Creation of the tax incentive for investment in specified productivity-enhancing equipment: immediate depreciation or a 7% tax creditA new tax reward is being created for companies that buy big new machines
The fiscal 2026 (Reiwa 8) tax reform created a system under which, when a company acquires specified productivity-enhancing equipment confirmed by the Minister of Economy, Trade and Industry, of at least a certain scale, and places it into service for business, it can choose either immediate depreciation or a tax credit of 7% of the acquisition cost (4% for buildings and the like). The NTA materials are based on laws and regulations as of May 27, 2026 (Reiwa 8).
- 1. ConfirmationReceive confirmation from the Minister of Economy, Trade and Industry within the designated period
- 2. AcquisitionAcquire the specified machinery and equipment, etc. within 5 years of the confirmation date
- 3. Placed into business useUse it for business in Japan (assets for lease are not eligible)
- 4. FilingChoose immediate depreciation or a tax credit, and file the final return with the schedule attached
Key points
- Eligible assets: specified productivity-enhancing equipment, etc. confirmed by the Minister of Economy, Trade and Industry (machinery and equipment, tools, fixtures and furniture, buildings, building fixtures, structures, and certain software)
- Examples of scale requirements: JPY 1.6 million or more per unit of machinery, JPY 10 million or more for a building, JPY 700,000 or more for software
- Measures to choose from: immediate depreciation, or a tax credit of 7% of the acquisition cost (4% for buildings, building fixtures and structures)
- The tax credit is capped at 20% of corporate tax before adjustment. Certified business-adaptation operators and others can carry forward any amount that cannot be fully credited for 3 years.
- The asset must be acquired and placed into business use by the date 5 years after the day of confirmation. The confirmation deadline is March 31, 2029 (Reiwa 11).
What to do in practice
- If you are drawing up an investment plan, check the latest information from the Ministry of Economy, Trade and Industry and the NTA on the effective date and the promulgation status of the laws setting the criteria.
- Sort out in advance that during the period covered by a confirmed investment plan, tax incentives such as the Regional Future Investment Promotion Tax System and the SME Business Strengthening Tax System cannot be used.
A new system is being created that lowers taxes for companies that make large purchases of new machines and equipment meeting the government's conditions. A company can choose either to count the full price as an expense in the year it buys, or to subtract 7% of the price from its tax. Some details, such as dates and conditions, are not yet fully decided.
Points
- Covers machines and equipment that raise productivity and have been confirmed by the government
- You choose between "count everything as an expense at once" and "subtract 7% of the price from your tax"
- For buildings and the like, the amount subtracted is 4% of the price
What the words mean
- Immediate depreciation (即時償却)
- Counting the whole price as an expense at once in the year of purchase
- Tax credit (税額控除)
- Being allowed to subtract a set amount from the tax you calculated
- National Tax Agency (NTA): NTA: Outline of the Fiscal 2026 (Reiwa 8) Corporate Tax Law Amendments (1. Creation of the Tax Incentive for Investment in Specified Productivity-Enhancing Equipment, Etc.)
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.