Japan lures investment with 10-year tax breaks for EVs and chips

The Japanese government will offer tax incentives for a decade to boost production in five areas including electric vehicles and high-tech chips as part of a bid to attract firms to make big-ticket investments, an outline of the plan showed.

The scheme aims to make it easier for companies to invest in Japan by providing tax benefits for projects with high hurdles for achieving profitability in areas the government sees as strategically important such as green transformation.

Japan’s ruling Liberal Democratic Party and the coalition Komeito party will include the tax breaks in the fiscal 2024 tax reform framework that is set to be finalised on Thursday, a source familiar with the matter said.

The tax breaks will include 400,000 yen ($2,755) for each battery EV and hydrogen fuel-cell car, the document showed. The plan includes incentives worth half that much for each plug-in hybrid vehicle.

Investments in other sectors that may receive the 10-year tax benefits are semiconductor production, such as of silicon carbide chips, as well as sustainable aviation fuels, green steel and green chemicals. The EV category also includes vehicle batteries.

For semiconductors, businesses will receive up to a 20% break on the corporate income tax each fiscal year, while for other categories the tax breaks will be capped at 40%.

The Japanese government usually revises its tax code every spring after the ruling coalition politically agrees on their proposal and sets the overall course in December. Reuters