Japan’s Liberal Democratic Party and Komeito Party released the 2023 tax reform proposals on 16 December 2022. The proposals include a legislative outline (the ‘Outline’) to implement a global minimum corporate tax based on the Global Anti-Base Erosion Model Rules (‘Pillar Two’) published by the OECD (the ‘GloBE Model Rules’). The Outline introduces an Income Inclusion Rule (IIR) that broadly aligns with the GloBE Model Rules. The IIR would apply to fiscal years beginning on or after 1 April 2024.
The Outline excludes other features of the GloBE Model Rules, such as the Undertaxed Payments Rule (UTPR) and the Qualified Domestic Minimum Top-up Tax (QDMTT), but they may be included in the 2024 tax reform proposals or later. This Insight provides an overview of the IIR proposed in the Outline and how it may affect taxpayers. We will share additional information after the legislation is published.