Fiscal stimulus spending by the government will serve as the main tool for softening the outbreak’s economic impact. The government is significantly expanding subsidies to maintain jobs impacted by the health crisis.
Filing/Payment Deadline Extension
The payment due dates for 2019 tax return for taxpayers who use automatic bank transfer will be extended as follows:
- Individual income tax and special reconstruction income tax are due May 15, 2020.
- Individual consumption tax and local consumption tax are due May 19, 2020.
- The payment due date for consumption taxpayers who apply special measures for certain short tax periods is also May 19, 2020.
The National Diet on 30 April 2020 passed legislation that includes tax and economic measures in response to the coronavirus (COVID-19) pandemic, the legislative measures include tax relief, such as:
A grace period of one year for tax payments of almost all national tax liabilities of corporate or individual taxpayers with payment due dates between 1 February 2020 and 31 January 2021, provided there has been a 20% decrease in the taxpayer’s revenue for the same period in the prior year.
- Tax refund by application of tax loss carrybacks—expanded for companies with stated capital of JPY 1 billion or less (from JPY 100 million or less).
- Tax reduction for capital investments with regard to teleworking for small and medium-sized companies.
- Allowance of a charitable (donation) deduction by individuals who forfeited a right to claim a refund of the amount they paid for admissions to a cultural, arts or sporting event that was cancelled because of the pandemic.
- Flexible treatment of the requirements for application of the special deduction available for housing loans.
- Special rules for consumption tax—when sales for a one-month (or longer) period between 1 February 2020 and 31 January 2021 are decreased significantly (50% reduction or more), the selection or cancellation of taxable company status for consumption tax purposes is to be permitted.
- Stamp tax exemption for contracts involving public or private financial institutions.
- There are also local tax relief measures (such as a grace period for tax collection and reduction of property tax on certain property owned by small and medium-sized entities).
In April, 2020, the National Tax Agency released a set of “frequently asked questions” (FAQs) concerning tax relief measures provided in response to the coronavirus (COVID-19) pandemic, addressing the following:
- Procedures for the extension of tax return filing and tax payment due dates for corporation tax, local corporation tax, and consumption tax in response to the pandemic.
- Providing instructions concerning the treatment of reductions of directors’ compensation in response to business downturn.
- Procedures for individual taxpayers with regard to extensions of tax return filing and tax payment due dates regarding individual income tax, gift tax, and individual consumption tax.
On April 15, 2020, the NTA extended the AEOI reporting deadline and amended the CRS legislation.
On April 20, 2020, the Tokyo Bureau of Taxation released information on the procedures that companies should follow to extend the tax return filing and payment due dates for corporate business tax and inhabitant tax purposes. Companies not able to file their tax returns or pay the related taxes by the due date because of “unavoidable reasons” related to the COVID-19 pandemic may avail themselves of one of two application methods for an extension for filing returns and paying tax:
- File Form No. 22 regarding extension by disaster (under Tokyo metropolitan ordinance 17-2)
- File Form No. 13 regarding extension by disaster (under local taxation law 72-25)
- A list of FAQs addresses the procedures for extension of return filing and tax payment due dates for corporate business taxpayers and payers of corporate inhabitant tax in Tokyo.
Business Income Tax
- On April 13, 2020, the NTA has amended the administrative guidance for corporation tax to provide that certain actions in transactions between business entities—such as forgiveness of trade receivables or the provision of low-interest loans—when there are financial difficulties related to the pandemic, should not be treated as donations or entertainment expenses.
- In addition, for small and medium-sized enterprise (SMEs), a tax reduction (in terms of special depreciation or tax credits) has been introduced for capital investment in teleworking.
Customs/Import and Other Miscellaneous Taxes
On April 30, 2020, the National Diet passed additional tax relief measures which, among others, provide for a reduction in the taxable basis for property tax purposes of depreciable assets and houses for business owned by SMEs to one half or zero for 2021.
Additional information regarding employment-related measures, economic stimulus measures and other measures.