FY2015 Tax Reform (Main Points)
(Cabinet decision on January 14, 2015)
In light of the current economic situation, etc., in order to better ensure a break away from deflation with economic revitalization, the Government will carry out pro-growth corporate tax reform and take tax measures to invigorate the housing market through early transfer of assets from elderly to younger generations. To invigorate local areas, the Government will take tax measures to strengthen companies' local business facilities and support marriage and childcare. Moreover, in order to achieve economic revitalization and fiscal consolidation, the Government will also take tax measures related to a change in the implementation date of the consumption tax hike to 10%. Based on international initiatives including the BEPS project, the Government will take tax measures toward international harmonization of taxation related to cross-border transactions, etc. In addition, tax measures to support reconstruction from the Great East Japan Earthquake and other necessary tax measures will be implemented. More specifically, the Government will make the following tax system revisions.
Individual income taxation
○ Expansion of NISA
・Create the Junior NISA (enabling people aged less than 20 to open accounts, with the maximum amount of the annual investments set at ¥800,000).
・Raise the maximum amount of the annual investment (from ¥1 million to ¥1.2 million)
○ Change in the application period for housing loan reduction, etc.
・Extend the application period for housing loan reduction, etc. for one and a half years (until December31, 2017 ⇒ until June 30, 2019).
○ Introduction special provisions for taxation on capital gains at the time of move from Japan
・Introduce special provisions in which tax is imposed on people who meet certain criteria, such as having securities, etc. with a value of ¥100 million or more at the time of move from Japan, by deeming that the securities, etc. have been sold.
○ Expansion of home town tax contribution through donation
・Expand the special deduction amount (the upper limit will be raised from 10% of the individualresident tax proportionate to the income level to 20%).
・Request donation recipients to send a return gift to donors in a sensible way based on the purpose of the deduction for donation.
・Simplify the tax return filing procedures (introduce a one-stop procedure of applying the deduction when salaried workers who do not file a final income tax return make a donation).
| ○ Extension and expansion of gift tax exemption related to funds for housing acquisition, etc. ・Extend the period for applying tax exemption and increase the exemption amount (from ¥10 million to a maximum of ¥30 million). ○ Introduction of exemption on gifts for marriage and childcare in lump sum ・As for gift tax on gift money for marriage, childbearing and caring in a lump sum to his or her own children or grandchildren, introduce an exemption of up to ¥10 million per donee. |
Corporate taxation | |
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○ Pro-growth corporate tax reform
・Reduce the corporation tax rate, etc.
| Current rate | Corporation tax rate | 25.5% | Corporation enterprise tax rate on income (standard tax rate) | 7.2% | (Reference) Effective corporate tax (national and local) | 34.62% |
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⇒FY2015 | FY2016 | 23.9% | 23.9% | 6.0% | 4.8% | 32.11% (▲2.51%) | 31.33% (▲3.29%) |
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・Broaden tax base, etc.
－Revision of the deduction of loss carried-forward
Current deduction limit for large corporations: 80% of income
⇒From FY2015: 65%
⇒From FY2017: 50%
－Revision of exclusion of dividends received, etc. from gross profits
Current status: 50% of the dividend amount is excluded from gross profits when the shareholding ratio is less than 25%, and 100% is excluded when the shareholding ratio is 25% or higher
⇒ The exclusion ratio will be set at:
20% when the shareholding ratio is 5% or lower 50% when the shareholding ratio is a third or lower
100% when the shareholding ratio is more than a third.
－Expansion of pro-forma standard taxation of local corporate enterprise tax Current status: a fourth
⇒ From FY2015: three-eighths
⇒ From FY2016: a half
－Revision of special tax measures (to be explained later).
・Revise the tax system for promoting expansion of income
－Revision of the requirement of the salary payment increase.
Current status: 3% rise in FY2015 compared with the base year→ 5% rise in FY2016→ 5% rise in FY2017
⇒3% rise in FY2015
⇒4% rise in FY2016 (3% rise in the case of SMEs)
⇒5% rise in FY2017 (3% rise in the case of SMEs)
－Introduction of a system to deduct the amount equivalent to the salary payment increase from the tax base of corporate enterprise taxation(pro-forma standard taxation) based on additional value when companies meet the eligibility requirements for tax system for promoting expansion of income.
○ Introduction of tax system for strengthening local business facilities
・ Create tax reduction for investment when companies acquire buildings, etc. for local business facilities and expansion of the employment promotion tax system on the assumption that the Local Revitalization Act is revised.
○ Revision of special tax measures
・Revise R&D tax system (set a deduction quota for special experimental research expenses (5%) separately, while maintaining the overall deduction limit of 30% of the corporation tax amount. Abolish the system for carried forward of the excess over the limit).
・Abolish the tax system to promote investment in facilities to improve productivity.
・Abolish immediate depreciation of photovoltaic power generation facilities.