SME Management Strengthening Tax Measure: Power Generation Equipment Selling Over Half of Its Output Is Excluded (FY2026 Guide)Power equipment that sells a lot of its electricity is not covered by the tax-cut program
According to the Small and Medium Enterprise Agency's guide (FY2026 tax reform edition, April 1, 2026 version), under the tax measure for strengthening SME management, power generation machinery, buildings and building fixtures are excluded if the amount of electricity expected to be sold exceeds one half of the generated amount. To apply the tax measure to power generation equipment, a report must be submitted when applying for approval of a management improvement plan.
- ○Applies: Expected sales are one half of output or less (not excluded on this point)
- ×Does not apply: Expected sales exceed one half of output (excluded)
Key points
- Power generation machinery, buildings and building fixtures are excluded if the share of electricity expected to be sold exceeds one half of the amount generated
- To apply the tax measure to power generation equipment, a report must be submitted when applying for approval of the management improvement plan
- For tools and fixtures acquired on or after April 1, 2026, the acquisition cost requirement is raised from JPY 300,000 or more to JPY 400,000 or more (National Tax Agency outline)
- The special rule for small-value depreciable assets of SMEs is also raised from under JPY 300,000 to under JPY 400,000 for assets acquired on or after April 1, 2026. Companies with more than 400 regular employees are excluded, and the JPY 3 million annual cap is unchanged
What to do in practice
- For the equipment you plan, estimate the share of generated electricity expected to be sold and check that it does not exceed one half
- Prepare the report required with the management improvement plan application before acquiring the equipment
There is a program called the "management strengthening tax measure" that lowers taxes when a company buys machines or equipment. However, power generation equipment that is expected to sell more than half of the electricity it makes is left out. What matters is whether the company uses much of the electricity itself.
Points
- If more than half of the electricity is expected to be sold, it is left out
- Before buying, a company applies for approval of a "management improvement plan", and for power equipment it also submits a report
- An up-to-date guide matching the FY2026 tax changes has been published
What the words mean
- Management strengthening tax measure
- A program that lowers taxes when small and medium companies buy certain equipment
- Management improvement plan
- A plan a company makes to improve its business, which can be approved by the government
- Small and Medium Enterprise Agency: Small and Medium Enterprise Agency: Guide to using support measures under the SME Management Strengthening Act (FY2026 tax reform edition, April 1, 2026 version)
- Small and Medium Enterprise Agency: National Tax Agency: Outline of FY2026 corporate tax law amendments
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.