Japan Tax Bulletin
Tax Measures In Emergency Economic Measures Relating To
COVID-19
January 2021
1.

Special tax measures for deferral of national tax payments

The tax payment deferral system is one whereby taxpayers inspecial circumstances can postpone their tax payment for up to one
year by applying to the tax office.
Under current tax laws only taxpayers who are in special
circumstances, such as they face difficulty continuing business by
paying the tax in one lump sum, or they have lost their assets due
to disasters, are eligible for the system (Acts on General Rules for
National Taxes, Article 46).
In view of the COVID-19 outbreak, special tax measures fordeferral of payments have been established for taxpayers whose
income has decreased considerably due to influence of COVID-19(Act on Extraordinary Exception on National Tax Related Laws toAddress the Impact of COVID-19, Article 3).
If taxpayers meet both of the following requirements, they areeligible for the special tax deferral system and can postpone theirtax payment for up to one year without any delinquent penalty tax.
(1) The taxpayer suffers a decrease in income for any period (morethan one month) after February 2020 by about 20 percent or morecompared to the same period of the previous year; and(2)The taxpayer has difficulty paying their national tax in one lumpsum.
The special tax measures cover national taxes which are due fromFebruary 1, 2020 to February 1, 2021. An application is required by
the due date for payment.
2.

Additional tax measure for extension of the national tax filingdeadlines

If this is applied for, the filing due date will be the date when
corporations file the tax return and the tax payment due date willbe also postponed to the date of the tax filing.
3.

Special tax measures for carried-back losses

If corporations who file blue tax returns continuously, make ataxable loss for a fiscal year, the loss can be carried back to thepreceding year (Acts on Corporate Tax, Article 80) or carriedforward for ten years (Acts on Corporate Tax, Article 57).
If the corporations choose to carry back the loss, the tax ontaxable income for the previous fiscal year will be refunded fullyor partially.
Under the current tax laws, the loss-carried-back system isapplied only for corporations whose paid-in capital is JPY100
million or less.i
The special tax measure for loss carry-back widen the scope ofeligible corporations to include those with paid-in capital is JPY1
billion or less.ii
The special tax measure for loss carry-back applies to fiscal years
ending during the period from February 1, 2020 to January 31,
2022.
4.

Special tax credit /special depreciation applicable to capital investment
for remote work

Under the current laws, if a small or medium-sized enterprise(SMEiii) that files a blue tax return acquires and uses certain
equipment for business, the SMEs can depreciate 100% of theacquired amount or deduct 7% of the amount from its corporate
tax liability for the fiscal year.

An additional tax measure has been introduced in relation toextending the filing deadline for national taxes (including corporate
income, consumption and withholding taxes).

SMEs with paid-in capital of JPY30 million or less can deduct
10% of the amount from its corporate tax liability for the fiscalyear.

If corporations are unable to file tax returns by the due datebecause of ‘unavoidable circumstances’ such as some employees
work from home to prevent the spread of COVID-19, thecorporations can apply for a tax filing extension and postpone thetax filing until they are able to file the return (Acts on General Rules
for National Taxes, Article 11).

In addition, a special measure has been introduced so that SMEs
that acquire and use specific equipment for remote working canalso apply the special tax credit or the special depreciation. The
equipment includes items that enable remote control, videoconferencing, or automatic control etc. (Act on Special Measures
Concerning Taxation, Article 42-12-4).

With regards to the filing extension, corporations do not have tosubmit any documents in advance. They just need to state‘Application for tax filing/payment extension’ in the tax return.

In order to enjoy the special tax credit or the special
depreciation, SMEs need to submit a management improvement
plan to the Ministry of Economy, Trade and Industry and receive
approval in advance.

5.

Other tax measures

Besides the above tax measures, there are other tax measures
such as tax credits for donations and housing loans under
personal income tax, exemptions from revenue stamp tax, andamendments to the filing deadlines for some consumption tax
notifications.

i This is not applicable to corporations that are wholly owned directly or indirectly by companies with paid-in capital of JPY500 million or more(“Large corporation”).
ii This is not applicable to corporations that are wholly owned by companies with paid-in capital of JPY1 billion or more.
iii SME is a corporation whose paid-in capital is JPY 100 million or less. Even where the paid-in capital is JPY 100 million or less, a corporationthat is wholly owned directly or indirectly by large corporations is not qualified for SME.

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