TOKYO —

The industry ministry is trying to introduce a territorial tax system next fiscal year for Japanese companies, switching from the current system of collecting taxes from their worldwide income, in an attempt to ensure the country’s international competitiveness, ministry officials said Friday. The officials said the industry ministry has decided to include this plan in its tax reform proposals for fiscal 2009, to be submitted to the Finance Ministry this summer.

Under the current system, profits earned by overseas affiliates of Japanese companies are taxable if they are repatriated to headquarters. In many cases, Japanese companies would have to pay more in taxes if they bring home foreign-source profits, although these are subject to deductions.

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2 Comments

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  sharky1 at 09:02 PM JST - 11th May

  So....what is the new tax system proposal?

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  borscht at 11:05 PM JST - 13th May

  sharky1,

  Please don't embarass JT by asking such insightful questions. Let's see if we can discern the change.

  profits earned by overseas affiliates of Japanese companies are taxable if they are repatriated to headquarters.

  So, obviously, profits aren't repatriated to headquarters. The new tax system must be 'fixing' this loop hole. Which means the profits are taxed no matter where they are. So, the Japanese government gets more tax money. To spend on 'entertainment.' And this makes the companies more internationally competitive how? By taking away some of their money. Hmmm. I think we need Kyodo/JT to dig a little deeper.

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