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Postponement of Japanese Consumption Tax
Rate Increase – Measures and Action Items

Japan:Inbound Tax Alert October 2016, No.16

A bill in relation to the delay in the second planned increase of the Japanese Consumption Tax rate is expected to be passed in November 2016. The announcement made clear that transitional measures will not be available for entities unless the entity qualifies as a small or medium-sized enterprise. Based on the contents of the current proposal and, depending on the type of company, certain actions will be required. (Japan:Inbound Tax Alert October 2016, No.16)

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On 24 August 2016, the Japanese Cabinet office approved a proposal that summarized an announcement made by Prime Minister Shinzo Abe in June 2016 regarding a delay in the second planned increase of the Japanese Consumption Tax (JCT) rate from 8% to 10%. A related bill was submitted to the Diet on 26 September 2016 and is expected to be passed in November 2016. The delay will push back the planned rate increase from 1 April 2017 to 1 October 2019 and it is expected that the introduction of the new invoice method will be delayed as well. The announcement also made clear that transitional measures will not be available for entities unless the entity qualifies as a small or medium-sized enterprise (SME)1. Based on the contents of the current proposal and, depending on the type of company, certain actions will be required.

This alert highlights a new timetable for the implementation of JCT measures and a list of action items that may need be to accomplished.

1. For purposes of qualifying for JCT transitional measures, SMEs are enterprises whose taxable sales for the base period (accounting period two years before the current accounting period for a corporation) are JPY 50 million or less.

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