Japan To Reduce Corporate Income Tax Rate

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The corporate income tax rate in Japan is known to be one of the highest worldwide. To encourage foreign companies to do business in Japan and make Japan a more attractive location for investments, Prime Minister Shinzo Abe is considering reducing the corporate income tax rate to a “competitive rate in the global market” in the near future. Reduction in the corporate income tax rate is expected to revitalize the Japanese economy and encourage repatriation of Japanese multinationals that have moved their operations to low-tax jurisdictions due to the high tax rate in Japan. The current corporate income tax rate, a national tax levied on a company’s profits, is 25.50%, and the effective tax rate (“ETR”) is 35.64%. The ETR takes into account, in addition to the corporate income tax, various small taxes such as the Enterprise Tax, the Inhabitants Tax, and the Special Local Corporation Tax.

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