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Under the Corporation Tax Acts, where monetary claims such as account receivables, loan receivables etc. become uncollectible, losses on such monetary claims are tax deductible subject to certain conditions. Further, SME1 and certain other corporate taxpayers are allowed to make a tax-deductible provision for bad debt allowance subject to the deductible limitation.

On December 18, 2020, the OECD released a “Guidance on the transfer pricing implications of the COVID-19 pandemic”. The Guidance represents the consensus view of the 137 members of the Inclusive Framework on BEPS regarding the application of the arm’s length principle and the OECD Transfer Pricing Guidelines to issues that may arise or be exacerbated in the context of the COVID-19 pandemic. The Guidance is helpful both for taxpayers in reporting the financial periods affected by the pandemic and for tax administrations in evaluating the implementation of taxpayers’ transfer pricing policies.

The group tax relief system will be introduced for business years beginning after March 31, 2022, replacing the current consolidated tax return system. Corporate taxpayers that elect to file consolidated tax returns are deemed to elect for the group tax relief system automatically unless they notify the tax office otherwise.

1. Special tax measures for deferral of national tax payments 2. Additional tax measure for extension of the national tax filing deadlines 3. Special tax measures for carried-back losses 4. Special tax credit /special depreciation applicable to capital investment for remote work 5. Other tax measures

The tax deductibility of officer1 remuneration is limited under Japan tax law (Corporation Tax Law (“CTL”) 34①). Officer remuneration consists of amounts other than retirement payments and are only deductible for corporate income tax purposes if they fall under the following categories: (1) Salary paid in the same amount on a regular basis2 (CTL 34①(1)); (2) Salary for which the fixed payment amount has been notified in advance (CTL 34①(2)); or (3) Performance-linked salary3 (CTL 34①(3)).

Transactions such as export sales are consumption tax exempt as tax rate 0%. 1. Export tax exemption 2. Tax exemption at export shops

Amendments to the basic corporate tax circular s have been announced due to the spread of the new coronavirus infection infection.

In order to improve the consumption tax credit system for purchases of residential rental buildings, the two adjustments below have been in force since April 2020. 1. Restriction of the purchase tax credit for residential rental buildings 2. Adjustment of consumption tax credit for purchases of residential rental buildings

The filing deadline of consumption tax return is within two months after the end of taxation period (a taxation period is basically a financial year of a company) in principle. The tax reform of an extension for consumption tax filing deadline for the companies comes into force after the financial year ended March 31, 2021.

A partnership is a vehicle not used frequently for business activities but rather used for investment activities in aircraft leasing, ship leasing etc. A partnership is formed under the Civil Code and called a Kumiai or Nini Kumiai.

New anti-avoidance rule to prevent the pre-sale dividend stripping of foreign subsidiary investments.

The 2020 Tax reform closed a loophole for wealthy individual taxpayers who used investments in offshore second-hand buildings to reduce their income tax liability. Losses generated by these investments can be used to offset against other types of income and reduce a taxpayer’s total tax liability. The loophole relied on the accelerated depreciation deductions that could be taken for a second-hand building that was either nearing, or had reached, the end of its statutory useful life.

The Tokyo Olympic and Paralympic Games (“the Games”) have been postponed until the summer of 2021 due to the worldwide COVID-19 outbreak. Special tax exemption rules, as provided for in the Act on Special Measures Concerning Taxation, will apply to non-resident athletes, game officials and foreign corporations involved in the Games.

1. Foreign corporation with a Permanent Establishment (PE) in Japan 2. Calculation of taxable income. 3. Calculation of corporation tax liability 4. Local taxes 5. Documentation requirements

1. Definition of a leasing transaction for tax purposes 2. Treatment of a leasing transaction for Corporation tax purposes. 3. Consumption tax

As the result of the 2018 tax reform, a new salary increase tax credit will apply to fiscal years that begin between 1 April 2018 and 31 March 2021. This new tax credit is designed to assist corporations that invest in new assets and develop human resources.