FY2014 Tax Reform(Main Points)

(Ministry of Finance Cabinet Decision December 24, 2013) 

The government has decided on a tax reduction for promoting investment ,etc. and expansion and improvement for of tax measures for promoting the expansion of income in its “Raising the National and Local Consumption Tax Rates and Associated Responses” (Cabinet decision on October 1, 2013). From the perspective of considering economic situation, the government will take additional tax measures, such as the abolition of the special corporate tax for reconstruction one year ahead of schedule, and tax measures for expanding private investment and consumption, and tax measures for vitalizing local economies, with the aim of ending deflation and revitalization. In order to steadily implement comprehensive tax reform, the government will take necessary measures concerning  income  tax,  corporation  tax,  automobile  taxation,  etc.  Furthermore, tax measures for supporting reconstruction from the earthquake will be implemented.

1. Matters decided in “Raising the National and Local Consumption Tax Rates and Associated Responses”

○   Introduction of tax measures for promoting investment in facilities to improve productivity (mentioned above)

○  Expansion of investment promotion tax measures for SMEs

・When a company acquires facilities to improve productivity, immediate depreciation or a 7% tax credit (or a 10% tax credit for companies whose amount of stated capital  is 30 million yen or less) will be permitted.

1. Matters decided in addition to I. above 

○Abolishment of the special corporate tax for reconstruction one year ahead of schedule

○Expansion of private investment and consumption

・Extend the period for applying taxation on social and entertainment expenses for two years and companies will be allowed to include 50% of their expenses for food and drinks in deductible expenses.

(Note) SMEs may choose either of this tax break and the current lump sum deduction of JPY 8 million.

○  National Strategic Special Zones

・Introduce a system under which special depreciation (or immediate depreciation for certain machinery, etc. for core business) or a tax credit is allowed when a company acquires machinery, etc. in a National Strategic Special Zone, and apply special provisions for an R&D tax credit (special experiments and research expenditures).

○Adjustment of uneven local corporation tax

・Transfer a part of the corporate inhabitant tax on a corporation tax basis to national tax revenue (reduce the tax rate of corporate inhabitant tax on a corporation tax basis and introduce local corporation tax (provisional name)).

・Reduce the tax rate of special local corporation tax and raise the tax rate of corporation business tax (limited to portions on an income basis and a revenue basis).

○Taxation for reconstruction support 

・Extend the period for applying measures allowing immediate depreciation when a company acquires machinery, etc. in a Reconstruction Industry Cluster Zone for two years.

○Revision of taxation on automobiles

・Motor vehicle tonnage tax

－Expansion of ‘eco-car tax cut’ and revision of taxation on old cars

・Automobile acquisition tax

－Reduction of tax rates (registered vehicles 5%→3%; light motor vehicles 3%→2%) and expansion of tax breaks for ‘eco-car tax cut’