METI Requests Expansion and a 3-Year Extension of the Wage-Increase Tax Credit for SMEs (Not Yet Decided)Asking to Keep the Tax Break for Raising Pay Going (Not Decided Yet)
For the FY2027 (Reiwa 9) tax reform, the Ministry of Economy, Trade and Industry (METI) has requested a 3-year extension of the wage-increase promotion tax system for small and medium-sized enterprises, a change of the increase test from total payroll to average pay per employee, and a review of the wage-increase thresholds. This is only a request; it has not been decided whether it will be adopted.
Key points
- Current system: if payroll (employment-related pay) rises 1.5% or 2.5% or more from the previous year, 15% or 30% of the increase can be taken as a tax credit (plus 5 points depending on Kurumin / Eruboshi certification)
- The credit is capped at 20% of the corporate tax for the period, and any unused amount can be carried forward for 5 years
- Requested: extend the application period by 3 years, covering FY2027 to FY2029 (Reiwa 9 to Reiwa 11)
- Requested: change the increase test from "total payroll" to an increase in "average pay per employee", and review thresholds such as the 1.5% increase
- A similar review is requested for the 1.5% increase rate used in the deduction under the enterprise tax (value-added portion)
What to do in practice
- Check how the requirements and period turn out in the coming tax reform outline and bills
- If you plan wage increases, keep an eye on the movement to revise the requirements
There is a system that lowers the taxes of companies that raise pay. One government ministry, METI, has asked to keep it for 3 more years and to change how it is judged. But nothing has been decided yet.
- ○Applies: METI has made the request
- ×Does not apply: It has been officially decided
- ×Does not apply: The new rules can already be used
Points
- Not decided yet. It is only a request the ministry has put forward
- One part of the request is to keep this system for 3 more years
- They want to judge it by whether pay per person went up, not by the company's total pay
What the words mean
- Tax credit
- A set amount taken off the tax you have to pay
- Tax reform request
- A request from a ministry asking to change tax rules
- Ministry of Economy, Trade and Industry (METI): Ministry of Internal Affairs and Communications: FY2027 (Reiwa 9) local tax reform request (METI), expansion and extension of the wage-increase promotion tax system for SMEs (PDF)
- Ministry of Economy, Trade and Industry (METI): Ministry of Internal Affairs and Communications: list of FY2027 (Reiwa 9) tax reform requests (METI)
- Ministry of Economy, Trade and Industry (METI): Ministry of Finance: FY2027 (Reiwa 9) tax reform requests
This article previews items that are still under consideration or only requested. Whether they will be adopted, and whether the content or timing will change, is not final. Please check the official source again once a decision is made.
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.