Please find this month’s topics below. We hope they will be useful to you.
▼Taxation (Extension of the Reduced Corporate Tax Rate for SMCs)
Under the 2025 Tax Reform, the reduced corporate tax rate of 15% applicable to the portion of taxable income up to 8 million yen for Small and Medium-sized Corporations (SMCs) will be revised as follows, and the application period will be extended to fiscal years beginning on or before March 31, 2027.
1. For fiscal years in which taxable income exceeds 1 billion yen, the tax rate applied to the portion of income up to 8 million yen will be 17% (currently 15%).
2. Consolidated corporations are excluded from the scope of eligible corporations.
▼Labor Management (Revision of the Basic Exception for Income Tax under the 2025 Tax Reform)
The 2025 tax law amendment introduced revisions to the income tax “basic exception” and “salary income exception” and established the “special exception for specific relatives”. These amendments generally take effect on December 1, 2025, and apply to income tax for the 2025 tax year and thereafter. Consequently, changes will occur in year-end tax adjustment conducted in December 2025 and subsequent withholding tax procedures.
Points to Note for Year-End Tax Adjustment
1. Confirm whether employees have any relatives, etc., who have newly become eligible for exception for dependents, etc. due to the revisions.
2. Obtain the “Application for Special Exception for Exception for Specific Relatives of Employment Income Earner” from employees seeking to apply for the Special Exception for Specific Relatives.
3. Perform year-end tax adjustment calculations based on the revised basic exception amounts, salary income exception amounts, etc.
Source: National Tax Agency website “Revision of Basic Exception for Income Tax under the 2025 Tax law amendment”