Government and ruling coalition officials are considering giving tax breaks to small and midsize companies that invest ¥10 million or more in startups, sources familiar with their discussions said Wednesday.
The officials see the move as a way to revitalize the nation’s economy, and aim to include it in a tax reform package for fiscal 2020, which starts April 1, the sources said.
The move comes as Japanese companies lag behind those in the United States, Europe and China in their investments in startups, which have led to the creation of innovative services.
Large companies are required to make startup investments of ¥100 million or more in order to qualify for the proposed tax breaks.
The envisaged extra breaks for small and midsize firms would apply to investments in unlisted companies founded less than 10 years earlier and that are not members of corporate groups led by large companies, the sources said.
Companies would be required to hold shares in the startups for at least a year to prevent them from fraudulently obtaining tax breaks by reselling them soon after, the sources said.
Tax breaks under consideration include deducting 5 percent of the investment value from corporate income tax, and allowing companies to book a certain amount of reserves as losses.
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