On 10 December 2020, the Liberal Democratic Party (LDP) and the New Komeito Party announced the tax proposals for the 2021 providing the following corporate tax measures.
- Either special depreciation of 30% or a tax credit of 3% or 5% tax incentives will be provided for the acquisition of cloud-based systems to create new demand and improve productivity through the development of new products, and/or the introduction of new production/sales methods.
- In order to achieve the goal of carbon neutrality by 2050, tax incentives (either a special depreciation of 50% or a tax credit of 5% or 10%) will be created for investments in assets that make production carbon neutral and in assets for manufacturing carbon neutral products.
- For companies with an approved business plan making a number of specific investments, such as those in digital transformation and carbon neutrality, the limitation on the utilization of net operating losses (NOLs) arising during a period affected by COVID-19 will be temporarily lifted to allow the utilization of up to 100% of such NOLs for a certain period.
- The tax credits to promote investments in digital transformation and carbon neutrality will be included in the scope of the unapproved tax credits if additional requirements are not met. The interest used to calculate the non-deductible interest on debt attributable to a Japanese PE of a foreign company is expanded to include “other financing” related to the interest.
It should be emphasized that the above-mentioned proposals have not entered into force and could change before they become law.
