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A Quick Glance at the Special Tax Rates for SMBs in Japan

Japan is enjoying a period of sustained economic growth, although modest, that is largely fueled by domestic demand, and buffeted by strong export sales. The economy has shown tremendous resiliency in dealing with global economic concerns. A quick glance at the special tax rates for SMBs The Amended Tax Reform Bill includes Corporate Tax rates that were approved and effective on June 30, 2011, given that the proposed Tax Reform Bill was not passed in its original form. The main changes under the amended Tax Reform Bill stated that the expiration dates of the Special Tax Measures Law which had been extended by 3 months (i.e. from March 31 2011 to 30 June 2011) by the Stopgap Bill are further extended. Accordingly, the reduced corporate tax rate (18%) for a small/mediumsized company (share capital less than or equal to JPY 100 million) will be extended. The tax reform bill also states that companies filing blue tax returns and satisfying certain conditions can claim special tax credits of JPY 200,000 for the net increase in the number of each employee. The benefit will be applicable to the company for fiscal years commencing between April 1, 2011 and March 31, 2014. The Tax Reform Bill is also inclusive of • Amendment to employment income deduction rules • Amendment to taxation of retirement income • Repealing allowances for adult dependents

International Tax With regard to the foreign tax credit, the June Bill affirmed that where the applicable tax rates vary depending on an agreement with local taxing authorities, any taxes in excess of the amount computed using the lowest applicable rate can be excluded for purposes of the foreign tax credit computation or the anti-tax haven rules. The amendment is effective after June 30, 2011. And also for the purpose of computing foreign tax credit limitation, income of a corporation which may be taxed in a foreign country in accordance with the tax treaty from Japan and that foreign country shall generally be deemed to be treated as foreign source income for fiscal years starting on or after April 1, 2011. Corporate Tax • • • •

Reduction of corporate income tax rate Review of the net operating loss carry-forward rule Amendment of the depreciation provisions Amendment of bad debt reserves

While expanding business overseas, corporate tax returns and financial statements need to be prepared on different computational bases. This can pose a challenge to companies operating overseas since the criteria for corporate tax compliance vary from country to country. Companies also need accurate international corporate tax provisioning accruals to be made, which can be done with ease with a help of a business partner, who can also provide assistance in other areas of business like expat tax advice, international accounting, HR etc,

Also read on - Intercompany transfer pricing, sas compliance


A Quick Glance at the Special Tax Rates for SMBs in Japan