Accounting, payroll, HR, and admin outsourcing services for your Japanese subsidiary - HTM Tokyo
recent regulation changes in japan - accounting, HR, payroll, tax To review recent and upcoming regulation changes in Japan, navigate the categories to find the title of a recent or upcoming regulation change. Clicking the title will show the details of that change. Technical terms in bold can be rolled over to show their definitions, and clicking on them will take you to the glossary page.

Revision of Employee Pension Premium Rate for Sep 2016-Aug 2017 - Sep 2016

Decrease in Employment Insurance Premium Rate for 2017 - Apr 2017

Revision in Childcare Allowance Contribution Rate - Apr 2017

Revision of Employee Pension Premium Rate for Sep 2015-Aug 2016 - Sep 2016

Revision of Employee Pension Premium Rate for Sep 2014-Aug 2015 - Sep 2014

Decrease in Asbestos Insurance Premium Rate for 2014 - Apr 2014

Increase in Long-Term Care Insurance Premium Rate for 2014 - Mar 2014

Revision of Employee Pension Premium Rate for Sep 2013-Aug 2014 - Sep 2013

Revision of Employee Pension Premium Rate for Sep 2012-Aug 2013 - Sep 2012

Revision in Childcare Allowance Contribution Rate - Apr 2012

Decrease in Employment Insurance Premium Rate for 2012 - Apr 2012

Revision of Standard Value of In-Kind Wage for Social Insurance Premium Calculation - Apr 2012

Revision of Worker’s Accident Compensation Insurance Rates - Apr 2012

Effectuation of Social Security Agreements with Brazil and Switzerland - Mar 2012

Increase in Health Insurance Premium Rates for 2012 - Mar 2012

Increase in Long-Term Care Insurance Premium Rate for 2012 - Mar 2012

Abolishment of Qualified Pension Plan - Mar 2012

Allowing Employee to Contribute to Corporate-type Defined Contribution Plan - Jan 2012

Revision of Employee Pension Premium Rate for Sep 2011-Aug 2012 - Sep 2011

Unchange in Employment Insurance Premium for 2011 - Apr 2011

Increase in Health Insurance Premium Rate for 2011 - Mar 2011

Increase in Long-Term Care Insurance Premium Rate for 2011 - Mar 2011

Revision of Participant's Age Restriction for Defined Contribution Plan to 65 years old - TBA

The market value of leased property at the end of the quarterly accounting period and the quarterly balance sheet amount are no longer required to be annotated in quarterly financial reporting, even when the value of the leased property has changed dramatically from the last year due to business mergers.
Effective date: April 1, 2011
Accounting standard for quarterly financial reporting has been revised as the following:
  1. Quarterly statement of cash flow for the first and third quarter can be omitted. If the statements are omitted, depreciation expense of intangible assets and amortization expense of goodwill from the beginning of year are required to be annotated.
  2. Time period subject to disclosure of quarterly income statement and quarterly comprehensive income statement can be on a voluntary basis.
  3. Annotations for quarterly financial reporting have been simplified.
Effective date: April 1, 2011
Minimum wage has increased from 730yen to 737 yen on the national average. Minimum wage differs by prefecture, for instance minimum wage in Tokyo has increased from 821yen to 837 yen.
Effective date: September 30, 2011
Businesses with fewer than 100 employees are now required to establish a short working hour system to employees rearing a child under 3 years old. Before July 2012, only businesses with over 100 employees were required to establish the short working hour system. Short working hour system is a system which limits working hours of specified employees to the maximum of 6 hours a day if the employee demands. Specified employees eligible for the short working hour system are the following:
  1. Employee is rearing a child under 3 years old and has not taken child-care leave while using the short working hour system.
  2. Employee is not daily employed.
  3. Working hours each day greater than 6 hours.
  4. Employee applying is not exempt from the short working hour system by a labor-management agreement.
Effective date: July 1, 2012
Businesses with fewer than 100 employees are now required to establish a limitation of overtime work provided to employees rearing a child under 3 years old if the employee demands. Before July 2012, only businesses with over 100 employees were required to establish a limitation to overtime work system. The following employees may not be subject to this system:
  1. Employee who is daily employed
  2. Employee whose length of service is less than 1 year.
  3. Employee who works less than 2 days a week.
Effective date: July 1, 2012
Business with fewer than 100 employees are now required to establish a nursing care leave system upon employees' demands. Before July 2012, only businesses with over 100 employees were required to establish a nursing care leave system. Nursing care leave system is a system which provides 5 days leave to an employee who is nursing a member of his/her family. If an employee has more than 2 family members who require nursing care, the employee may take nursing care leave up to 10 days. The following employee may not be subject to this system:
  1. Employee whose length of service is less than 6 months.
  2. Employee who works less than 2 days a week.
Effective date: July 1, 2012
The 380,000 yen dependent deduction for taxpayers with dependents under 16 has been abolished.
Effective date: January 1, 2011
The extra 250,000 yen dependent deduction for taxpayers with dependents between 16 and 18 has been abolished. The dependent deduction applied to dependents between 16 and 18 is 380,000 yen per dependent.
Effective date: January 1, 2011
The age range of specified dependents eligible for the extra 250,000 yen dependent deduction has been reduced to between the ages 19 and 22 from 16 and 22.
Effective date: January 1, 2011
The dependent deduction for taxpayers with a seriously handicapped spouse or dependent living with the taxpayer has increased from 400,000 to 750,000 yen per dependent. Seriously handicapped person is defined as either:
  1. A handicapped person who is determined as having severe disability specified by a public agency or designated doctor, or
  2. A person who has a disability certificate or wounded in war certificate and specified as having severe disability, or
  3. A person who cannot make judgment due to continuous mental disorder, or
  4. A person who is bedridden for more than six months and requires nursing care, or
  5. A victim of nuclear bombing who is certified by the Japanese Health Minister.
Determination of the handicapped for the deduction takes place on December 31st of the tax year.
Effective date: January 1, 2011
Insurances contracted or renewed on or after January 1, 2012 are now classified into 3 types; life insurance, personal pension insurance and long-term and medical care insurance. Calculation methods of the deductible amount for insurances contracted or renewed on or after January 1, 2012 have also changed to the following:
  1. Annual insurance premiums ≤ 20,000 yen: whole amount paid is deductible
  2. 20,000 yen < annual insurance premiums ≤ 40,000 yen: 1/2 of payment plus 10,000 yen is deductible
  3. 40,000 yen < annual insurance premiums ≤ 80,000 yen: 1/4 of payment plus 20,000 yen is deductible
  4. Annual insurance premiums > 80,000 yen: 40,000 yen is deductible.
Calculation and classification of insurance contracted or renewed before 2012 (previously contracted insurance) use previous classifications and calculation methods. If a taxpayer has both newly contracted and previously contracted life insurance or personal pension insurance and the premium for the previously contracted insurance is less than or equal to 60,000 yen, the deduction is the sum of deductible calculated with the formula for the newly contracted insurance and deductible calculated with the formula for the previously contracted insurance. The sum of the deductibles for each type of insurance may not exceed 40,000 yen. If the premium for the previously contracted insurance is more than 60,000 yen, the taxpayer should only apply deductibles calculated with the previously contracted insurance formula, because the maximum deductible amount is larger for the previously contracted insurance deduction (maximum of 50,000 yen).
Effective date: January 1, 2012
Employment income more than 15 million yen a year will have smaller employment income deduction of 2.45 million yen. Before the revision, employment income deduction for employment income more than 10 million yen was 5% of employment income plus 1.7 million yen.
Effective date: January 1, 2013
Expenses to obtain qualification directly required for occupation, such as lawyer, certified accountant, certified tax accountant, will be included in specified expense deduction. Expenses for purchasing books related to work, purchasing cloths worn at work and entertainment expense necessary for duties will also be included in specified expense deduction with a maximum total of 650,000 yen a year. In addition, determination amount for specified expense deduction will change to the following:
  1. Taxpayer who earns less than or equal to 15 million yen a year: Amount of specified expense exceeded 1/2 of employment income may be deductible form income
  2. Taxpayer who earns more than 15 million yen a year: Amount of specified expense exceeded 1.25 million yen may be deductible from income.
Effective date: January 1, 2013
The non-taxable limit of commuting allowance for people commuting by car and/or bicycle for more than 15km one-way is now only determined by the distance table provided by the National Tax Agency. The distance table provided is the following
  1. Commuting distance < 2km: all commuting allowance is taxable
  2. 2km ≤ commuting distance <10km: 4,100 yen is non-taxable
  3. 10km ≤ commuting distance < 15km: 6,500 yen is non-taxable
  4. 15km ≤ commuting distance < 25km: 11,300 yen is non-taxable
  5. 35km ≤ commuting distance < 35km: 16,100 yen is non-taxable
  6. 35km ≤ commuting distance < 45km: 20,900 yen is non-taxable
  7. Commuting distance ≥ 45km: 24,500 yen is non-taxable
Before the revision, the non-taxable limit for people commuting more than 15km one-way was determined by the higher of the amount based on the table or the actual cost of public transportation that would be charged.
Effective date: January 1, 2012
The depreciation rate by declining balance method for assets purchased on or after April 1, 2012 will change to 1/useful life multiplied by 2.0 (called 200% declining balance depreciation). However, as a transitional measure, assets purchased on or between April 1, 2012 and December 31, 2012 may be depreciated using former declining balance depreciation rate, which is 1/useful life multiplied by 2.5. Assets purchased before April 1, 2012 may be depreciated using 200% declining balance depreciation rate, if notification to a tax office is filed by the final tax return of 2012.
Effective date: April 1, 2012
The declining balance depreciation rate of capital improvement cost on asset spent on or after April 1, 2012 is now required to be 200% declining balance method (1/useful life multiplied by 2.0). If an asset improved is purchased before April 1, 2012 and its improvement cost is spent on or after April 1, 2012, the improvement cost can no longer be added on the book value of the asset and depreciated as if a new asset costing sum of the book value and the improvement cost is purchased. The capital improvement cost in this case is required to be depreciated separately from the improved asset using the same kind and the same remaining useful life as the improved asset.
Effective date: April 1, 2012
White Return business income earners who earn less than or equal to 3 million yen in previous year or two years before will be required to book and preserve daily transaction records. Therefore, from January 2014, all white return business income earners will be required to book and preserve records relating to income and expense for 7 years and other documents for 5 years.
Effective date: Jan 1, 2014
The special reconstruction income tax of additional 2.1% of base income tax liability will be imposed from January 1, 2013 to December 31, 2037. The special reconstruction tax is created in order to finance post-earthquake reconstruction for earthquake occurred on March 11, 2011 in Tohoku. This special income tax includes not only income tax filed in tax return, but also withholding income tax. For example, current withholding tax for dividends, interests and royalties paid to foreign corporations is 20%, but after 2013, withholding tax rate will change to 20.42%.
Effective period: January 1, 2013 to December 31, 2037
Payment time of withheld income tax between July and December for business which submitted special extension of withheld tax payment (源泉所得税の納期の特例の承認に関する申請書) will be extended from January 10 to January 20. This regulation change is effective to withheld income tax on salaries, retirement allowances and etc. paid on or after July 1, 2012.
Effective date: July 1, 2012
Tax on retirement income for directors whose service period is less than or equal to 5 years will be increased due to revision in calculation of retirement income subject to income tax as the following:
  1. Retirement income for directors whose service period is less than or equal to 5 years: gross receipt of retirement allowance – retirement income deduction
Retirement income for directors whose service period is greater than 5 years will not change from the current calculation, which is (gross receipt of retirement allowance – retirement income deduction) ×1/2.
Effective date: January 1, 2013
Record of exercising stock option will be required to be filed to a tax office, when stock option granted from foreign corporation to employees and directors of its Japanese subsidiary is exercised. Salaries paid to employees and directors in conjunction with the value of company stocks are also subject to the notification requirement. Employees and directors subject to this requirement are Japanese residents whose company’s 50% or more stocks are owned by a foreign corporation, or whose company is a Japan branch of a foreign corporation. Filing date of the record is by March 31 of following year when stock option is exercised.
Effective date: January 1, 2012
Residents owning more than 50 million yen of assets located outside of Japan at the end of year will be required to declare information regarding the overseas assets (国外財産調書) to a tax office. Items required to be declared are the following:
  1. Type of the assets
  2. Number of the assets
  3. Value to the assets
  4. Any other required information
The value of overseas asset here is a fair market value, but it can be substituted by estimated value. Due date of submission is March 15 of the following year. In order to encourage people to accurately declare their overseas assets, special measures for penalty tax on under declaration and non declaration of taxes on overseas assets will also be introduced. If penalty tax is imposed, but overseas assets are properly declared, amount of the penalty tax will be reduced by 5%. If penalty tax is imposed and overseas assets are not properly declared, amount of the penalty tax will be increased by 5%.
Effective Date: January 1, 2014
Businesses making donations of more than 2,000 yen to nonprofit organizations can now take either income deduction or special tax credit. 40% of total amount of donations made to nonprofit organizations over 2,000 yen is the amount of the special tax credit. The maximum amount of donations that can be credited is 25% of income due for the year.
Effective date: January 1, 2011
Businesses making donations of more than 2,000 yen to public interest incorporated associations can now take either income deduction or special tax credit. 40% of total amount of donations made to public interest incorporated associations over 2,000 yen is the amount of the special tax credit. The maximum amount of donations that can be credited is 25% of income due for the year.
Effective date: January 1, 2011
Blue return businesses with increasing number of employees can now take special tax credit of 200,000 yen per new employee if the business is fulfilling the following requirements:
  1. Number of standard employees is more than five (for small and medium-sized corporations, more than two)
  2. Rate of standard employee is more than 10%
  3. Total payment for salary exceeds comparative salary payment
  4. No replaced worker in previous and current year
  5. Company is doing business specified in Employment Insurance Act Article 5, paragraph 1.
The maximum amount of the credit is 20% of income tax due for the year for small and medium-sized businesses and 10% of income tax for other businesses.
Effective date: January 1, 2012
Subsidies and monetary benefits received from the government for the renovation are now required to be subtracted from the cost paid for the renovation when applying tax credit for earthquake resistant renovation of homes. Limitation of areas subject to the tax credit is also eliminated, so that all areas are now subject to the tax credit for earthquake resistant renovation.
Effective date: June 30, 2011
The following special tax credits can only be applied if the documents specifying the amount of the credits are attached to the final return, or amended tax return, or claim correction:
  1. Special tax credit for experiment and research
  2. Special treatment of tax credit for experiment and research
  3. Special tax credit for installing machines by small and medium-sized corporation
  4. Special tax credit for increasing number of employees
  5. Special treatment of tax credits that are deducted from income tax
Effective date: December 02, 2011
The following special tax credits will be abolished on April 1, 2012:
  1. Special tax incentives for energy demand and supply structure reform
  2. Special tax incentives for strengthening information technology structure
  3. Special depreciation for business innovation facilities
Effective date: April 01, 2012
Employees are now allowed to contribute to corporate-type defined contribution plan up to certain limits. The contribution limits are specified as the following:
  1. Sum of employee’s and employer’s contribution is less than or equal to 51,000 yen per month if not participating in other corporate pension plan, or less than or equal to 25,500 yen per month if participating in other corporate pension plan.
  2. Employee’s contribution amount may not exceed employer’s contribution amount. The whole amount of the contribution is deductible for income tax and withholding tax.
Effective date: January 1, 2012
Health insurance premium has increased from 9.34% to 9.50% for the national average and from 9.32% to 9.48% for Tokyo. Health insurance premium is borne fifty-fifty by both employee and employer and the contribution amount is calculated by the rate of health insurance premium multiplied by employee’s average index monthly earnings.
Effective date: March 1, 2011
Long-term care insurance premium has increased from 1.50% to 1.51%. Long-term care insurance premium payment only applies to people who are between 40 and 64 years old.
Effective date: March 1, 2011
Employment insurance premium for 2011 was unchanged at 0.6% for an employee and 0.95% for employer. The rate is reviewed annually and is valid for the fiscal year (April to March).
Effective period: April 1, 2011 to March 31, 2012
Employee pension premium has increased to 16.412%. This is an annual increase decided by the Japanese government in 2004 and will continue to increase annually by 0.354% until 2017.
Effective date: September 1, 2011
Qualified pension plan is abolished and corporations with qualified pension plans are required to shift the plan to other corporate pension plans, such as defined contribution plan and defined benefit pension plan by the abolishment date.
Effective date: March 31, 2012
Participant’s age restriction to defined contribution plan has changed from 60 years old to 65 years old. Effective date has not been specified, but will be specified within 2 years and 6months from August 4th 2011.
Effective date: Has not been specified
Standard price of in-kind wage used for employee pension and health insurance premiums calculation for Tokyo has been revised to the following:
  1. Meals provided each month equivalent to 18,900 yen
  2. Meals provided each day equivalent to 630 yen
  3. Breakfast provided equivalent to 160 yen
  4. Lunch provided equivalent to 220 yen
  5. Dinner provided equivalent to 250 yen
  6. Housing provided equivalent to 2400 yen per mat (tatami)
  7. Items provided other than the above is equivalent to the market value
The standard value of in-kind wage is adjusted to the price level by The Ministry of Health, Labor and Welfare and differs by prefecture.
Effective date: April 1, 2012
Health insurance premium rates will be increased from 9.50% to 10.00% on the national average and from 9.48% to 9.97% for Tokyo. Health insurance premium rates differ by prefectures. Health insurance premiums are assumed fifty-fifty by both employee and employer and the contribution amount is calculated by the rate of health insurance premium multiplied by employee’s average index monthly earnings.
Effective period: March 1, 2012 to February 28, 2013
Employment insurance premium rate for 2012 will be decreased from 0.6% to 0.5% for employee and from 0.95% to 0.85% for employer. Overall employment insurance premium rate will be 1.35% of employee’s wage. The rate is reviewed annually and is valid for the fiscal year (April to March).
Effective period: April 1, 2012 to March 31, 2013
Long-term care insurance premium rate will be increased from 1.51% to 1.55%. Long-term care insurance premium payment only applies to people who are between 40 and 64 years old.
Effective date: March 1, 2012
Worker’s accident compensation insurance rates have been revised and some of the revised rates are the following:
  1. Transportation industry: 0.45%
  2. Freight operations: 0.9%
  3. Port cage and freight operations: 1.1%
  4. Port cargo and handling industry: 1.6%
  5. Media and publishing: 0.25%
  6. Whole sale trade, retail trade, restaurant and lodging industry: 0.35%
  7. Finance, insurance and real estate: 0.25%
  8. Other industry: 0.3%
Worker’s accident compensation insurance premium is borne only by the employer and is calculated by total wages times the insurance rates. The rates are revised every 3 years.
Effective period: April 1, 2012 to March 31, 2015
Social security agreements between Japan and Brazil and between Japan and Switzerland came into effect on March 2012. Dual coverage of social security for employees and self-employed individuals from Brazil or Switzerland sent to Japan, or from Japan sent to Brazil or Switzerland are eliminated by these agreements. In addition, periods of social security coverage of both Japan and Brazil or Switzerland will be totalized, so that expatriate workers may qualify social security benefits.
Effective date: March 1, 2012
Childcare allowance contribution rate has been revised from 0.13% to 0.15%. Childcare allowance contribution is contributed by employers only and is calculated based on the average index monthly earnings and the average index bonus of employee pension plan.
Effective date: April 1, 2012
Employee pension premium has increased to 16.766%. This is an annual increase decided by the Japanese government in 2004 and will continue to increase annually by 0.354% until 2017.

Effective date: September 1, 2012
Employee pension premium has increased to 17.120%. This is an annual increase decided by the Japanese government in 2004 and will continue to increase annually by 0.354% until 2017.

Effective date: September 1, 2013
Long-term care insurance premium rate will be increased from 1.55% to 1.72%. Long-term care insurance premium payment only applies to people who are between 40 and 64 years old.
Effective date: March 1, 2014
Asbestos insurance premium rate for 2014 will be decreased from 0.005% to 0.002% for employer. The rate is reviewed annually and is valid for the fiscal year (April to March).
Effective period: April 1, 2014 to March 31, 2015
Employee pension premium has increased to 17.474%. This is an annual increase decided by the Japanese government in 2004 and will continue to increase annually by 0.354% until 2017.

Effective date: September 1, 2014
Employee pension premium has increased to 18.182%. This is an annual increase decided by the Japanese government in 2004 and will continue to increase annually by 0.354% until 2017.

Effective date: September 1, 2016
Employee pension premium has increased to 18.30%. This is an annual increase decided by the Japanese government in 2004 and has increased annually by 0.354% until 2017.

Effective date: September 1, 2017
Childcare allowance contribution rate has been revised from 0.20% to 0.23%. Childcare allowance contribution is contributed by employers only and is calculated based on the average index monthly earnings and the average index bonus of employee pension plan.
Effective date: April 1, 2017
Employment insurance premium rate for 2012 will be decreased from 0.4% to 0.3% for employee and from 0.7% to 0.6% for employer. Overall employment insurance premium rate will be 0.9% of employee’s wage. The rate is reviewed annually and is valid for the fiscal year (April to March).
Effective period: April 1, 2017 to March 31, 2018
Dependents under 16 years old are no longer eligible for inhabitant tax deduction calculation, because the 330,000 yen dependent deduction for dependents under 16 was abolished.
Effective date: January 1, 2012
The extra 120,000 yen dependent deduction for dependents between ages 16 and 18 was abolished. The deduction for dependents between 16 and 18 is now 330,000 yen per a dependent.
Effective date: January 1, 2012
Insurances contracted or renewed on or after January 1, 2012 (newly contracted insurance) are now classified into 3 types, which are life insurance, personal pension insurance and long-term and medical care insurance. Calculation methods of deductibles for the newly contracted insurance have also changed to the following:
  1. Annual insurance premiums ≤ 12,000 yen: whole amount paid is deductible
  2. 12,000 yen < annual insurance premiums ≤ 32,000 yen: 1/2 of payment plus 6,000 yen is deductible
  3. 32,000 yen < annual insurance premiums ≤ 56,000 yen: 1/4 of payment plus 14,000 yen is deductible
  4. Annual insurance premiums > 56,000 yen: 28,000 yen is deductible

Calculation and classification of insurance contracted or renewed before 2012 (previously contracted insurance) use previous classifications and calculation methods.
If a taxpayer has both newly contracted and previously contracted life insurance or personal pension insurance, the deduction is the sum of deductible calculated with the formulas for newly contracted insurance and deductible calculated with the formulas for previously contracted insurance. The sum of the deductibles for each type of insurance may not exceed 28,000 yen.
Effective date: January 1, 2013

The special reconstruction individual inhabitant tax of an additional 1,000 yen on per capita tax will be imposed and will increase overall per capita inhabitant tax to 5,000 yen a year for 10 years. The special reconstruction tax is created in order to finance post-earthquake reconstruction for earthquake occurred on March 11, 2011 in Tohoku.
Effective period: January 1, 2014 to December 31, 2023
The reduced tax rate for capital gains, which is 10%, is extended until December 31, 2013. The tax rate will go back to 20% from 2014.
Effective period: April 1, 2011 to December 31, 2013
The reduced corporate tax rate, which is 18%, for small and medium-sized corporations, is extended until March 31st, 2012. The reduced tax rate applies to incomes of up to 8 million yen and 30% of corporate tax is levied on any amount more than 8 million yen.
Effective period: April 1, 2011 to March 31, 2012
A schedule describing the correction of past events is required to be attached to the final tax return from April 1, 2011. This rule excludes businesses ending fiscal years before June 30, 2011.
Effective date: April 1, 2011
Small and medium-sized corporations which 100% of its shares are held by two or more large-sized corporations in a 100 Percent Group is no longer eligible for special tax reliefs. A corporation as described above is not eligible for the following special tax reliefs:
  1. Reduced corporate tax rate of 18% (non-small and mid-sized corporation is 30%)
  2. Exemption from special tax rates on retained earnings applied to specified family corporation
  3. Preferable allowance ratios for bad debt provisions
  4. Partial deductibility of entertainment expenses
  5. Refund of tax through one year carry-back of tax losses
Effective date: April 1, 2011
Contribution-in-kind of assets and liabilities located outside Japan from Foreign Corporations or Domestic Corporations is no longer treated as a tax-qualified contribution-in-kind and the assets and liabilities contributed should be valued at market value. If the assets and liabilities are considered as tax-qualified contributio-in-kind, a corporation may value the contributed assets at book value. Qualifications of contribution-in-kind are determined by the relationship of the corporations which the contribution is made and the form of compensation for the contribution.
Effective date: June 30, 2011

The priority of pricing methods for arm’s length price has been abolished so the three traditional methods; comparable uncontrolled price method, resale price method and cost plus method are no longer prioritized when determining a calculation method of arm’s length price. A corporation may determine and use "the best method" or most applicable method when calculating arm’s length price.
Effective date: October 1, 2011

The tax credit amount can now be revised to the properly calculated amount in a tax claim correction. Tax incentives which may be revised are the following:
  1. Foreign Tax Credit
  2. Special Tax Credit for Experiment and Research Expense
  3. Special Tax Credit for Acquisition of Energy Demand and Supply Structure Facilities
  4. Special Tax Credit for Investment by Small and Medium-Sized Corporation
  5. Special Tax Credit for Increasing Number of Employees
  6. Special Tax Credit for Blue Return Taxpayer
  7. Special Tax Credit for Filing Tax Return by Electronic System
  8. Non-Treatment of Dividends Received as Income
  9. Non-Treatment of Dividends from Foreign Subsidiary as Income
  10. Expensing of Specified Donations
  11. Income Tax Credits
  12. Special Tax Credit for Acquisition of Facilities by Businesses Located in Special International Strategic Districts
Effective date: December 2, 2011
Certain tax incentives may now be applied after tax claim corrections even if applications are not filed in advance. Tax incentives which may be applied are the following:
  1. Specified Expense Reduction for Employment Income Earner
  2. Special Calculation of Income when Transferring Assets for Redemption of Guarantee Obligation
  3. Carry Forward of Net Losses
  4. Carry forward of Miscellaneous Losses
  5. Average Taxation of Fluctuating and Extra Income
  6. Foreign Tax Credit
  7. Expensing of Consumption Tax which are not Subject to Assets Related Deductions
  8. Non-Treatment of Dividends Received as Income
  9. Non-Treatment of Dividends from Foreign Subsidiary as Income
  10. Expensing of Specified Donations
  11. Expensing of Retained Losses when Debts are Discharged due to Reorganization of Company
  12. Expensing of Dividends from Business with Corporative Association
  13. Income Tax Credits
  14. Special Calculation of Unappropriated Deficits that are Not Subject to Handover
  15. Special Treatment of Requirements for Retained Losses of Corporation which are Controlled by certain Shareholders
  16. Specified Assets which are not Subject to Expensing of Losses from Transfer of Assets
  17. Special Calculation of Losses from Transfer of Specified Assets
  18. Inheritance Tax Relief for Spouse
  19. Spousal Deduction for Gift Tax
  20. Deduction of Inheritance Tax for Specified Donated Properties
Effective date: December 2, 2011
The time period for tax claim corrections which may be declared has been extended from one year to five years. In addition, the tax amount corrections which the taxation office can notify to taxpayers has been extended from three years to five years. This regulation change applies to tax claim corrections that are due after December 2, 2011.
Effective date: December 2, 2011
The special corporate tax of additional 10% of base corporation tax liability will be imposed for 3 years. The special corporate tax is called special reconstruction tax and is aimed to finance post-earthquake reconstruction for earthquake occurred on March 11, 2011 in Tohoku. However, overall corporate tax rate will be decreased due to reduction in corporate tax rate starting from April 2012 as the following:
  1. Small and medium sized corporation with taxable income up to 8 million yen a year: 16.5% (15% × 110%) for fiscal years beginning by March 31, 2015 and 20.9% (19%×110%) for fiscal years beginning on or after April 1, 2015
  2. Small and medium sized corporation with taxable income in excess of 8 million yen a year: 28.05% (25.5%×110%)
  3. Corporations other than the above: 28.05% (25.5%×110%)
Effective period: For 3 fiscal years beginning between April 1, 2012 and March 31, 2015
Corporate tax rate will be reduced as the following:
  1. Small and medium-sized corporation with taxable income up to 8 million yen a year: 15% for fiscal year beginning by March 31, 2015 and 19% for fiscal year beginning on or after April 1, 2015
  2. Small and medium sized corporation with taxable income in excess of 8 million yen a year: 25.5%
  3. Corporations other than small and medium –sized: 25.5%
However, overall corporate tax rate will change due to addition of the special reconstruction corporate tax until March 31, 2015 as the following:
  1. Small and medium sized corporation with taxable income up to 8 million yen a year: 16.5% (15%×110%) for fiscal years beginning by March 31, 2015 and 20.9% (19%×110%) for fiscal years beginning on or after April 1, 2014.
  2. Small and medium sized corporation with taxable income in excess of 8 million yen a year: 28.05% (25.5%×110%)
  3. Corporations other than the above: 28.05% (25.5%×110%)

Effective date: fiscal year beginning on or after April 1, 2012
Corporations, filing blue tax return, other than small and medium-sized corporations and investment vehicle corporations, will only be able to carry forward net operating loss (loss from disaster if filing white return) of 80% of current year taxable income. Small and medium-sized corporations and investment vehicle corporations will be able to carry forward 100% of net operating loss. In addition, the period which loss can be carried forward will be extended from 7 years to 9 years for all corporations, including small and medium-sized, investment vehicle, and other corporations. In order to carry forward the loss, taxpayer must maintain books and records for tax years in which the loss was recognized.
Effective date: April 1, 2012
Special taxation on secret expense is extended for 2 years. Secret expense is taxed 40% separately from corporate tax.
Effective period: April 1, 2012 to March 31, 2014
Non-application of loss carry-back by corporations other than small and medium-sized is extended for 2 years. Only small and medium-sized corporation filing blue return may carry back losses to the previous year and get tax refund from tax office.
Effective period: April 1, 2012 to March 31, 2014
Depreciation for obsolete assets was abolished. An asset's useful life may be shortened using the special provision for shortening useful life authorized by a tax office. Depreciation for obsolete asset was allowed when an asset’s useful life has decreased more than 10% compared to the useful life specified by National Tax Agency due to technological advancement, etc.
Effective date: April 1, 2011
The separation method applied to write down inventory to market value was abolished. The lower of cost or market method for valuing inventory may only use the reversal method.
Effective date: April 1, 2011
Upon approval of a tax office, corporations may depreciate obsolete asset over a shortened useful life less the period which the asset has already been depreciated.
Effective date: April 1, 2011
The depreciation rate of declining balance method for assets purchased on or after April 1, 2012 will change to 1/useful life multiplied by 2.0 (called 200% declining balance depreciation). However, as a transitional measure, assets purchased on or between April 1, 2012 and December 31, 2012 may be depreciated using former declining balance depreciation rate, which is 1/useful life multiplied by 2.5. Assets purchased before April 1, 2012 may be depreciated using 200% declining balance depreciation rate, if notification to a tax office is filed by final tax return of 2012.
Effective date: April 1, 2012
The declining balance depreciation rate of capital improvement cost on asset spent on or after April 1, 2012 is now required to be 200% declining balance method (1/useful life multiplied by 2.0). If an asset improved is purchased before April 1, 2012 and its improvement cost is spent on or after April 1, 2012, the improvement cost can no longer be added on the book value of the asset and depreciated as if a new asset costing sum of the book value and the improvement cost is purchased. The capital improvement cost in this case is required to be depreciated separately from the improved asset using the same kind and the same remaining useful life as the improved asset.
Effective date: April 1, 2012
Allowance for bad debts will be abolished for corporations other than small and medium-sized corporations, banks, insurance companies and other similar financial corporations. The abolishment will take place gradually over 4 years as the following:
  1. Tax years beginning between April 1, 2012 and March 31, 2013: 75% of the current amount of bad debts can be deductible
  2. Tax years beginning between April 1, 2013 and March 31, 2014: 50% of the current amount of bad debts can be deductible
  3. Tax years beginning between April 1, 2014 and March 31, 2015: 25% of the current amount of bad debts can be deductible
  4. Tax years beginning on or after April 1, 2015: no bad debts expense can be deductible (abolished)
Effective date: April 1, 2012
The maximum amount of general donations which can be expensed will be decreased as the following:
  1. Maximum amount of donations which can be expensed = 1/4 × (0.25% of year end capital + 2.5% of income for the year)
However, the maximum amount of donations to specified organizations promoting public interest will be increased as the following:
  1. Maximum amount of donations which can be expensed = 1/2 × (0.375% of year end capital + 6.25% of income for the year)
Effective date: April 1, 2012
Deduction of petty sum depreciable assets for small and medium-sized corporation will be extended for 2 years. Assets which can be expensed by small and medium-sized corporation are assets with acquisition cost less than 300,000 yen, up to total of 3 million yen a year.
Effective period: April 1, 2012 to March 31, 2014
Non-deduction of entertainment expenses for corporations other than small and medium-sized is extended for 2 more years.
Effective period: April 1, 2012 to March 31, 2014
Partial deduction of entertainment expense for small and medium-sized corporation is extended for 2 more years. 90% of the first 6 million yen of the entertainment expense may be deducted when calculating corporate tax.
Effective period: April 1, 2012 to March 31, 2014
Corporations increasing the number of employees may take a special tax credit of 200,000 yen per new employee if the corporation is fulfilling the following requirements:
  1. Number of standard employee is more than five (For small and medium-sized corporations, more than two)
  2. Rate of standard employee is more than 10%
  3. Total payment for salary exceeds comparative salary payment
  4. No replaced worker in previous and current year
  5. Corporation is doing business specified in Employment Insurance Act Article 5, paragraph 1.
The maximum amount of credit is 20% of corporate tax due for the year for small and medium-sized corporation and 10% of corporate tax for other corporations.
Effective date: April 1, 2011
Businesses with a taxable basis more than 500 million yen is no longer allowed to take full-deduction of purchase credit even if the business has the taxable sales ratio above 95% and is required to determine the credit using either the the itemized method or the proportional method. Before the revision, businesses with taxable sales ratio above 95% could take full-deduction of purchase credit for taxable purchases.
Effective date: April 1, 2012
Corporations are required to attach detailed statements of taxable purchases when filing consumption tax return. Attachment of the statement of taxable purchases has been on a voluntary basis but now is mandatory.
Effective date: April 1, 2012
Businesses with a tax basis or salaries paid greater than 10 million yen in the first 6 months of the previous year is no longer exempt from consumption tax. Therefore, consumption tax exempt businesses must be the following:
  1. Amount of tax basis in the base period (calendar year 2 years before the current year) is less than or equal to 10 million yen, and
  2. Amount of tax basis or salaries paid in the first 6 months of the previous year is less than or equal to 10 million yen.
The tax basis for a domestic transaction is the amount paid in return for transfer of property or services and for a foreign transaction is the sum of the custom value (CIF price), specific consumption tax (such as liquor tax and tobacco tax), and tariff. The first 6 months of the previous year here is the first six months of the previous business year for corporations and between January 1 and June 30 of the previous year for individual businesses.
Effective date: January 1, 2013

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