Ruling coalition’s tax reform for FY 2021 announced: Fiscal support for digital transformation and environment

Japan’s ruling coalition’s tax reform plan for fiscal year 2021, the first under PM Suga, lays focus on supporting digital transformation (DX) and environmental measures.

 

With the shortcomings in the digital infrastructure coming painfully to the fore earlier this year, confronted with the fallout of the COVI-19 pandemic, the Suga cabinet, plans to introduce fiscal measure to support business with their efforts to introduce IT-innovations. Investments in IT infrastructure and software R&D are to be made deductible from the corporate tax burden. A new tax system will make a maximum of 5% deduction of the costs for DX-related infrastructure investments possible for the coming 2 years. The measure is meant to support companies to develop services by common usage of data in cloud-based systems and to increase efficiency in their business activities.

 

The government is expected to introduce a system where it approves investment plans for IT equipment and software. To gain preferential treatment companies will have to invest the equivalent of at least 0.1% of their annual turnover, have cyber security audits and be able to show productivity improvement goals by means of DX.

 

Currently the ratio of companies that are taking DX related measures is only have that of the US, reports Nikkei Online.  Also, there are fears that rushed introduction is not leading to the desired results.

 

Fiscal stimulation of R&D of software is expected to be included to promote development of software which is not directly tied to hardware, such as AI and autonomous driving control systems offered in a cloud environment.

 

Also, using cloud-based solutions will be one of the conditions, as many IT systems in Japan are presently scattered and rigid ‘legacy systems’ have suppressed the impact of IT investments thus far.  By focusing on cloud-based IT, the government hopes business will take more company-wide approaches to IT investment and insert their DX efforts in their business strategies.

The maximum of R&D deductions is raised from the current 45% to 50%, and particularly aimed at companies whose turnover has been affected by COVID-19.

 

Environmental protection will be fiscally supported with the introduction of higher standards for eco-cars in order to obtain a more friendly fiscal treatment.  Electric vehicles and hybrid vehicles are to receive tax relief at the first and second time shaken (automobile inspections), while clean diesels cars for the coming two years get fiscal reprieve only if they meet high fuel efficiency standards, for other combustion engine cars, fiscal treatment will depend on the degree of meeting fuel efficiency standards. Cars that are below the new 25.4 km/l fuel efficiency standard will receive only one time tax relief or less.

 

Source: Nikkei online (J)

Full text of ruling coalition's FY 2021 Tax Reform Plan 

EU-Japan Centre's News

More
38 years ago, the EU-Japan Centre was founded in a spirit of enduring partnership between the…
We are pleased to inform you about the upcoming webinars that will take place in May/June. Do not…
The EU-Japan Centre for Industrial Cooperation is recruiting a Data and Financial Coordinator in…
The EU Japan Centre is releasing a weekly press review covering Japan's economic and policy matters…
The EU Japan Centre is releasing a weekly press review covering Japan's economic and policy matters…

Events

More
Online and in Japan
19/05/2025 - 13/06/2025
19-23 May 2025 → 1st phase online 9-13 June  2025→ 2nd phase in Japan PROGRAMME OBJECTIVES “Get Ready for Japan” aims to help understand Japanese business practices and communication styles and…
Japan
20/05/2025 - 23/05/2025
Mission dates : May 20 to 23, 2025 --- Applications are now closed --- Are you running a business specializing development of defence technologies and solutions, such as cyber-security, drones,…
We use a selection of our own and third-party cookies on the pages of this website. If you choose "ACCEPT ALL", you consent to the use of all cookies. You can accept and reject individual cookie types.
Related
Subscribe to
our newsletters

The EU-Japan Centre currently produces 5 newsletters :

  • EU-Japan NEWS - our flagship newsletter covering the Centre's support services, information about EU (or Member States) - Japan cooperation
  • Japanese Industry and Policy News
  • “About Japan” e-News (Only available for EU companies / EU organisations)
  • Japan Tax and Public Procurement Weekly Tender Digest (Only available for EU companies / EU organisations)
  • Tech Transfer Helpdesk Newsletter
Subscribe