• Service: Tax, Global Indirect Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 10/4/2013

Japan - Proposed business-related tax incentives, increased consumption tax rate 

October 4: The Japanese government this week announced a decision to increase the rate of the consumption tax, from 5% to 8% with an effective date of 1 April 2014.

In connection with this final determination for an increased consumption tax rate, a report (known in English as Policies to prepare for an increase in the consumption tax rate) was released by the coalition government with details of an economic stimulus package. This package would include provisions intended to address the effects of the increased consumption tax rate and the risk of a short-term business downturn, as well as to encourage future growth.

An outline of the economic stimulus package includes proposals for:

  • Certain business-related tax incentives—including tax credits for research and development (R&D), and measures to promote investment in productivity improvement facilities, business restructuring, and business ventures
  • Repeal of the “special reconstruction corporation tax” a year ahead of its scheduled expiration date

KPMG observation

The information currently available indicates the government’s decision regarding the increased rate of consumption tax and the main points of the economic stimulus proposals. The details of the tax reform proposals are expected to be provided in future bills, cabinet orders, and ministerial ordinances. The final reform package, therefore, could differ from the proposal, and could be subject to amendment during discussions of the provisions in the Diet.

Read an October 2013 report [PDF 327 KB ] prepared by the KPMG member firm in Japan: Increase in the Consumption Tax Rate and Outline of Tax Reform Proposal to Stimulate Business Investment

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