Act of the Comprehensive Special Zones effective on June 22, 2011

Tuesday, July 26, 2011. 15:10


As a measure for regional revitalization and a strategy for new growth in economics, Japan started a proposal of Comprehensive Special Zones on June 18, 2010. As of June 22, 2011, this proposal was accepted into law and will come into effect from this August.

The act of Comprehensive Special Zones refers to Japan tax preferential zones that offer preferential tax treatment to certain industries, including medical, environmental, agricultural and similar growth areas. In addition, it also allows private sector to operate nursing home and offer certain restriction reliefs for the usage of industrial region.

This act offers companies established in the zones a menu of tax preferences from which they can chose. For example:
- Tax credit for the investment.
- Special depreciation (an increase in the limitation of tax deduction for depreciation of facilities, plant and equipment. 50% of the acquisition cost (25% for buildings) can be claimed for depreciation).
- Tax credit: 15% of the acquisition cost (4% for buildings)

Further, companies can also enjoy the subsidy of up to 0.7% of the interest payment for bank loan.

Being able to enjoy higher amount of depreciation and tax credits is certainly equivalent to a de-facto exemption from taxation of some part of the income of the company which somewhat can relive companies from high taxation rate as well as allow cash flow savings.

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