LDP plan to halve fixed asset tax for capital investments SMEs for three years

Nikkei (J) reports on December 7th that the LDP Tax System Research Council is planning to half the fixed asset taxes (kotei shisanzei) for SMEs for a period of three years, starting in 2016.  The measure would cover purchases by SMEs of new manufacturing or processing machinery or equipment costing more than ¥1,600,000 (approx. €12.000) each and apply to total annual investments totalling more than ¥1 trillion (€7.5 million). The measure would cut the current 1.4% asset tax levied in half. 

With the move, the government hopes to push domestic capital investment, and improve productivity.  An increase in productivity of more than 1% or more efficient energy usage are some of the conditions, in order to be eligible for the cut. The proposal will be part of the 2016 Tax Reform Plan, which is currently under discussion in the Council. Other than in most EU countries, China and South Korea, Japan levies taxes on machinery and equipment subject to depreciation, the move is therefore also seen as bringing the country more in line with the international practice.