Japan Mulls 7 Pct Tax Deduction to Fuel Capital Spending

Tokyo, Dec. 11 (Jiji Press)–The Japanese government and the ruling coalition are considering allowing companies to deduct 7 pct of capital spending from corporate tax to help spur domestic investments, people familiar with the matter said Thursday. Under the plan, companies will also be allowed to fully book capital spending as depreciation costs in an initial year to reduce tax payments in a scheme called immediate depreciation, instead of receiving the tax deduction. The tax breaks are part of efforts by the administration of Prime Minister Sanae Takaichi to make the Japanese economy strong. The government and the coalition plan to include the incentives in their tax system reform package for fiscal 2026. Investments by large companies in manufacturing machinery, buildings and software worth 3.5 billion yen or more will be eligible for the tax deduction. For smaller businesses, the deduction will apply to investments of 500 million yen or more. Up to 20 pct of corporate tax will be allowed to be deducted. For buildings, 4 pct of capital spending will be deducted. Companies that were impacted by high U.S. tariffs will be allowed to carry forward the deduction for up to three years. Firms will be asked to submit capital investment plans by the end of March 2029 to make them eligible for the tax breaks. The administration of former Prime Minister Shinzo Abe introduced a 5 pct tax deduction and immediate depreciation in 2014 as a temporary measure in place for three years to fuel domestic investments. END [Copyright The Jiji Press, Ltd.]