Japan’s National Diet enacted the 2017 tax reform proposals on 27 March 2017, which include the following major corporate tax changes:
- The R&D tax credit regime is revised to increase competitiveness.
- The deductibility of director compensation is amended, including revisions to increase flexibility for companies to use profit-linked compensation.
- Provisions related to corporate reorganizations are revised, including the expansion of the definition of a taxqualified horizontal-type corporate division to include certain horizontal-type corporate divisions via incorporation. The scope of tax relief for small and medium-sized enterprises will be limited for fiscal years beginning on or after 1 April 2019.
- The controlled foreign corporation rules are fundamentally revised in accordance with the basic concepts of the OECD’s BEPS project. The new rules will become effective for accounting years beginning on or after 1 April 2018 of the foreign related company.