Japanese Tax Panel Proposes Disaster Tax Relief

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

10 October 2011

A government tax panel has proposed new measures to provide tax relief for individuals and companies that were affected by the earthquake and tsunami in north-east Japan earlier this year, as well as for those that create jobs or make investments in the region.

It is estimated that the new measures will provide a further JPY100bn (USD1.3bn) annually to reduce tax burdens in the affected areas, so that the total amount of relief given by way of tax measures for reconstruction would then reach over JPY200bn per year.

It is expected that the new tax breaks will include an allowance of up to JPY50m as a deduction against taxable income for sellers of land and buildings to local authorities, while companies based in the disaster-affected areas will be given a tax credit of 10% of the total remuneration of new employees hired, up to a limit of 20% of their corporate tax payable.

In addition, businesses will become eligible for special depreciation and tax credits on new investments in plant and machinery, and individuals will be allowed to deduct the cost of damage repairs from their taxable income for a total of three years.

The panel is still working on the final package of proposed measures, and it is looking particularly at how it can encourage businesses further to invest in the affected region. It is hoped that the panel’s proposals will be ready to be presented in parliament by the end of this month.

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