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.
If you are planning on doing business in Japan, knowledge of the investment environment and information on legal, accounting, taxation and human resource frameworks are essential to keeping you on the right track. This guide has been prepared for the assistance of those interested in doing business in Japan. It does not cover the subject exhaustively but is intended to answer some of the important, broad questions that may arise. When specific problems occur in practice, it will often be necessary to refer to the laws and regulations of Japan and to obtain appropriate accounting and legal advice. This guide contains only brief notes and includes legislation in force as of November 27, 2024.
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.
If you are planning on doing business in Japan, knowledge of the investment environment and information on legal, accounting, taxation and human resource frameworks are essential to keeping you on the right track. This guide has been prepared for the assistance of those interested in doing business in Japan. It does not cover the subject exhaustively but is intended to answer some of the important, broad questions that may arise. When specific problems occur in practice, it will often be necessary to refer to the laws and regulations of Japan and to obtain appropriate accounting and legal advice. This guide contains only brief notes and includes legislation in force as of November 27, 2024.
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.
As part of the 2025 tax reform, revisions have been introduced to reduce the tax burden amid rising wages and to aid flexible employment arrangements. The reform includes an increase in the basic exemption and the minimum amount of the employment income deduction, as well as the introduction of a new special exemption for specific dependents.
In recent years, with the spread of teleworking and the diversification of international work styles, there has been an increasing number of cases where employees of foreign corporations stay in Japan and continue working remotely. While such work arrangements allow companies to utilize human resources more flexibly, they may also give rise to Permanent Establishment (PE) risks in Japan. The determination of a PE directly affects the attribution of taxing rights in Japan, making proper analysis and appropriate responses essential.
Many companies in Japan conduct lease transactions, such as office leases, copiers and vehicles, and these lease transactions are accounted for in accordance with IFRS, US GAAP or Japan GAAP and so on. Japan corporate tax law has particular treatments for lease transactions. This article provides an overview of leases from the lessee's perspective.
The Foreign tax credit system is designed to avoid international double taxation. It allows a corporation to deduct, within certain limits, the amount of foreign corporate income tax paid or withheld abroad from its corporate tax liability. A domestic corporation and a foreign corporation which has a permanent establishment in Japan are allowed to take advantage of the foreign tax credit. The following explanations are for a domestic corporation. A foreign corporation is able to take foreign tax credit for eligible foreign taxes on income attributable to a permanent establishment in Japan.
The corporations subject to the size-based business taxation have been revised with the 2024 (Reiwa 6) tax reform.
Pillar Two presents a complex web of rules, Income Inclusion Rule (IIR), Qualified Domestic Minimum Top-up Tax (QDMTT), and the Undertaxed Profits Rules (UTPR), formerly known as the Undertaxed Payments Rule. Multinational enterprises (MNEs) operating in Japan will need to understand the interaction of each rule enacted under Japan's domestic legislation.
With the COVID-19 travel restrictions lifted, business travel has increased significantly. Some companies assume their employees are tax-exempt if their home country has an income tax treaty with the host country and the employee spends not more than 183 days in aggregate there.How to count the days can easily create confusion. This edition of the tax bulletin explains how to count 183 days and pitfalls you need to be aware of when counting travel days to Japan.
The global tax landscape is experiencing a historic transformation as countries implement the OECD/G20’s Pillar Two framework—an initiative designed to introduce a Global Minimum Tax (GMT) of 15% on large multinational enterprises (MNEs). Japan has taken a proactive role in adopting and legislating this framework, aligning its domestic laws with the OECD’s model rules while tailoring certain elements to suit its national tax policy objectives. This article provides an overview of the Income Inclusion Rule (IIR), Undertaxed Profits Rule (UTPR), and Qualified Domestic Minimum Top-up Tax (QDMTT) as implemented in Japan, highlights key dates, compares Japan’s approach with OECD recommendations, and explains the rules’ impact on Japanese corporations.
The quality of AI outputs is improving with a pace too significant for it to be discounted. The oft repeated phrase is that AI and automation is ideal for tasks that are repetitive, follow a specific set of rules, and take a long period of time with manual input. For example, current AI can assimilate information from a Local File and use this to evaluate the comparability of comparable companies based on their business description and other information, providing acceptance and rejection reasons accordingly.
The 2025 fiscal year, known as Reiwa 7 in Japan, brings several changes to the corporate tax landscape. These reforms aim to enhance corporate competitiveness, encourage investment, and ensure fair taxation. This bulletin outlines the key aspects of the Reiwa 7 corporate tax reforms, based on the latest publications by the Japan Ministry of Finance.
Foreign investors looking to invest in Japan real estate have various options on how to hold the investment.
Foreign investors looking to invest in Japan real estate have various options on how to hold the investment.