Overview of Japan’s Cabinet Order on the Global Minimum Tax

On June 16, 2023, the Cabinet Order to Partially Amend the Enforcement Order of the Corporation Tax Law (Cabinet Order No. 208) was promulgated in the Official Gazette.

This follows the Bill for the Partial Revision of the Income Tax Act of February 6, 2023 (Approved by Parliament on March 28, 2023) and published in the Official Gazette on Friday, March 31, 2023 , which provides for the application of the GloBE rules in Japan from April 1, 2024.

Whist the Act included the key aspects of the GloBe Rules (jurisdictional blending, substance-based income exclusion (including the transitional rates), the de minimis rule, rules for intermediate parent companies, partially-owned parent companies, minority owned companies and investment companies, filing rules etc), it left a number of the crucial details outstanding which were to be included in future Cabinet Orders.

For example, the calculation of GloBE income (Article 82 of the Act) and Adjusted Covered Taxes are to be stipulated by Cabinet Order. These are both crucial to the calculation of the GloBE jurisdictional effective tax rate (ETR).

The Cabinet Order issued on June 16, 2023 therefore provides much more detail on the application of the GloBE rules in Japan.

As expected, the amendments to the Enforcement Order of the Corporation Tax Law (as yet not updated) are effective from April 1, 2024.

The e-gov portal website also announced the “Cabinet Order to Partially Revise the Enforcement Order of the Corporation Tax Law and includes an overview of the Cabinet Order. A link to the The Overview is provided below:

Overview of the Cabinet Order