Japan

Tax and financial measures associated with COVID-19

27 April 2020

On 7 April 2020, Japanese Government made a cabinet decision to approve the emergency economic measures in the economic package to mitigate the impact of COVID19.

Tax measures

Deferral of tax payment

The deferral of the national tax payment will be permitted for one year or less without providing collateral and without incurring delinquent tax for the tax payers with the taxable revenue for at least one month from February 2020 is decreased by 20% compared with the same period of time in the prior year. This special measure is applied for all the taxpayers regardless of individual or corporation, for which payment due dates fall between 1 February and 31 January 2021.

In addition, the deferral of local tax collection will be also permitted for one year or less without providing collateral and without incurring delinquent tax under certain conditions.

The expansion of tax loss carry-back status

Under the current rules, a company with a share capital of 100 million JPY or less can carry back tax losses against taxable income of previous fiscal year.  The scope of eligible company for tax refund by tax loss carry back will be expanded to a company with a share capital of 1 billion JPY or less.

Tele-work investment incentive

The capital investment in teleworking will be added to the scope of the existing tax incentive regime for a small and medium sized company.

The right to change consumption taxpayer status

The taxpayer is allowed to reverse or select the consumption taxpayer status after the start of a taxable period will be permitted  if it’s  sales revenue for any discretionarily selected one month or longer period between 1 February 2020 and 31 January 2021 are decreased approximately 50% or more.

Deduction/tax credit for cancelled event tickets

Where the ticket buyer gives up their right to claim a refund in case a sport or cultural event is cancelled, the admission fee will be subject to the donation deduction for their income tax filing.

Flexibility of the application for the special deduction for housing loan

The flexible treatment about requirements regarding the application of special tax credit for housing loans will be allowed.

Reduction of property tax

Regarding the property tax and city planning tax for 2021 on depreciable fixed assets and buildings for business owned by SMEs, the taxable basis will be reduced to one-half or zero if it meets certain condition.

 

Employee and employer supportive measures

Under the special treatment for COVID-19, employment adjustment subsidies are available for the companies & business owners which are shut down their business temporary because of worsening economic conditions. The scope of these subsidies will also be expanded for both large company and SMEs.

Business support

Non-interest bearing and or non-collateral loans will be made available to private entrepreneurs and SMEs which are decreasing their sales.

If sales decrease more than 50% compared with the same month in previous year, small and medium sized companies can receive a cash benefit up to a maximum of 2 million JPY and private entrepreneurs can receive a cash benefit up to 1million JPY.

Accounting implications

A due date of annual securities report submission for the listed companies with March 2020 fiscal year end is postponed from June 2020 to September 2020.

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