https://asia.nikkei.com/Politics/Japan-plans-10-year-tax-breaks-for-EV-and-chip-production

The Japanese government plans to offer 10 years of tax incentives to promote mass production in five areas, including electric vehicles and semiconductor devices.

The ruling Liberal Democratic Party will include the measures in the fiscal 2024 tax reform framework to be finalized as early as this week.

They will be part of a package of breaks targeting domestic production in strategic fields. The size of the breaks will be proportional to production and sales volumes of qualifying products.

Other areas to receive the 10-year tax benefits include sustainable aviation fuels, green steel made with renewable energy, and green chemicals made from plants and recycled waste products. The EV category also encompasses storage batteries.

For semiconductors, businesses will receive up to a 20% break on the corporate income tax each fiscal year. The cap will be set at 40% for the other categories.

If a business suffers a loss during a reporting period, it will be able to carry over unused tax breaks from then to the next reporting period. This will apply for up to three years for semiconductors and up to four years for other areas.

The tax breaks will include 400,000 yen ($2,749) for each EV, 30 yen per liter of sustainable aviation fuel, and 20,000 yen for each tonne of green steel.

The incentives would last for 10 years, starting with the authorization of the business plans. The government will require businesses to submit their plans by the end of fiscal 2026.

Policymakers have also decided on specifics to the "innovation box" tax preferences to draw research and development centers to Japan.

For transfer and license income from patents and copyrights, 30% will be deductible from taxable income. This will apply to copyrights and patents acquired from April 2024, and the incentives will expire in seven years after April 2025.

The government is also modifying the formula for the prefectural corporate taxation system that levies taxes on businesses based on their size. The changes will prevent companies from lowering their tax bills by reducing their capitalization.

Lawmakers are also extending the deadline to apply for tax breaks to promote the transfer of small businesses to younger generations. Filings will be accepted through March 2026 from the current end date of March 2024.