The bills for the proposed changes to the tax law as announced on 30 December 2014 were submitted to the Diet on 17 February 2015.

 The main Proposal for changes is summarized below:

Corporation taxation:

  • The corporate tax rate is reduced for fiscal years (FYs) starting on or after 1 April 2015. Therefore the national corporate income tax rate is reduced from 25.5% to 23.9% (FY 2015). Also the income tax rate for small and medium-sized companies, public interest corporations and cooperative unions is reduced from 19% to 15% for income not exceeding JPY 8 million and will be extended for 2 years.
  • The local corporate business tax rate is reduced from 7.2% to 6.0% and 4.8% (for FYs 2015 and 2016 respectively).
  • The effective corporate tax rate (national and local) is reduced from 34.62% to 32.11% and 31.33% (for FYs 2015 and 2016 respectively).
  • Also the government aims to reduce the corporate tax rate to 31.33% or below for FY 2016, and below 30% for subsequent years.
  • The cap on losses that may be carried forward to offset against subsequent taxable income will be reduced from 80% to 65% for FYs beginning on or after 1 April 2015 to 31 March 2017, and further to 50% for the FY beginning on or after 1 April 2017.
  • The exemption on dividends received is reduced. From 1 April 2015, the 100% exemption on dividend income received will only apply if the recipient holds more than 33.3% of the shares of the payer. If the recipient holds 5% or less of the shares of the payer, then only 20% of the received dividends will be exempted. In all other cases a 50% exemption applies.
  • Incentives for a corporation to transfer or expand its office from Tokyo to local areas are being introduced.

Individual Taxation:

  • Tax measures for Nippon Individual Savings Accounts are expanded in order to stimulate investments.
  • Exit tax will be introduced from July 2015. When a resident individual with stocks, securities or derivatives of JPY 100 million and above moves out of Japan, the financial assets are deemed to be sold at fair market value and will be taxed on the gains or losses at that point of exit.
  • Proper documentation has to be filed in order to claim dependent exemptions in an individual income tax return if the dependents are living abroad.

 International taxation:

  • To prevent double non-taxation, dividends received from a foreign subsidiary will not be exempt from taxable income if the paying subsidiary has received a deduction for the payment in its country of residence from 1 April 2016.
  • From 1 January 2017, the implementation of automatic exchange of information on financial accounts of non-residents will take effect.
  • The activating tax rate in controlled foreign company (CFC) legislation will be revised from “20% or less” to “less than 20%”.
  • The scope of the exemption for “controlled company” under the CFC legislation has been revised with regard to qualifying as a regional headquarters or as an operating holding company.

 Other measures:

  • For consumption taxation the planned tax rate increase from 8% (national rate of 6.3% and local rate of 1.7%) to 10% (national rate of 7.8% and local rate of 2.2%) will be postponed from 1 October 2015 to 1 April 2017. Also, the clause in the bills that relates to the implementation of the tax increase will be deleted.
  • The coverage of consumption tax is extended to cross-border supplies of electronic commerce, which will be subject to consumption tax from 1 October 2015 onwards
  • The reduced fixed property tax rate for housing land and farmland will be extended until 2017.