies with the amount of capital or investment (“capital”) above JPY 100 million or the amount of corporation tax above JPY 10 million.
3. Introduction of Local Corporation Tax
Similarly, “Local Corporation Tax” was introduced along with the reduction of the Local Inhabitant Tax rates on corporations. The Local Corporation Tax (national tax) should be filed and paid to the national government (national tax offices), and allocated to local governments.
Amount of Local Corporation Tax = Amount of Corporation Tax before deducting income and foreign tax credits, etc. × 4.4%
4. Revision of Enterprise Tax rates on corporations
The Enterprise Tax rates on corporations (standard rates), depending on the amount of “capital”, are amended as follows:
① Companies with “capital” exceeding JPY100 million
② Companies with “capital” of JPY100 million or less
5. Revision of Special Local Corporation Tax Rates
The Special Local Corporation Tax rates are also reduced as follows:
In this column, we have provided information about tax reforms related to companies ending fiscal years in September 2015. The above mentioned tax reforms are basically aimed for amending the unbalance of local corporate taxation. It is recommended to check tax rate tables and other information again. Also, this column intends to introduce general guidelines and does not include any professional advice. Please do not make any judgements without any advice from professionals. If you have any questions, please feel free to contact us.
Ministry of Finance Japan（2014）Pamphlet “The 2014 Tax Reform”
Ministry of Finance Japan ”Outline (“Taiko”) of the 2014 Tax Reform (Cabinet Decision dated December 24, 2013)” <http://www.mof.go.jp/tax_policy/tax_reform/outline/fy2014/26taikou_gaiyou.pdf>
National Tax Agency (2013) “Tax Statistics”
Ministry of Internal Affairs and Communications “Guidelines for partial revisions of Local Tax, etc.”
Bureau of Taxation, The Tokyo Metropolitan Government（July 2, 2016）”Tax Rate Revisions for Corporate Inhabitant and Enterprise Taxes” <http://www.tax.metro.tokyo.jp/kazei/data/zeiritsu_kaisei.pdf>
Bureau of Taxation, The Tokyo Metropolitan Government “Provisional Tax Returns for the First FY after Amendment of Tax Rates