InvestmentThe Japanese Government Will Offer A Tax Break For Investing In 5G Cellular/Data Networks

1272 min

In the Japanese government, the ruling coalition has decided to grant a tax break to companies that invest in 5G (a new cellular phone and data networking standard). The ruling coalition includes the Liberal Democratic Party (LDP) and the Komeitō.

In order to qualify, a company needs to help develop a 5G base station. They can then declare the expenses on their taxes, and deduct 15% of those expenses from their corporate taxes. Another requirement is that the company must have a certificate from the government. The certificate ensures that the company is not using any parts that pose a national security risk. This is likely in light of the recent allegations by the US that certain Chinese products, for example those manufactured by Huawei, could be used to conduct espionage.

The proposal for such a tax cut to encourage 5G infracstructural growth had previously been discussed. The LDP had suggested allowing 9% of the expenses to be deducted, but the new amount of deductible expenses is 6% higher, at the urging of the government, than what the LDP had advocated. Not only will there be a tax cut for companies that participate in the development of 5G networks, but also, another tax cut will be to power companies.

The specifics will be decided on Thursday. It is then that the governing coalition will fine tune a tax reform package.