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September 10, 2021

Japan: Update on COVID-19 tax measures

Executive summary

The National Tax Agency (NTA) of Japan has implemented tax policy and administration measures in response to the ongoing global pandemic.

This Alert summarizes the current status, with particular focus on tax administration issues such as the extension of filing and payment deadlines.

Detailed discussion

Extension of deadline for filing and payment

The NTA has updated its position in response to “frequently asked questions” on tax measures issued in response to COVID-19. According to an April 2021 update, if a taxpayer faces difficulties meeting the tax return filing or tax payment deadline due to the pandemic, an extension should be granted following the submission of an application form (Basis: “Extension of deadline due to natural disaster”).

This deadline extension is widely available for the filing and payment of national taxes, such as corporate tax and consumption tax, including interim filing and payment. The taxpayer is required to detail the reasons why the deadline cannot be observed. For example, a situation where persons in charge of accounting have been infected by COVID-19 or a finance department is closed.

This extension mechanism aims to support taxpayers where filing or payment is physically difficult. In cases where the making of a tax payment is financially difficult the taxpayer should consider the deferral of payment, explained in the following section.

Deferral of tax payment

Special COVID-19 tax measures allowing for the deferral of tax payment and an exemption from delinquent tax if revenues had decreased by 20%, expired on 1 February 2021. However, if a taxpayer’s financial situation continues to deteriorate and timely settlement of a tax liability is difficult, a payment deferral application under the general regime for tax payment deferrals may be available.

By way of such an application, a tax payment can generally be deferred for one year and delinquent tax can be reduced (from 8.8% to 1% in 2021), or potentially exempted. The taxpayer is required to file an application for the deferral of the tax payment, describing the circumstances which have resulted in difficulties in making the tax payment, e.g., illiquidity due to a decrease in sales.

This general regime is also available for interim returns, amended returns and estimated tax. For interim returns and payments, taxpayers may consider making submissions based on the provisional settlement of accounts. Specifically, interim returns, such as consumption tax, are usually calculated based on the prior year’s results, generally being a certain percentage of the tax amount that was due for that tax period. However, if based on the actual provisional account settlement, sales for the current period are significantly reduced compared to the previous year, a taxpayer may reduce their interim tax payment to zero.

Refund via the carryback of net operating loss

Alongside the measures mentioned, the tax refund regime was expanded via the carryback of net operating losses (NOLs). Previously this refund regime was only available for small and medium-sized enterprises with a stated capital of JPY100 million or less. In order to increase its availability, the threshold for entitlement to the refund regime has been temporarily increased to include medium-sized companies with a stated capital of JPY1 billion or less.

While the above tax payment deferral measure has already expired, the expanded carryback can still be applied to NOLs incurred in business years during the period 1 February 2020 to 31 January 2022. However, it should be noted, subsidiaries which are 100% (directly or indirectly) owned by a large (domestic or foreign) enterprise with a stated capital exceeding JPY1 billion are not entitled to this refund regime.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Co., Tokyo

For inquiries in relation to tax matters for Japan inbound investments, please contact any of the following members of our Inbound Tax Advisory Services Team:

EY Tax Japan – Inbound Japan Tax Advisory Services Team


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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