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Japan plans 10-year tax breaks for electric cars and chip production

Update time : 2023-12-15 10:54:10

The Japanese government plans to offer a 10-year tax credit to promote mass production in five areas, including electric vehicles and semiconductor devices.

Japan will include the measures as early as this week in its tax reform framework for fiscal year 2024, which will be finalized this week, and will determine the size of the tax incentives based on the volume of production and sales of eligible products. Other areas receiving ten-year tax incentives include sustainable jet fuel, green steel made from renewable energy, and green chemicals made from plants and recycled waste. The electric vehicle category also includes storage batteries.
Businesses in the semiconductor industry will receive up to 20 percent corporate income tax relief each fiscal year; the cap for other categories will be set at 40 percent.
If a business suffers a loss in a reporting period, it will be able to carry forward unused tax relief to the next reporting period. This applies for up to three years for semiconductors and up to four years for other sectors.
Tax credits include 400,000 yen ($2,749) per electric vehicle, 30 yen per liter of sustainable jet fuel, and 20,000 yen per ton of green steel. The incentives will last for 10 years, starting when business plans are authorized. The government will require companies to submit their plans by the end of fiscal 2026.
Policymakers have also decided on the details of an "innovation box" tax credit to attract R&D centers to Japan.
Income from the transfer and licensing of patents and copyrights will be deducted from taxable income at a rate of 30%. This will apply to copyrights and patents acquired from April 2024, and the incentive will expire after seven years from April 2025 onwards.
The government is also revising the formula for the prefectural corporate tax system, which taxes companies based on their size. The changes will prevent companies from lowering their tax burden by reducing capital.
Lawmakers have also extended the deadline for applying for tax credits to promote the shift of small businesses to the younger generation. The deadline to apply is March 2026, starting with the current deadline of March 2024.1 The deadline to apply for the tax credit is March 2026.2 The deadline to apply for the tax credit is March 2026.3

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