Japan To Give Corporate Tax Exemption In Disaster Region

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

13 October 2011

The Japanese government’s tax panel has approved the provision of a five-year corporate tax exemption to businesses that invest in the earthquake and tsunami-hit north-east of Japan.

The proposal comes immediately after the government’s recent agreement on a JPY12 trillion (USD156.6bn) budget, including corporate and individual income taxation increases, to be presented to opposition parties and parliament this month for the financing of the area’s reconstruction costs.

It is expected that this measure will also be introduced to the country’s parliament later this month for approval. The government hopes that the tax exemption will halt any movement of businesses away from, and thereby speed up reconstruction in the special reconstruction zones that are to be established in the disaster-affected areas.

To qualify for the corporate tax exemption, companies are likely to be required to increase their investment in the special zones over and above their original plans, and to reserve a proportion of their earnings for reinvestment. It is also hoped that, alongside the individual tax breaks that are already in place, the special zones will be given other corporate incentives, such as a relaxation of onerous regulations.

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