Bold Investment Tax Incentive (Tax incentives for promoting investments in specified productivity improvement equipment, etc.)
This article is a content of “Japan Incentive Insights”, a search service for tax incentives and subsidies in Japan. The information in this article is based on the data as of January 9, 2026, and may differ from the most recent information.
Japan Incentive Insights : Tax incentives for promoting investments in specified productivity improvement equipment, etc.
Overview
On December 19, 2025, Japan’s ruling parties released the outline of the 2026 Tax Reform Proposals, which includes the introduction of a new measure: the tax incentive for promoting investments in specified productivity improvement equipment, etc. While detailed provisions will be clarified upon publication of the legislative bill, this incentive is expected to apply broadly to both large corporations and SMEs. Notably, the scope of eligible assets extends beyond production equipment to include buildings and software, making this one of the most significant and widely applicable tax measures in recent years.
In this article, we provide an overview of the key features of the incentive based on what is currently known from the 2026 Tax Reform Proposals.
Key Features of the Incentive
Overview of the incentive
Bold Investment Tax Incentive (officially, the tax incentive for promoting investments in specified productivity improvement equipment, etc.) allows companies that obtain confirmation from the Minister of Economy, Trade and Industry (METI) by March 31, 2029, and acquire and put qualifying assets into use for the business within five years from the date of confirmation, to choose between:
- A tax credit of 7% of the acquisition cost (or 4% for buildings, facilities attached to buildings and structures); or
- Immediate depreciation of the acquisition cost.
In the past, many tax incentives required companies to obtain confirmation/certification and complete construction within about three years. This tight timeline often created uncertainty—businesses were unsure whether projects could be finished before the deadline, and many missed out on the benefits as a result.
The new Incentive addresses these concerns by offering much greater flexibility. Companies can secure confirmation within roughly three years (by March 31, 2029) and still have up to five years from the confirmation date to bring the assets into use for the business. This extended window makes the Incentive far more practical for today’s environment, where construction projects frequently take longer to complete.
Qualifying Assets and Tax Credit Rate
Qualifying investments include machinery, tools, FF&E (furniture, fixtures and equipment), buildings, facilities attached to buildings, structures, and software that are part of production and related equipment exceeding a certain amount and fall under “Specified equipment for productivity improvement, etc.”
If the tax credit option is selected, the tax credit is limited to 20% of the total corporate tax amount for the fiscal year.
In addition, companies that have obtained certification for a plan to address rapid and unforeseeable changes in international economic conditions are eligible for the carry forward of excess tax credits for up to three years. However, the specific requirements for this carryforward provision have not yet been disclosed in the Tax Reform Proposals.
Key Requirements
According to the Tax Reform Proposals, the following requirements have been disclosed:
The minimum investment threshold is JPY 3.5 billion for large corporations (or JPY 500 million for SMEs), clearly positioning this Incentive as a measure designed for large-scale capital investments.
Suspension of Application
For certain companies belonging to large corporate groups, the Incentive (excluding carryforward of excess tax credits) does not apply in any fiscal year where the company fails to meet both the required wage increase rate and the specified domestic investment thresholds. Importantly, these conditions are assessed only in fiscal years where the company’s income exceeds that of the previous year.
Restriction on overlapping with other tax incentives
A company that has obtained confirmation of its investment plan pertaining to the above tax incentives shall not be eligible to apply the following tax incentives during the period of the said investment plan:
- Tax incentives for promoting regional future investment;
- Tax incentives for strengthening the management of SMEs; and
- Tax incentives for promoting carbon neutrality.
In addition, confirmed assets under this Incentive are excluded from the calculation base for the tax credit limit under the Tax incentives for Strategic Sector Domestic Production Promotion, ensuring that companies cannot receive overlapping benefits for the same asset.
Preparing for Application
The detailed requirements will be clarified when the legislation is enacted around March, and companies planning large-scale investments in FY2026 are strongly encouraged to continue tracking updates closely.
If you are considering this or other incentives, we recommend consulting Deloitte Tohmatsu Tax Co. for tailored advice and support.
