What was decided, when, and by whom

The FY2020 Outline of Tax Reform is the government outline approved by Cabinet on December 20, 2019, as stated beneath the original title. Its priorities appear in the introductory paragraph.

To achieve sustained economic growth, tax measures will promote open innovation, investment, and wage increases, alongside fundamental reform of consolidated taxation. Reflecting economic and social changes, fair taxation for children in all single-parent households and revisions to NISA will be implemented. International tax rules, property tax issues involving unknown landowners, and tax administration will also be addressed. Specific reforms follow.

For how to read the outline, see Key points of the FY2026 tax system revision outline Please also see.

Main pillars of the outline

The text has seven chapters followed by an appendix. Their names and decisions are as follows.

For adjacent years, see FY2019 Outline of Tax Reform and FY2021 Outline of Tax Reform Please see

Moving from Consolidated Taxation to Group Relief

The largest corporate tax item is consolidated taxation reform. The original states the direction in one line.

Revise consolidated taxation and shift to the following group relief system.

Eligible corporations and application methods broadly follow consolidated taxation, except each parent and subsidiary files its own corporation tax return and blue-return approval is required. Eligible entities must electronically file final, interim, and amended corporation tax and local corporation tax returns.

Group calculations remain through profit and loss offsetting. Total losses are allocated among profitable entities in proportion to income, capped at their combined income, and deducted by those entities. Each group member's applicable tax rate is used. The annual JPY 8 million income band qualifying for the SME reduced rate is allocated among profitable entities in proportion to income.

Application begins with fiscal years starting on or after April 1, 2022. Existing consolidated entities may become separate taxpayers outside group relief if the parent notifies the tax office by the day before its first fiscal year beginning on or after that date.

Creating Incentives for Open Innovation and 5G Investment

The corporate tax chapter opens with open innovation measures. Qualifying blue-return corporations conducting specified business activities may deduct a special account provision of up to 25% of the acquisition cost of specified shares acquired from April 1, 2020 through March 31, 2022 and held at year-end, capped at that year's income.

Targets are qualifying new business development operators under the Industrial Competitiveness Enhancement Act, generally less than ten years old, with certification from the Minister of Economy, Trade and Industry. Minimum paid-in amounts are JPY 100 million, JPY 10 million for SMEs, or JPY 500 million for foreign corporations. The special account is reversed into taxable income on disposal or other triggering events, except after five years from acquisition.

The other measure supports 5G. Corporations qualifying as provisional certified advanced information and communications system introduction businesses may choose 30% special depreciation or a 15% tax credit for certified equipment acquired and used domestically, with credits capped at 20% of current-year corporation tax. Meanwhile, the domestic investment requirement for retaining access to R&D and similar incentives rises from more than 10% to more than 30% of total current depreciation.

Crypto Assets Appears in the Outline

Both crypto assets and virtual currency appear. Crypto assets is used only for derivatives, always in measures accompanying commencement of amendments to the Payment Services Act and related laws.

The personal income tax chapter states:

Miscellaneous income and similar income from crypto asset derivatives are excluded from special futures taxation and loss carryforwards for cash settlements and similar futures transactions.

Payment reporting is also introduced. Branch heads of financial instruments businesses and similar operators accepting crypto derivative orders must report total realized gains or losses from cash settlements during the year to the tax office by January 31 of the following year. Transactions from the amendment's effective date through December 31, 2020 need not be reported. The international tax chapter also excludes crypto derivatives from the interest exemption for over-the-counter derivative margins.

The corporate tax chapter retains virtual currency. As part of implementation of the Accounting Standard for Fair Value Measurement, it states:

The same revision as in item 1 above applies to market valuation amounts of short-term trading commodities and similar assets, excluding virtual currencies.

The outline thus uses crypto assets for the new legislation and virtual currency for existing corporation tax provisions. The terminology transition is discussed in The crypto asset tax system was created this way., and the tax-law classification in How does the tax law define "cryptoassets"? respectively.

Restructuring NISA and Ending Junior NISA

Personal income taxation begins with NISA. Tsumitate NISA's account-opening period is extended five years through December 31, 2042. On expiry of the existing general NISA period, a provisional specified tax-exempt cumulative investment contract regime is introduced as an alternative to the existing cumulative investment exemption.

The new contract establishes two accounts together. A provisional specified cumulative investment account opens in each year from 2024 through 2028 when no existing cumulative account is opened, accepting eligible publicly offered equity investment trust interests with annual acquisition cost no more than JPY 200,000. A provisional specified tax-exempt management account accepts specified listed shares and similar assets with total acquisition cost no more than JPY 1.02 million.

Junior NISA ends without extending its account-opening period. From January 1, 2024, all listed shares, similar assets, and cash in taxable minor and minor accounts may be withdrawn without withholding.

A Common Deduction for All Single-Parent Households

Other personal income tax measures introduce relief for unmarried single parents and revise widow and widower deductions. A resident who is currently unmarried and meets prescribed conditions, excluding existing widows and widowers, may deduct JPY 350,000 from total income and similar income for the year.

There are three requirements: a child sharing the taxpayer's livelihood with total income and similar amounts no more than JPY 480,000; the taxpayer's total income no more than JPY 5 million; and no entry on the taxpayer's or household member's residence record indicating an unregistered wife, husband, or equivalent relationship to the household head.

Widow and widower deductions are also revised. Widows with children gain a JPY 5 million total income ceiling, and both categories gain the residence-record requirement above. The existing special widow deduction is abolished, and deductions for widows with a child sharing their livelihood and for widowers rise to JPY 350,000. All apply to income tax from 2020 onward.

To determine if it relates to you

• Managers of corporations using consolidated taxation should review corporate taxation and the appendix. Application begins with fiscal years starting on or after April 1, 2022.
• Corporations considering startup investment or 5G equipment should review corporate taxation. Equity investments have minimum contribution thresholds.
• If you trade cryptoasset derivatives, see the individual income taxation chapter. These transactions will be excluded from the special taxation rules for miscellaneous income from futures transactions and the loss carryforward deduction.
• If you use NISA, see the individual income taxation chapter. Annual contribution limits are prescribed for investments from 2024.
• If you use Junior NISA, check that the period for opening minor accounts will not be extended and review the treatment of withdrawals from January 1, 2024.

Source

• Outline of the FY2020 Tax Reform (Cabinet decision of December 20, 2019)