Following the enactment of Japan’s 2014 tax reform a decrease of the effective corporate income tax rate is in force from April 2014. The fall in the effective tax rate is a result of the repeal of the special reconstruction surtax. This surtax was introduced as a result of the natural disaster that hit Japan in March 2011 and was originally planned to remain in effect for three years, however the government wishes to avoid any potential negative economic impact from the surcharge, especially in view of the consumption tax increase.
The Japanese Diet passed the 2014 tax reform legislation on 20 March 2014. This legislation includes the abolition of the special reconstruction corporation tax one year before the original timetable. As a result of this the effective corporate tax rate has gone down from 38.01% to 35.64% for fiscal years from 1 April 2014. The 2014 tax reform also included measures relating to local taxes on companies, changes to the international tax rules, and amendments to consumption tax.
The effective corporate tax rate in Japan is still high compared to that of most other developed economies and further measures are under consideration to reduce the tax burden in due course.
