Japan Introduces Tax Reform Bill

Mary Swire, Tax-news.com, Hong Kong

30 March 2001

The Diet, Japan's legislative branch of the government, enacted this week a series of tax revision bills for the fiscal year 2001 focusing largely on extended tax breaks for home loans and withholding taxes on capital gains. This new legislation is expected to pave the way for the Liberal Democratic Party to begin considering more tax reforms to boost the stock market.

Under this latest set of tax reforms, the basic tax-deductible amount for gifts will increase from 600,000 yen to 1.1 million yen. Tax breaks for home loans, originally due to be shelved by the end of June, will be extended until the end of December 2003. By the same token the withholding taxes on capital gains from stocks, which were to be abolished at the end of March, will be extended for two more years as it was expected that the abolition of the tax would have a negative impact on the stock market.

Investors can choose whether or not to pay a 1.05 per cent withholding tax on the value of share sales regardless of whether they have made a loss or profit from the sale, or they can pay a 26 percent tax on their annual total of capital gains.

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