Global Investment and Innovation Incentives (Gi3)

The challenge to fully leverage available credits and incentives globally

Many countries, including Japan, offer various credits and incentives (C&I) such as preferential tax systems, tax deductions, and subsidies to promote R&D, innovation, and investment in other targeted areas. For example, Japan has recently proposed incentive programs targeting digital transformation and carbon neutrality, while maintaining programs relating to research and development, investments in human capital, and renewable energy, among others. When considering the multitude of programs available in Japan alone, and when also considering the number of programs available in each country globally, it is imperative that companies understand the scope of C&I that may be available to them in order optimize investments.

For Japan specifically, the Japanese government at both the national and local levels offer a multitude of C&I programs that continue to encourage investments to bolster competitiveness globally. The underlying applicability of these programs from a national and local perspective is complex and requires companies to carefully exam and consider the qualifying requirements in order to obtain the benefits potentially available to them.

With respect to the impact of the COVID-19 pandemic, many countries have introduced an ever-changing array of relief measures that may be utilized to help them to address the challenges created by this unprecedented global event . Understanding the applicability of these measures together with existing C&I programs from a global perspective can be challenging, and as a result, it is possible that many companies are not fully realizing the potential benefits available to them.

Deloitte Japan’s Gi3 Team can leverage Deloitte’s global network and its collective knowledge, which covers more than 150 countries and regions worldwide, to enable us to comprehensively identify preferential tax systems, tax deductions, subsidies, and other C&I from around the world that may benefit you. Our Gi3 team can also help you to identify C&I that are offered in Japan. Together with global and local resources, we can help companies to develop and execute C&I strategies that optimize the use of eligible C&I to the fullest extent possible.

■Gap between incentives currently being used vs. maximum use (example)

Our Gi3 Team can perform an initial high-level review to evaluate whether or not the C&I available to you globally are being fully utilized.

[Case Study 1] Using C&I to reduce cash outflows and generate cash inflows

As economies struggle due to the effects of the COVID-19 pandemic, businesses increasingly place importance on strategies to efficiently reduce cash outflows and to enhance cash inflows in the short term to manage liquidity and income. Effective utilization of C&I programs can help to improve cash flows and positively impact a company’s financial position by leveraging the tax deductions, subsidies, and other incentive programs implemented by the various national governments. The usage of C&I differs in many respects from the aggressive tax planning that has been reported in the news in recent years, as utilizing C&I does not create reputational risk.

[Case study 2] Forward-looking C&I strategies

Although the initial priority is to obtain the incentives for which a company may already be eligible, companies should also consider C&I strategies in future management decisions. Below are specific examples of how consideration for C&I can play a role in management decisions.

■Examples of incentives that can be received by investing

Deloitte Japan can help to develop effective C&I strategies

C&I programs are administered independently by local and regional governments within each country, and given the scope and breadth of the benefits that may be available globally, businesses may find the task optimizing the use of the available programs to be extremely challenging. Identifying the appropriate programs in each country, understanding the details, and assigning priorities requires significant time and effort. Nevertheless, businesses can realize significant benefits both domestically and globally if they adequately understand and leverage these incentive programs based on appropriate strategies.

Deloitte Japan’s Gi3 Team can help to identify those locations (countries) that a company should prioritize based on the size of the business in that location and the scope of incentives that are available in that country. Our team can assist companies in gathering and creating the appropriate documents needed to obtain the benefits, and can provide advisory services throughout the entire process up to filing.

■Project phases

▲In Phase 1, we summarize information on the potential C&I available in a priority country. Based on that information, in Phase 2 we identify which C&I to obtain and transition this to a long-term C&I strategy in Phase 3.