November 20, 2020
Tokyo- Japan's government and ruling parties are looking to relax accounting rules on carrying losses forward, in a bid to help companies cope with the coronavirus epidemic, Jiji Press learned Friday.
The loosening of rules is being considered as a temporary measure applicable to losses for the current business year, informed sources said.
The government and the ruling bloc are aiming to include the measure in a tax system reform package for fiscal 2021, the sources said.
The existing rules allow companies to carry forward annual losses to the next 10 years, with up to 50 pct of each year's taxable income deducted until total deductions reach the amount of losses.
The government and the ruling parties are looking at an option of allowing 100 pct deductions for five years.
For instance, if a company incurs a deficit of 100 billion yen in the current year and earns taxable income of 20 billion yen in the next year, the company can deduct 10 billion yen from the taxable income under the current rules. Under the envisioned rules, the firm would be allowed to offset in full the taxable income.
Such a measure has been requested by businesses including airlines, which are suffering huge losses amid the epidemic.
The planned measure is expected to reduce tax burdens on companies and allow them to focus on investment to rebuild their businesses as they recover from the coronavirus crisis.
To utilize the new carry forward rules, companies are expected to be required to obtain government approval for their management reform plans. The industry ministry plans to submit a related bill during next year's regular parliamentary session. Jiji Press
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