2020 Tax Reform -Summary of Revision for Corporation Tax-
On 12 December 2019, the ruling coalition (the Liberal Democratic Party and New Comeito) released the 2020 Tax Reform Outline, and the Cabinet approved on 20 December 2019.
In this News, we will mention revisions of corporation tax in the reform. Please note that the contents of the reform might change through the discussion in the Diet.
2. Corporate Taxation Revision
・ Introduction of a tax incentive for open innovation
From the viewpoint of promoting companies’ open innovation for high productivity and development of a new business, a company which invests in a startup company aiming at the innovation for the next generation will be entitled to take a certain income deduction.
Where a company acquires a certain amount of specified shares of a venture company between the period from 1 April 2020 and 31 March 2022 (should be maintained by the end of the fiscal year including the acquisition date), 25% of the acquisition cost of the specified shares will be deducted as expenses.
The contribution amount should be JPY100 million or more (JPY10 million or more for small and medium sized companies, and JPY500 million or more for foreign companies).
・ Revision for consolidated tax system
In the current consolidate tax system, some difficulties such as complexity in tax calculation and heavy workload of revision or correction of the tax amount after a tax audit were pointed out. As a result, there are many companies which hesitate to use the consolidate tax system despite the merit of offsetting profits and losses.
In the 2020 Tax Reform, a new “group tax relief system” will be introduced, which simplifies the offset of profits and losses in a consolidated group and allows each entity in a group to file and calculate corporation tax individually.
・ 5G (5G generation mobile communication systems)
5G is an essential social structure for achieving Society 5.0, and 5G systems should be built up with safety, trust, stability, and openness. For the purpose of activating 5G systems as Japan’s national strategy, where a company acquires 5G systems, etc. and put them into use in accordance with an authorized introduction plan under the Act on Promotion of Dissemination of Specified Advanced Information and Telecommunications System (name tentative),” it can elect to take either special depreciation or special tax credit.
In this News, we have mentioned “2020 Tax Reform -Summary of Revision for Corporation Tax-.” Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference / Japanese)
・Ministry of Finance Japan 2020 Tax Reform Outline