1. Introduction
On 10 December, 2021, the Ruling coalition (the Liberal Democratic Party and Komeito) announced the “Outline of the Tax Reform Proposals,” which was approved by the Cabinet on 24 December, 2021. The Kishida Cabinet seeks to bring about a new form of capitalism into realization with the concept of a “virtuous cycle of economic growth and distribution” and the “development of a new post-COVID 19 society.” In this News, we will mention the contents of major tax reforms. Please note that the content of tax reform will be changed through the deliberation in the Diet.
2. Individual income taxation
・Revision of housing loan rules
The applicable period will be extended by four years, from 31 December 2021to 31 December 2025. The tax credit rate will be reduced from the current 1% to 0.7%. On the other hand, the creditable period for a new housing, etc. will be extended from the current 10 years to 13 years during the period of 2022 and 2023.
3. Corporation taxation
・Enhancement of the tax incentive to encourage wage increases
In cases where large companies which increase total wages paid to continuously hired employees by 3% or more in each fiscal year beginning between 1 April 2022 and 31 March 2024, a tax credit of up to 15% of a total year-on year increase in the total wages paid to all employees will be allowed. (The upper limit is 20% of the corporation tax liability.) In case of the increase of total wages by 4% or more, 10% will be further added to the credit rate. In cases where education and training costs increase by 20% or more from the preceding year, 5% will be added to the tax credit rate. Please note that certain large-sized companies are required to announce their policies on wage increases and other specific issues.
As for small and medium-sized companies, the eligible period of the tax credit of acceleration of substantial salary increase will be extended by one year, and the tax credit will be amended as follows.
① If total wages to employees in the current year increase by 2.5% from the preceding year, 15% will be added to the tax credit ratio.
② If education and training costs increase by 10% from the preceding year, 10% will be added to the tax credit ratio.
4. Reform for tax administration
・Transitional measures for smooth transition to preservation of electromagnetic records related to transaction information of electromagnetic transactions
In line with the tax reform of Electronic Record Preservation Law in 2021, the preservation of electromagnetic records related to transaction information of electromagnetic transactions was further amended, the output documents of electromagnetic records are not allowed on or after 1 January, 2022.
However, considering the burden of the preservation obligors, the transitional measures will be applicable for the period from 1 January 2022 through 31 December 2023 if the following conditions are met.
① The tax authority agrees that there are unavoidable situations for the preservation obligors.
② Hard copy of preservation records can be presented or submitted.
5. Conclusion
In this News, we mentioned some points about the Outline of 2022 Tax Reform Proposals.
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference)
Outline of 2022 Japan Tax Reform Proposals
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