Japan Mulls Inward Investment Incentives

by Mary Swire, Tax-News.com, Hong Kong

26 October 2010

The Japanese government may introduce preferential tax rates for foreign companies investing in Japan, the Nikkei Keizai Newspaper has reported.

Discussions on reducing the Japanese corporate tax rate for all companies by 5% have already progressed, while the extra incentives for inward investment could involve reductions of 10-15% in the effective rate over the first five years.

The incentives would be targeted at high tech, medical, biotechnology and similar technologically advanced companies wishing to establish a regional base or research and development center.

An effective corporate tax rate of 25-30% for the first five years is aimed to be competitive with China, Korea and other countries in the Asia region. Further concessions on local taxes could also lower the effective corporate tax rate paid by foreign investors.

Other issues under discussion were reported to include:

• Concessions for mergers or acquisitions of businesses in Japan;
• Incentives for office rental or the acquisition of land or buildings;
• Streamlining of visa processing;
• Promoting more congenial conditions for foreigners coming to work in Japan; and
• Fast-tracking procedures in the pharmaceuticals approval process.

The proposals are reportedly championed by the Ministry of Economy, Trade and Industry, but face opposition from the Finance Ministry among others. The government's top level panel chaired by the Prime Minister would aim to turn the discussions into concrete proposals in the coming weeks for implementation next year.

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