The ruling bloc started final adjustments Thursday to extend the so-called open innovation tax relief program to promote corporate investments in startups in fiscal 2022 and beyond without changing the size of tax breaks.
The program allows existing companies to deduct from their taxable income 25% of the value of their investments in startups. Eligible for the program are large companies investing ¥100 million or more and smaller businesses investing ¥10 million or more.
The Liberal Democratic Party-led ruling coalition aims to promote technological innovation by having companies work together. The program especially targets investments in the health care, biotechnology, space and artificial intelligence fields.
The extension will be included in the ruling bloc’s tax system reform package, which will be decided in early December.
Meanwhile, many in the government are cautious about giving companies tax breaks to help them boost their profits. The ruling bloc therefore termed the program as a “very unusual measure” in its tax reform package for fiscal 2020, deciding to have the program expire at the end of fiscal 2021.
However, the program will be extended since “it has become important to promote technological innovation (in many fields) more than ever looking at the post-coronavirus world,” a senior member of a ruling party tax commission said.
The program targets startups less than 10 years old. The ruling bloc now hopes to ease the rule and let such companies less than 15 years old be part of the program under some conditions.
The ruling coalition also plans to change the minimum number of years investing companies are required to hold shares in startups from five to three.
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