Abolition of special reconstruction corporation tax takes place one year ahead

1. Overview

The special reconstruction corporation tax which was supposed to be levied during the tax assessment period from 2012 to 2014 was abolished one year ahead of the original schedule. Accordingly, the effective tax rate would be reduced from 38.01% to 35.64% (This effective tax rate applied to company with paid-in- capital of 100 million yen located in Tokyo using Tokyo tax rate; for other areas using tax rate of that local area, the effective rate may vary slightly).

2. Content

The special reconstruction corporation tax was introduced as a measure to help recover from the 3.11 disaster of east Japan. It levied by adding10% to the existing corporation tax, applicable for a period of three years to company with fiscal year beginning on or after 1 April 2012. The abolition taking place a year in advance means that the taxation will be finished after it levies on the company with fiscal year beginning on or before 31 March 2014. In other words, company with fiscal year begins on 1 April 2014.

The table below shows the applicable effective tax rate before and after the abolition of the special construction corporation tax.

Fiscal year begins on or before

31 March 2014

Fiscal year begins on or after

1April 2014

Non-SME
(company with paid-in capital ＞100 million yen)

38.01%

35.64%

SME

(company with paid-in capital ≦100 million yen)

39.43%

37.11%

※SME: small to medium sized enterprise.