Japan: Preferential tax measures for investment in National strategic special zones

Overview 

One of the general plans of the Japan Revitalization Strategy 2013 proposed the setting up of the “National Strategic Special Zones” within Tokyo, Osaka and other major central cities whereby investors are able to apply preferential tax measures. The aim of “National Strategic Special Zones” is to make those zones to be the world’s best commercial cities. Since the said idea was brought up, several “National Strategic Special Zones” conferences were held to discuss and review the regulations to extend the visa period, the promotion for foreigners employment and to attract more foreign as well as domestic investments. 

Special depreciation or tax deduction 

To encourage the improvement of technology and the protection of environment, company which has invested in approved machinery and equipment is eligible for special depreciation or 15% tax deduction if fulfilled certain conditions for the first year of incorporation in the special zones. 

Research and development 

To ensure the grow and competitiveness of companies, 100% special depreciation and 12% of the depreciation expense to offset the tax liability are available for those companies which have invested in developing new industrial technology and products for the first year of incorporation in the special zones. 

Exemption of fixed assets tax 

In general, a company who possess lands, buildings orcertain kind of depreciable fixed assets is required to pay fixed assets tax on 1 January every year. However, a companycan enjoy 50% exemption of the tax payment for the first three (03) years of incorporation in the special zones.

Corporation Tax Reduced 

The effective corporation taxes applied to foreign entities incorporated in the special zones will be reduced from 35% to 26.9%. Such tax relief is being discussed within the 2015 draft tax reform. 

‍