Tax policies to promote innovation

Committee:
Tax
status:
Some progress
Published:
Bold incentives are crucial for the Japanese Government to successfully achieve its policy objectives for digital transformation. Previous years’ tax reforms further relaxed the requirements for the tax incentives for promoting open innovation and extended the applicability of the incentives, set to expire on 31 March 2022, by two years to 31 March 2024. A notable feature of the reform is the introduction of an "Innovation Box" regime. This allows companies to deduct 30% of qualifying income derived from domestic transfers or licensing of certain intellectual property (IP), such as patents and copyrights related to artificial intelligence (AI) software developed through in-house R&D in Japan.

Recommendations

  • Enhance the scope and scale of innovation tax policy to maintain and improve Japan’s international attractiveness as a location for innovation, and consider targeted policies for foreign and start-up companies.