Japan Issues Circular for Additional GloBE Guidance

On September 29, 2023, the National Tax Agency published the “Partial Revision of the Basic Circular on Corporate Tax” (the ‘Amended Circular’) which provides some administrative guidance on various aspects of Japan’s GloBE law.

The Amended Circular amends the Basic Circular on Corporate Tax, which provides further specific guidance on the interpretation and application of the corporate tax law.

Key clarifications include:

• Definition of total income (New Section 18-1-7)
• Companies to which the equity method is applied (New Section 18-1-14)
• Calculation of net profit or loss after tax (New Section 18-1-24)
• When the accounting standards of constituent entities differ from the ultimate parent company financial accounting standards (New Section 18-1-26)
• Arm’s length price (New Section 18-1-33)
• Tax equivalent to corporate income tax (New Section 18-1-64)
• Scope of employees of constituent entities, (New Section 18-2-1)
• Examples of tangible fixed assets and natural resources (New Section 18-2-2)
• Non-application of de-minimis rules to stateless companies. (New Section 18-2-10)
• Treatment of the Transitional Substance-Based Income Exclusion Rules for the CbCR Safe Harbour (Transitional Measures)