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Japan to offer 10% tax break for companies investing in green tech

Ruling party to back up PM Suga's zero-emissions pledge with corporate incentive

Spending on wind power equipment is likely to be one of the candidates for a new 10% tax break in Japan.   © Kyodo

TOKYO -- The Japanese government is considering a tax deduction of up to 10% of capital expenditures for producing goods that lead to decarbonization as the country aims to achieve net zero emissions of greenhouse gases by 2050.

The government, working with the ruling Liberal Democratic Party, is finalizing the outline for tax policy revisions. A 10% cut would be the biggest tax reduction for investments in production facilities.

The government would decide on which areas would lead to emissions cuts, such as lithium ion batteries, hydrogen fuel cells, power semiconductor devices for voltage control and wind power equipment. For example, the tax deduction would apply to the expansion of production facilities or investments to cut electricity consumption in these areas. Other areas could be added to support companies making green investments.

For a company to be approved for a tax deduction, it would have to submit a business plan to show how its investment would lead to emissions cuts. The deduction would be either 5% or 10% from corporate tax, depending on the degree of contribution to decarbonization.

The approval system would be set up after amending the Act on Strengthening Industrial Competitiveness. The tax policy would be for three years from fiscal 2021.

Prime Minister Yoshihide Suga announced on Friday the creation of a 2 trillion yen ($19 billion) fund to help decarbonization research and development efforts. His budget and tax policies are meant to support digitization and green efforts, which he sees as two key sources of growth.

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