Japan to Prepare Legislation to Ensure 15 Pct Corp. Tax Rate

Tokyo, Nov. 25 (Jiji Press)--Japan aims to prepare legislation that would enable it to tax domestic corporations with overseas operations until their effective corporate tax rates reach the internationally agreed minimum rate of 15 pct, sources said Monday.

The measure, expected to be included in the upcoming fiscal 2025 tax system reform package, is aimed at avoiding a situation in which foreign tax authorities levy additional taxes on Japanese companies' foreign units because the effective tax rates applied to the parents stand below 15 pct due to tax relief measures.

Japan and other member states of the Organization for Economic Cooperation and Development have agreed on a global rule establishing a minimum corporate tax rate of 15 pct, to avoid an international race to the bottom over tax rates. The rule applies to multinational corporations with group sales totaling at least 750 million euros.

Under the rule, if the effective corporate tax rate on a Japan-based company fails to reach 15 pct, foreign authorities can collect the tax shortfall from local subsidiaries of the company.

This would effectively lower tax revenues for Japan, so its government and ruling parties have judged that a new system to ensure that the effective tax rates reach 15 pct domestically is needed.

[Copyright The Jiji Press, Ltd.]