Some changes to Japan’s tax law announced on 1 October 2013 were passed on 20 March 2014. The “attributed income principle” in respect of the profits of permanent establishment, as set out in the authorized OECD approach, will be adopted. The tax base of a permanent establishment in Japan will therefore be limited to attributed income of the PE.
The salary income deduction is to be reduced from 1 January 2016 to JPY 2.2 million plus 5 percent of salary income for income between JPY 10 million and JPY 12 million, and a deduction of JPY 2.3 million if the income is above JPY 12 million. There will be a further reduction from 1 January 2017 under which the deduction will be JPY 2.2 million for all salary income over 10 million.
