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On 19 December 2025, Japan’s ruling coalition released the outline of the fiscal year 2026 (Reiwa 8) tax reform proposals. While the proposals introduce several individual amendments to corporate and international tax rules, collectively they reflect a broader recalibration of Japan’s tax policy - one that prioritizes strategic investment, domestic economic substance, and tighter alignment between incentives and measurable outcomes.The proposals reflect a clear policy shift toward targeted incentives that support capital formation, advanced technology development, and economic security, while simultaneously tightening eligibility criteria, reducing reliance on broad-based tax benefits, and strengthening compliance expectations. This article summarizes the key corporate and international tax measures based on publications issued by the Ministry of Finance.

A new Defense Special Corporate Tax has been introduced in Japan pursuant to tax reform legislation enacted on March 31, 2025. As a consequence of this legislative change, Japan’s statutory effective tax rate will be revised.

The 2025 Tax Reform included amendments to the Consumption Tax Act. This bulletin introduces revisions to the tax-free shopping system for foreign tourists and tax-free shops.