2017 Tax Reform Proposals

Japan:Inbound Tax Alert December 2016, No.19

On December 8, 2016, proposals for the 2017 tax reform (hereinafter the “Tax Reform”) were released by the Liberal Democratic Party and Komeito Party. (Japan:Inbound Tax Alert December 2016, No.19)

Under the Tax Reform, revisions aimed at promoting growth include amendments to the R&D tax credit regime and revisions to deductible compensation paid to directors. Further, the proposals expand the definition of certain tax qualified corporate reorganizations, including corporate divisions. While various tax rules will be established and expanded to support small and medium-sized entities (“SMEs”) , special tax measures for these entities are proposed to be limited in certain tax years. With regards to individual tax, proposed revisions include amendments to inheritance/gift taxes and redefining the scope of taxable income for non-permanent residents.

This alert highlights some of the key proposals that may affect foreign companies doing business in Japan or individuals residing in Japan. It should be emphasized that these proposals have not been enacted yet and could change prior to becoming law.

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