Tax incentive promoting more investment in SMEs

Monday, May 30, 2011 11:28

The period of tax incentive for small and medium-size enterprises (SMEs) investing in productive asset such as machinery or equipment expired December 31, 2010 has been extended for two more years through March 31, 2013 as part of the tax relief and SMEs’ investment promotion.

The tax incentive is that SMEs, based on its capital amount, can elect either special depreciation allowance or special tax credit for the investment – the acquisition cost of the machinery or equipment to serve a specific business.

Special depreciation allowance: The tax incentive allows SMEs to deduct as much as 30% of the acquisition cost as depreciation expense.

Special Tax credit: the tax incentive allows SMEs to enjoy a tax credit of 7% of the acquisition cost where such credit amount must be less than 20% of the total corporate tax liability.

SME who is considering the reinvestment of its productive assets or expansion of its business operation should embrace this incentive chance before it expires.

The table below illustrates the qualifications to claim for the incentive.

Qualifications

Qualified SMEs

1.     Special depreciation allowance: any SME or Agricultural cooperative association who files blue return.

※SME is any corporate entity whose capital amount is under 100 million yen and is not holding more than 50% issued shares of any large corporation.

2.     Special tax credit: any SME or Agricultural cooperative association whose capital amount is 30 million yen or below.

Qualified industries

Manufacture; Construction; Wholesale; Retail; Restaurant; Service or other specific industries.

Qualified productive assets

 (except second-handed items)

•     All types of machinery and equipment of which the amount of each piece/set must be 1.6 million yen or above.

•     A certain types of furniture, fixture and equipment (including electronic appliances) of which the total acquisition cost in a business year is 1.2 million yen or above

•     A certain types of software of which the total acquisition cost in a business year is 0.7 million yen or above.

•     Commercial vehicle weighing 3.5 ton or above

•       Coasting vessel: up to 75% of the acquisition cost is allowed
ie: 75% of the acquisition cost x 30% (Special depreciation allowance)

75% of the acquisition cost x 7% (Special tax credit)

Source:

- Act on Special Measure concerning special depreciation available for SMEs purchasing machinery or equipment:
Article 42-6(1), Article 68-11(1),

- Ordinance for Enforcement of the Act on Special Measures concerning special depreciation available for SMEs purchasing machinery or equipment: Article 20-2-2(3), Article 12 from Revised Ordinance.

[中小企業者等が機械等を取得した場合の特別償却（ 措法42 の６①、68 の11 ①）（措規20 の２の２③、改正措規附則12）]

   http://www.nta.go.jp/shiraberu/ippanjoho/pamph/hojin/kaisei_gaiyo2010/pdf/07.pdf - Page 31.