Japan Offers Ten Year Tax Incentives To Encourage Production Of Electric Vehicles And High-Technological Chips

JAKARTA - The Japanese government will provide tax incentives for ten years to increase production in five fields, including electric vehicles and high-tech chips. This is done as part of an effort to attract companies to make massive investments.

This scheme aims to make it easier for companies to invest in Japan by providing tax benefits for projects with high challenges in achieving profitability in areas that the government considers strategic, such as green transformation.

The ruling party of Japan, the Liberal Democratic Party, and the Komeito coalition party will include the tax cuts within the framework of the 2024 fiscal tax reform which is scheduled to be finalized on Thursday, December 14, said a source familiar with the matter.

The tax cuts will cover 400,000 yen (IDR 42.7 million) for each battery-powered electric car and a hydrogen fuel cell car. The plan includes incentives worth half of that amount for each plug-in hybrid car.

Investment in other sectors that may benefit from a ten-year tax is semiconductor production, such as silicon carbide chips, as well as sustainable aviation fuels, green steel, and green chemistry. The electric car category also includes vehicle batteries.

For semiconductors, businesses will get a corporate income tax cut of up to 20% annually fiscal, while for other categories, tax cuts will be limited to 40%.

The Japanese government usually revises its tax code every spring after the ruling coalition reaches a political agreement on their proposals and sets an overall direction in December.