Japan’s Cabinet approved a decision to align its Pillar 2 global minimum tax rules with the OECD’s Side-by-Side Package. The decision confirms key safe harbours and transitional extensions, with changes to apply from fiscal years beginning on or after 1 January 2026.
Japan’s Cabinet has adopted a decision of 23 January 2026 to bring the country’s Pillar 2 global minimum tax framework in line with the OECD’s Side-by-Side Package released on 5 January 2026.
The Cabinet decision outlines several key elements of the OECD Side-by-Side Package, including the Side-by-Side Safe Harbour, a one-year extension of the Transitional CbCR Safe Harbour, the Substance-Based Tax Incentive Safe Harbour, and the UPE Safe Harbour.
The Simplified ETR Safe Harbour is not mentioned in the decision.
The global minimum tax is designed to prevent countries from competing through lower corporate tax rates and to ensure multinational corporations are subject to a minimum 15% tax in each jurisdiction. Japan will introduce exemptions for group international minimum tax amounts and residual amounts under specified conditions, including the location of the ultimate parent entity in an internationally recognised jurisdiction.
The transitional exemption framework for certain country-by-country reporting items will be extended by one year, to 31 December 2027.
The Cabinet statement notes that while the policy direction has been set, the bill has not yet been submitted due to the dissolution of the lower house and the adjournment of the upper house on 23 January 2026.
The revisions will apply to fiscal years beginning on or after 1 January 2026 and include provisions for tax credits, income deductions, and eligible expenditures under specified conditions.
