Update taxation plans for 2016

The on-going discussions in the ruling LDP Tax System Research Council are yielding new fiscal reforms for the coming year.  Most conspicuous is the proposal to accelerate the decrease of corporate taxation rate to below 30% next year at 29.97%.  It had been expected that the effective corporate taxation rate would reach the 20% range in 2017. Nikkei Online (J) reports on November 30th on a number of other measures, which are likely to be implemented from April next year. 

Solar energy tax breaks to end

Current corporate taxation breaks for operators of solar energy facilities are likely to end next year, as the ‘Green investment tax reduction” system is reviewed.  Under the fiscally beneficial climate, development of solar energy facilities have soared more than initially anticipated in Japan during the past years. The system will continue into the next fiscal year, but solar energy facilities installed after April 1, 2016 will no longer be eligible.  Earlier, the government had already introduced lower feed-in tariffs.  It is expected that other renewable energy sources, such as wind and geothermal energy facilities will continue to fall under the advantageous fiscal climate, as their spread has lagged behind that of solar energy.

Lower tax-free threshold for foreign tourists

With the in-bound tourist boom continuing unabated, in particular fuelled by bakugai (shopping frenzied) tourists from the Chinese mainland, the ruling coalition is planning to decrease the tax-free threshold for foreign tourists. Currently at ¥10.000, the threshold will be lowered to ¥5.000 next year and will also include consumables.  The measure is expected to encourage foreign tourists to spend more in regional cities, instead of concentrating in major cities. 

Over-the-counter drug income tax deductible

A new measure (J) likely to be introduced in 2016 is allowing families to deduct costs for over-the-counter medicines over ¥10.000 from their income taxes.  The Ministry of Health and Welfare and the Finance Ministry hope such as measure stimulate people to  ‘self-medicate’ first, instead of going to a hospital in case of light illnesses, and thus lead to lower costs for national health covered medical care.  It is already possible to deduct costs for all types of medicines above ¥100.000 from income tax, but as over-the-counter medicines are usually cheaper, this threshold was hardly reached.

Tax breaks for 3-generation home-improvement

The ruling coalition is also considering the introduction of income tax deductions to assist families who wish to make home-improvements (J) to accommodate three generations.  The proposal is seen as a way to support measures to deal with the shortage of child-care facilities, preventing more Japanese women to engage in full-time employment.  Under the proposal families would be able to deduct 2% of their year-end loan balance over a period of 5 years and 10% of the construction costs, maximized at ¥2.5 mln.

Tax-free infertility treatment and child-rearing  donations

In its quest to stop the declining birth rate, the Japanese government is also considering fiscal initiatives to stimulate its citizens to have more children.  Donations made by (grand)parents to their offspring up to ¥10 million earmarked for childrearing related costs were already tax-exempt since 2015, but the scope is expected to be broadened in 2016.  Medical costs for infertility treatments and maternity are likely to covered by the system as well.


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