2018 Tax Reform
On 28 March 2018, the 2018 Tax Reform Act was approved by the Diet, and, on 31 March 2018, the 2018 Tax Reform Act, the Enforcement Orders, and Regulations were promulgated, which are effective for corporate tax years ending on or after 1 April 2018, in principle. The 2018 Tax Reform Act provides for tax measures to help improve corporate productivity by ‘Internet of Things’ (IoT) investment and increase salary income to revitalise the economy.
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) (MLI)
On 18 May 2018, the MLI was approved by the Diet. Although Japan has not yet deposited the ratification instruments to the Organisation for Economic Co-operation and Development (OECD), it is expected that Japan will deposit them by the end of September 2018 to enable the MLI (for Japan) to enter into force on 1 January 2018.
Due to a tax amendment, the consumption tax increase that was originally scheduled to rise to 10% on 1 April 2017 was delayed to 1 October 2019; however, concessions have been introduced with lower rates for selected goods to lessen the burden for the lower income tax brackets. To cope with the multiple consumption tax rates, an invoicing method will be introduced, although not until 1 April 2023, with transitional measures in place for the three-year and six months interim.