OAK Tax Corporation


2014 Japanese Tax Reform


1 Corporate tax
Special depreciation and tax credit for Productivity Improvement Facilities
If the blue form corporation acquires Productivity Improvement Facilities and uses them for its business, either the following special  depreciation or tax credit can be applied. The tax credit is capped at 20 % of  corporate tax liabilities for the fiscal year.

a) Special depreciation of 100% or tax credit of 5%  (3% for buildings and structures) of the acquisition costsin case of acquisitions from20 January 2014 to 31 March 2016
b) Special depreciation of 50% (25% for buildings and structures) or tax credit of 4% (2% for buildings and structures) of  the acquisitioncosts in case of acquisitions from 1 April 2016 to 31 March 2017

Productivity Improvement Facilities mean the following facilities which compose production facilities (Note 1) and which are prescribed inIndustrial Competitiveness Enhancement Act as the leading edge facilities (Note 2) or as the facilities which contribute to improvementof  production line and production operation (Note 3).

a) Machinery whose acquisition costs per unit are over 1.6 millionyen
b) Tools and equipment whose acquisition costs per unit are over 1.2million yen (or over 300,000 yen per unit and 1.2 million yen in totalfor the fiscal year)
c) Buildings, building facilities and structures whose acquisition costs per unit are over 1.2 million yen (or, only for building facilities, over600,000 yen per unit and 1.2 million yen in total for the fiscal year)
d) Software whose acquisition costs per unit are over 700,000yen (or over 300,000 yen per unit and 700,000 yen in total for the fiscalyear)

(Note 1)
The production facilities mean the facilities composed of depreciable assets directly used for business except head office buildings,dormitory, office equipment, welfare facilities etc.
(Note 2)
The leading edge facilities mean the latest facilities (including specific software and computer server in case of SME) that satisfy therequirement for productivity improvement (improvement of annual production averageat 1 % or more compared with old models).
(Note 3)
The facilities which contribute to the improvement of production line and production operation mean the machinery which are specifiedin investment plans whose rates of return on invested capital are 15 % or more (5 % or more incase of SME) verified by the RegionalBureaus of  Economy, Trade and Industry.

This will be applicable for Productivity Improvement Facilitiesfor domestic business acquired between January 20 2014 and March 312017. In case of acquiring by March 31 2014, it will be applicable forthe fiscal year which includes April 1 2014.

Special depreciation and tax credit for productivity improvement facilities for SME
If the blue form SMEacquires the following facilities which come under Productivity Improvement Facilities,either special depreciation of100% of the acquisition costs or tax credit of7% (10% for SME whose paid-in capital is 30 million JPY or less) of the acquisition costs canbe applied. The tax credit is capped at 20% of  corporate tax liabilities for the fiscal year.

Machinery

Unit costover 1.6 million yen

Tools for measuring and inspection

Unit costover 300,000 yen and total cost for the fiscal
year over 1.2 million yen

Equipment

Unit costover 1.2 million yen for
a) multifunction machine connected to the internet
b) measuring and test equipment

Computers

Totalcost for the fiscal year over 1.2 million yen

Software excluding master copies
for selling, RD and server OS

Unit costover 700,000 yen or total cost for the fiscal year
over 700,000 yen

Others

a) Trucks
b) Ships for coastal service

(Note)

SME (small and mediumsized enterprises) mean corporations whose paid-in capital are 100 million yen or less.

This will be applicable for the productivity improvement facilities for the domestic business acquired during the period from January 202014 till March 31st 2017. In case of acquiring by March 31 2014, it will be applicable forthe fiscal year which includes April 1 2014.

Early termination of theSpecial Reconstruction Corporation Tax
The special reconstruction corporate tax is terminated 1 year earlier than planned and is effective until the fiscal years beginning in theperiod from April 1 2012 to March 31 2014.

After the termination of the special reconstruction corporate tax, the withholding special reconstruction tax can be offset againstcorporate taxliabilities for the year along with income tax imposed on interest, dividendsand so on as the prepaid corporate tax.

Expansion of the limitationfor deductible entertainment expenses
50 % of the entertainment expenses paid for foods and drinks except for the internal entertainment purpose are deductible from income.
In addition, SME can choose either of this 50% or the formerlimitation of 8 million yen.

This will be applicable for the fiscal years beginning after 1 April2014.

Expansion of the taxcredit for increase of salary payment
As for the tax credit for increase of salary payment, the requiredconditions are eased. As a result, the tax credit of 10% of  increase ofemployee salary can be applied to the blue form corporation as long as the following 3 conditions are fulfilled.

(1) The salary payment is increased by the following percentage comparedwith the salary payment of the base year. The base year meansthe previousfiscal year of the fiscal year beginning first after April 1 2013.
a) 2 % or more in the fiscal years beginning before April 1 2015
b) 3 % or more in the fiscal years beginning between April 1 2015 and March 31 2016
c) 5 % or more in the fiscal years beginning between April 1 2016 and March 31 2018
(2) The salary payment for the continuously hired employees in thefiscal year is not lower than the salary payment for the one in theprevious fiscal year.
(3) The average salary for the continuously hired employees in the fiscal year is not lower than the average salary for the one in theprevious fiscal year.

The tax credit is capped at 10 % (20% for SME) of the corporate taxliability for the fiscal year.

This will be applicable for the fiscal years beginning between April 1 2013 and March 31 2018.

Introduction of Local Corporate Tax (National tax) and reduction of tax rates of inhabitant tax and enterprise tax
In order to correct the local tax revenue gap between the regions, a new national tax, local corporate tax, will be introduced. The localcorporate tax of  4.4% will be imposed on corporate taxliabilities for the fiscal year. At the same time, in exchange for above, the tax ratesof corporate inhabitant tax and enterprise tax will be reduced as follows.
These will be effective for the fiscal years beginning from October1 2014.

@@inhabitant tax@
@@@

Current

From 1 Oct 2014

Standard rate

Upper rate

Standard rate

Upper rate

prefectural

5.0“

6.0“

3.2“

4.2“

municipal

12.3“

14.7“

9.7“

12.1“


Size based enterprise tax

Current

From 1 Oct 2014

Up to4,000,000

1.5“

2.2“

4,000,001 to8,000,000

2.2“

3.2“

8,000,001 and upwards

2.9“

4.3“


Income based enterprise tax

Current

From 1 Oct 2014

Up to4,000,000

2.7“

3.4“

4,000,001 to8,000,000

4“

5.1“

8,000,001 and upwards

5.3“

6.7“


Special local tax(imposed on
enterprise tax additionally)

Current

From 1 Oct 2014

Size based enterprise tax

148“

67.4“

Income based enterprise tax

81“

43.2“

.

2 Income tax
Employment IncomeDeduction
Resident tax payers who earn employment income more than JPY 10 million will be set the upper limit on employment income deductionlower as follows.

Employment Income Deduction

Current

2016

2017

Gross employment Income@(A)

Employment Income Deduction

Up to1,625,000

650,000

do.

do.

1,625,001 to1,800,000

(A) x 40%

do.

do.

1,800,001 to3,600,000

(A) x 30% +180,000

do.

do.

3,600,001 to6,600,000

(A) x 20% +540,000

do.

do.

6,600,001 to10,000,000

(A) x 10% +1,200,000

do.

do.

10,000,001 to12,000,000

(A) x 5% +1,700,000

(A) x 5% +1,700,000

2,200,000

12,000,001 to15,000,000

2,300,000

15,000,001 and upwards

2,450,000



3 Consumption tax
Revision of deemed taxable purchasing ratio for the simplified calculation method for consumption tax

The scope of business of the deemed taxable purchasing ratio isrevised as follows.
This will be applicable for the taxable years beginning after April 1 2015.

Type

Deemed taxable
purchasing ratio

Scope of business

Current

After 1 April 2015

1

90%

Wholesale

do.

2

80%

Retail

do.

3

70%

Agriculture, forestry, fishing, mining,
construction,manufacturing, electricity,
gas, the heat supply and waterworks.

do.

4

60%

Business other than Type 1, 2, 3 and 5
including food service, financial and
insurance service

Business other than Type 1, 2, 3 and 5including food service

5

50%

Real estate, transportation,
communication, services excluding food
service

Transportation, communication, financialand insurance service, servicesexcluding food service

6

40%

n/a

Real estate