What was decided, when, and by whom

The FY2023 Outline of Tax Reform is the government outline approved by Cabinet on December 23, 2022. Beneath the original title appears only Cabinet Decision, December 23, 2022. Its preamble expresses the year's starting point.

To shift household assets actively from saving to investment and double asset income, NISA will be fundamentally expanded and made permanent, with tax measures to strengthen the startup ecosystem. For a fairer, more neutral system, minimum taxation of extremely high incomes and global minimum taxation will be introduced, alongside greater neutrality over the timing of asset transfers. Eco-car reductions in motor vehicle weight tax and environmental performance components of vehicle taxes will also be revised. Appropriate expiration dates will be set for special tax measures according to their nature. Specific reforms are set out in Part I.

Alongside the main reforms in Part I, Part II separately addresses Tax Measures to Secure Funding for Stronger Defense Capabilities. For how to read the outline, see Key points of the FY2026 tax system revision outline Please also see.

Main pillars of the outline

Part I contains seven chapters, followed by Part II. Their names and decisions are as follows.

The accompanying estimate of revenue changes from FY2023 domestic tax reform totals a JPY 1 billion reduction in a full year and JPY 9 billion in the initial year. For the previous year, see FY2022 Outline of Tax Reform Please see

Making NISA Permanent and Expanding Tax-Free Holdings

The account-opening period for Tsumitate NISA ends December 31, 2023, and the exemption is restructured. Provisional specified cumulative investment accounts are established annually from 2024 for regular investing, alongside provisional specified tax-exempt management accounts for listed shares and similar assets. Dividends and disposal income in these accounts are exempt from income and individual inhabitant taxes.

Contribution limits are as follows.

Eligible holdings are also restricted; specified tax-exempt management accounts accept only specified listed shares and similar assets. The estimated full-year revenue reduction for this measure is JPY 15 billion.

Linking Lifetime Gifts and Inheritance Over Seven Years

Settlement-at-inheritance taxation gains a JPY 1.1 million basic deduction from taxable value, separate from the existing basic deduction. Property added to inheritance tax taxable value on the specified donor's death is the amount remaining after this deduction.

The gift add-back period also extends. A person acquiring property by inheritance or bequest must add property received from the deceased within seven years before inheritance, rather than three. For gifts outside the final three years, only the total exceeding JPY 1 million is added. Both apply to inheritance or gift tax on property acquired by gift on or after January 1, 2024.

The exemption for lump-sum education gifts is extended by three years and that for marriage and child-rearing gifts by two years. For education funds, if total inheritance tax taxable value at the donor's death exceeds JPY 500 million, remaining funds are deemed acquired by inheritance or similar means even where the recipient is under 23 or otherwise meets specified conditions.

A Minimum Burden on Extremely High Incomes

Where 22.5% of the year's reference income after deducting JPY 330 million exceeds the reference income tax amount, additional income tax equal to the excess is imposed.

Definitions appear in the notes. Reference income is total income calculated without applying the no-filing election for that year's income tax. Here, no-filing elections refer to eligible dividend income and gains on listed shares and similar assets.

Income subject to final withholding taxation is excluded from this total. The amendment applies to income tax from 2025 onward.

Excluding Self-Issued Crypto Assets from Year-End Mark-to-Market Valuation

Some corporate year-end crypto holdings require recognition of market valuation gains and losses. This outline excludes certain assets from that scope. The corporate taxation chapter states:

Crypto assets meeting the following requirements are excluded from corporate year-end holdings subject to recognition of mark-to-market gains and losses.

Both of two requirements must be met.

• The assets must be self-issued and continuously held from issuance.
• Transfer restrictions must apply continuously from issuance, either through technical measures preventing transfer to others or by holding them as trust property in a qualifying trust.

The acquisition cost of self-issued assets is also set at issuance expenses, with the same revision for income tax. If a corporation disposes of crypto assets borrowed from someone other than a crypto asset exchange and does not repurchase the same type by year-end, it recognizes gains or losses calculated as if repurchased then.

Treatment of self-issued tokens is discussed in Will there be any inclusion income tax charged on tokens issued by myself?, while the development of crypto asset taxation is discussed in The crypto asset tax system was created this way. for further details.

Three Measures to Ease Invoice System Burdens

First, transitional credits for small businesses allow a tax-exempt business becoming a qualified invoice issuer to pay 20% of output consumption tax by deducting 80%. This applies to taxable periods containing dates from October 1, 2023 through September 30, 2026.

Second, input credits may be claimed with books alone for domestic taxable purchases below JPY 10,000 from October 1, 2023 through September 30, 2029, by businesses with taxable sales no more than JPY 100 million in the base period or JPY 50 million in the specified period.

Third, for returns and discounts, qualified credit invoices are not required where the tax-inclusive refund or similar adjustment is below JPY 10,000.

Funding Stronger Defense Through Three Taxes

Part II seeks stable funding from both spending and revenue measures for fundamentally stronger defense capabilities. Tax measures are to be phased in over several years toward FY2027, securing slightly over JPY 1 trillion that year. The following three taxes are covered.

The outline specifies only an appropriate time from 2024 onward for implementation, not exact dates.

To determine if it relates to you

• Those making regular investments through securities accounts or planning to start should review NISA under personal income taxation.
• Those making lifetime gifts to children or grandchildren or using settlement-at-inheritance taxation should review Building a Tax System More Neutral to Asset Transfer Timing under asset taxation.
• Those using or considering lump-sum education, marriage, or child-rearing gifts should review the exemptions under asset taxation.
• Those with substantial dividends or listed share gains previously excluded from filing should review Appropriate Tax Burdens on Extremely High Incomes under personal income taxation.
• Corporations issuing or holding crypto assets should review crypto asset valuation methods and related rules under corporate taxation.
• Tax-exempt businesses becoming qualified invoice issuers and businesses with many small purchases should review Revisions to the Qualified Invoice Retention System under consumption taxation.
• Corporations in groups with total revenue equivalent to at least EUR 750 million should review Global Minimum Taxation under international taxation.

Source

• FY2023 Outline of Tax Reform, Cabinet Decision of December 23, 2022