Tax laws Japan
Japan has introduced several tax reforms effective from 2025, aiming to adjust individual tax burdens in response to rising prices and to align with international tax standards. Here's an overview of the key changes:
Individual Income Tax:
Basic Deduction Increase: The basic exemption for individual income tax has been increased by JPY 100,000, raising it from JPY 480,000 to JPY 580,000. This adjustment aims to alleviate the tax burden on individuals amid rising prices. citeturn0search5
Employment Income Deduction: Similarly, the minimum guaranteed amount for the employment income deduction has been increased by JPY 100,000, moving from JPY 550,000 to JPY 650,000. This change addresses adjustments in working hours and aims to support taxpayers with employment income. citeturn0search5
Tax-Free Income Threshold: The annual income threshold for taxation has been raised from JPY 1.03 million to JPY 1.23 million, effectively increasing the amount of income exempt from taxation. citeturn0search0
Global Minimum Taxation:
- Implementation of UTPR and QDMTT: Japan's 2025 tax reform proposals include the introduction of both the Undertaxed Payments Rule (UTPR) and a Qualified Domestic Minimum Top-up Tax (QDMTT). These measures align with the OECD's Global Anti-Base Erosion (GloBE) rules and are set to apply for financial years beginning on or after April 1, 2026. The aim is to ensure that multinational enterprises pay a minimum level of tax, thereby addressing issues related to base erosion and profit shifting. citeturn0search2
Consumption Tax Reforms:
- Revisions to Tax Exemption System: To curb the resale of tax-free goods within the country, Japan is revising its Consumption Tax exemption system for foreign visitors. The reforms, scheduled for implementation in November 2026, include updating thresholds for Consumption Tax refunds and broadening the categories of goods eligible for tax repayment. These measures aim to prevent abuse of the tax exemption system and ensure its proper use. citeturn0search3
These reforms reflect Japan's efforts to adjust its tax policies in line with economic changes, international tax standards, and domestic fiscal needs.
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