On 5 December 2013, the Japanese government issued an ‘Economic Stimulus Package’ and clarified in it that they will abolish the Special Reconstruction Corporation Tax (equal to 10 percent of the corporation tax liability) a year ahead of the original schedule. The change will become definite after necessary amendments to the tax law are made.
Although details have not been announced yet, it is expected that the applicable periods for the Special Reconstruction Corporation Tax will be shortened and the effective corporate tax rate will be reduced as follows:
Current tax law:Fiscal years beginning from 1 April 2012 to 31 March 2015 (3 years)
Proposal:Fiscal years beginning from 1 April 2012 to 31 March 2014 (2 years)
| ||Fiscal years beginning before 1 April 2014||Fiscal years beginning on or after 1 April 2014|
|Special Reconstruction Corporation Tax||2.55%（25.5%×10%）||－|
|Special Local Corporate Tax||4.29%||4.29%|
|Prefectural and municipal tax||5.28%（25.5%×20.7%）||5.28%（25.5%×20.7%）|
|Effective tax rate||38.01%（40.882%×100/107.55）||35.64%（38.332%×100/107.55）|
(The above effective tax rates take into account the tax deductibility of Special Local Corporate Tax and business tax payments, and are calculated using Tokyo tax rates currently applied to a company whose paid-in capital is over JPY100 million.)
KPMG Tax e-Tax News No.63
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