METI Requests Extension of the SME Reduced Tax Rate and the JPY 8 Million Entertainment Expense Provision (Not Yet Decided)Asking to Keep Tax Perks for Small Companies (Not Decided Yet)
For the FY2027 (Reiwa 9) tax reform, the Ministry of Economy, Trade and Industry (METI) has requested that the reduced corporate tax rate for SMEs be reviewed and extended by 2 years, and that the special provision allowing small corporations to deduct entertainment expenses (fixed deduction limit of JPY 8 million) be extended. These are requests only; adoption has not been decided.
Key points
- Reduced rate: applies to taxable income up to JPY 8 million a year; the standard rate is 19%, the special measure rate is 15%. A review to raise policy effect, then a 2-year extension, is requested
- Entertainment expenses: generally non-deductible, but corporations with capital of JPY 100 million or less may deduct up to a fixed limit of JPY 8 million. Extension of this measure is requested
- If the entertainment expense extension is granted, the same effect is to apply to the corporate inhabitant tax (corporate tax portion) and the enterprise tax, automatically linked to national tax
- The stated reasons include improving cash flow and financial stability, and securing means of expanding business and sales promotion, amid labor shortages and rising prices
What to do in practice
- Check the current deadlines so they can be reflected in settlement and budget plans
- Check whether the coming tax reform outline shows an extension or revision
Small companies have a perk that lowers their tax rate, and another that lets them count business meal costs and the like as expenses up to a set amount. METI has asked to keep them. Nothing has been decided yet.
- At the normal 19%
- JPY 1,520,000
- At the special 15%
- JPY 1,200,000
- Saved by the special rate
- JPY 320,000
Points
- Not decided yet. It is only a request from the ministry
- They want to keep the lower tax rate on profit up to JPY 8 million a year
- They also want to keep the perk that counts up to JPY 8 million a year of costs like meals with clients as expenses
What the words mean
- Corporate tax
- A tax on a company's profit
- Entertainment expenses
- Money spent on hosting business partners and the like
- Ministry of Economy, Trade and Industry (METI): Ministry of Internal Affairs and Communications: FY2027 (Reiwa 9) local tax reform request (METI), extension of the special corporate tax rate for SMEs (PDF)
- Ministry of Economy, Trade and Industry (METI): Ministry of Internal Affairs and Communications: same, extension of the entertainment expense deduction special provision for small corporations (PDF)
- Ministry of Economy, Trade and Industry (METI): Ministry of Internal Affairs and Communications: list of FY2027 (Reiwa 9) tax reform requests (METI)
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.