Japan: Outline of 2025 tax reform proposals, including new Pillar Two rules

Proposals include introduction of undertaxed profits rule (UTPR) and qualified domestic minimum top-up tax (QDMTT)

The ruling governing coalition on December 20, 2024, agreed to an outline of tax reform proposals for 2025.

The outline is only indicative of the agreement, and the details of some contemplated changes are not certain. In addition, the final tax reform could differ from the outline depending on the outcome of the legislative process.

The tax proposals in the tax reform outline include:

Corporate tax
- Special defense corporation tax
- Taxation of leasing
- Special measures for reduced corporation tax rate for small and medium-sized companies
International tax
- Introduction of undertaxed profits rule (UTPR) and qualified domestic minimum top-up tax (QDMTT) in line with Pillar Two global minimum tax regime
- Controlled foreign company (CFC) regime
Consumption tax (taxation of leasing)
Individual tax (individual (personal) reliefs)
Preservation system for electromagnetic records related to transaction information of electronic transactions

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