Japan

Corporate - Significant developments

Last reviewed - 27 December 2019

2019 Tax Reform

On 27 March 2019, the 2019 Tax Reform Act was approved by the Diet, and, on 29 March 2019, the 2019 Tax Reform Act, the Enforcement Orders, and Regulations were promulgated, which are effective for corporate tax years ending on or after 1 April 2019, in principle. The 2019 Tax Reform Act provides for tax measures to promote investment in innovation and to encourage investment by small to medium size enterprises (SMEs) in improving business productivity. 

In addition, the 2019 Tax Reform Act includes amendments consistent with the recommendations of the Organisation for Economic Co-operation and Development's (OECD’s) Base Erosion and Profit Shifting (BEPS) Action Plan, with the stated purpose of supporting the global expansion of Japanese companies while limiting tax avoidance.

Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) becomes effective for Japan

On 1 January 2019, the MLI entered into force for Japan. As of 1 July 2019, 15 jurisdictions, which are among the Japanese covered convention, deposited the instrument of ratification, acceptance, or approval of the Convention, and for 12 jurisdictions, the MLI entered into force.

Consumption tax

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.