Japan to tax more foreign companies

December 2, 2017

Tokyo- Japan's government and ruling camp plan to newly impose cooperate tax on foreign companies that are active in the country but have no permanent business footholds such as branch offices, informed sources said Friday.

The expansion in the scope of taxation for foreign firms will be included in a tax reform package for fiscal 2018 starting next April. The government and the ruling coalition, led by the Liberal Democratic Party, hope for enactment of amendment bills to relevant laws during an ordinary parliamentary session starting early next year.

Currently, foreign companies having only large warehouses without permanent operation bases in Japan, such as cybermall operators, do not have to pay corporate tax in the country.

In June, Japan signed an Organization for Economic Cooperation and Development treaty to prevent tax avoidance by multinational companies.

Since measures against tax avoidance by firms without permanent bases were included in the pact, signed by 70 economies, the government has found it necessary to change domestic laws.

After the revised laws take effect, Japan will be able to impose tax on foreign firms that only have warehouses for storing and delivering goods.

In addition, foreign companies selling products in the country via domestic firms under sales consignment contracts will be taken as business entities with permanent bases and, therefore, become subject to corporate tax, the sources said. Jiji Press