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  • Service: Tax, International Tax Services
  • Date: 5/27/2014

Japan Enacts Corporate Income Tax Rate Reduction 

Global Tax Adviser


May 27, 2014


Japan has enacted its 2014 tax reform legislation that eliminates a special reconstruction corporation tax a year ahead of schedule. This results in the effective corporate tax rate being reduced to 35.64% (from 38.01%) for fiscal years beginning on or after April 1, 2014.

The 2014 tax reform bill was passed on March 20, 2014 and the amended legislation was released on March 31, 2014.


The new legislation contains various domestic corporate income and consumption tax measures, including measures to promote business restructuring and investment in productivity improvement facilities. Among other changes, the legislation:


  • Changes the "entire income principle" to the "attributable income principle". Generally, under the entire income principle, a foreign corporation with a Japanese permanent establishment (PE) is subject to corporate income tax on all Japanese source income regardless of whether such income is attributable to the PE. Under the attributable income principle, Japanese source income that is not attributable to the PE is taxed in the same manner as Japanese source income earned by foreign corporations without Japanese PEs (i.e., generally subject to withholding tax).
  • Adopts the OECD approach for calculating income attributable to a PE.


For more information, contact your KPMG adviser.



Information is current to May 27, 2014. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500