Applications for Business Revival Assistance Subsidies Have Begun


Applications for business revival assistance subsidies have been accepted since January 31.  Small and medium-sized corporations in situations meeting certain requirements, such as incurring a certain percentage decrease in their sales due to the “COVID-19” coronavirus, are eligible to receive grants of up to 2.5 million yen.

Sales Must Have Decreased by at least 30% to be Eligible.

Companies that are eligible for the business revival assistance grants are: small and medium-sized corporations that meet all of the following requirements (1.~3.), and sole proprietorships that meet conditions 2. and 3..

  1. Capitalization must be less than 1 billion yen as of January 1, 2022.
  2. The company started business before 2019, has generated sales from November 2018 to the present, and intends to take measures to continue and rebuild its business in the future.
  3. Sales for the applicable month must have decreased by 30% or more compared to the base month due to the impact of the new coronavirus, independent of their own business decisions.

The “due to the impact of the new coronavirus" in 3. above refers to the impact of requests by the national and local governments for measures against COVID-19 infections - such as special business holidays, shortened business hours, and cancellation of events, etc., as well as supply reductions and distribution restrictions resulting from the “novel coronavirus” pandemic.

Please note that voluntary closures or shortened business hours not based on such requests are not deemed to be due to the effects of COVID-19.

Subsidy Calculation Formula and Maximum Benefit Amounts

The benefit amount is calculated as “total sales for the base period - sales for the eligible month x 5”, and the maximum benefit amount is determined as shown in the table on the below.

For a small or medium-sized company with total sales of 4.8 million yen (800,000 yen per month) for the base period (assuming November 2018 - March 2019 is selected as that period), the percentage decrease in sales is at least 50% compared to January 2019, the base month (comparing 800,000 yen to the 300,000 yen {of January 2022}).

In addition, the following table shows that the maximum subsidy amount is 1,000,000 yen (due to a decrease of 50% or more in annual revenues, and revenues totaling 100,000,000 yen or less).  Finally, the subsidy amount can be calculated with this formula: total sales of 4.8 million yen for the  prior base period - (sales of 300,000 yen in the subject month {January 2022} x 5) = 3.3 million yen.  Because 3,300,000 yen is larger than 1,000,000 yen, the subsidy amount is calculated to be the maximum benefit amount - i.e., 1 million yen.

Rate of sales decrease in applicable month Sole proprietorship Corporation
Annual sales 100 million yen or less Annual sales over 100 million, up to 500 million yen Annual sales over 500 million yen
50% or more 500,000 yen 1 million yen 1.5 million yen 2.5 million yen
30% or more, yet less than 50% 300,000 yen 600,000 yen 900,000 yen 1.5 million yen

Particular Attention Needed if Your Company is Receiving Compensation for Shortening Business Hours, etc.

The calculation becomes a little more complicated if the applicant is receiving subsidies related to measures against COVID-19 (e.g., sustaining subsidies, rent support payments, etc.) or compensation payments for cooperating with requests for shorter hours, etc., from the local government.  In some cases, it may be necessary to add such payments to sales.

Lent Assets to be Excluded from the Special Provision for Acquisition Costs of Small-Sum Depreciable Assets


Generally, small-sum depreciable assets with acquisition costs of 100,000 yen or less are fully deductible in the fiscal year in which they are used for business purposes.  However, under the 2022 tax reform, loan assets are to be excluded from the assets eligible for the special exception/provision system for the acquisition costs of petty-sum depreciable assets.

What is the Special Provision for Acquisition Costs of Small-Sum Depreciable Assets?

Depreciable assets with small values that have been used for less than one year, or have an acquisition cost of less than 100,000 yen, may be fully deducted from expenses in the year in which they are used for business purposes. 

In addition, lump-sum depreciable assets acquired for less than 200,000 yen can be depreciated equally in each fiscal year over three years.  Furthermore, small-sum depreciable assets with acquisition costs of less than 300,000 yen can be included (only by small and middle-sized enterprises) in deductible expenses for their total costs, up to certain amounts in the fiscal year in which they are used for business.  In these ways, small-sum depreciable assets may be included in deductible expenses regardless of the usual depreciation method.

System Acquisition cost requirements Handling method
System for deduction of acquisition costs of small-sum depreciable assets Cost less than 100,000 yen (or has usage period of one year or less) Include the total acquisition costs in deductible expenses
System for deduction of lump-sum depreciable assets Less than 200,000 yen Straight-line method in each fiscal year of three years
Special provision for deduction of acquisition costs of small-sum depreciable assets for small and middle-sized enterprises Less than 300,000 yen Include the total acquisition costs in deductible expenses (up to 3 million yen for each fiscal year)

Preventing Tax Deferrals

The 2022 tax reform will exclude assets for loans from the respective programs listed on the above.  After the revision, assets used for lending purposes will no longer be deductible at their full acquisition cost, but will be deductible through normal depreciation.  This is due to the fact that in recent years, there has been an increase in the number of tax reduction measures in which companies purchase large quantities of scaffolding materials, drones, LED lighting, etc. used at construction sites and use these assets for lending purposes to recover their invested capital over several years and, in effect, defer taxation.  Since scaffolding materials, drones, and LED lighting can be purchased for less than 100,000 yen per unit, the full acquisition costs could be deducted in the fiscal year the assets were used for business purposes, allowing tax deferrals.

For instance, if Company A had unexpected profits due to subsidies or grants as a result of COVID-19, it was possible to reduce Company A's profits, albeit temporarily, by purchasing a large quantity of LED lighting and lending it to group Companies B and C.

Not Applicable for Businesses Which Mainly Lend/Rent

After the reform, such tax-saving schemes are blocked.  However, since lending as a principal business is excluded, small-sum depreciable assets leased by a lessor, renter, or real estate lessor for their business are considered to be used in lending as a principal business, and the acquisition of such assets is considered to be for rentals as a principal business.  It is thought that the full acquisition costs would be eligible to be included in deductible expenses.

However, the details of what constitutes "loans made as a main business" have not been clarified, and are currently unknown.

Tsuno-cho(都農町) in Miyazaki Prefecture Has Its Furusato-Nozei Designation Rescinded for Two Years


The Ministry of Internal Affairs and Communications has revoked the designation of a local government eligible for hometown tax donations (Furusato-nozei, ふるさと納税) forthe town of Tsuno-cho, in Koyu-gun (county), Miyazaki Prefecture (宮崎県児湯郡都農町).  This is drawing attention because the amount of donations to the town in 2021 was about 8.2 billion yen, which ranked fifth-largest in Japan.

The Town’s Designation was Revoked for Two Years

The Ministry of Internal Affairs and Communications issued a notice of cancellation of  the town’s designation for two years from January 14, for handling thank-you gifts that violated the standard for hometown tax returns, which states that, "Returns should be local products that account for no more than 30% of the donation amount”.

The town of Tsuno-cho had been returning "Miyazaki beef" as thank-you gifts to those who donated 10,000 yen in Furusato-nozei tax payments; however, when the vendor handling the product could no longer handle the large volume of orders, in October 2021 the town asked another vendor to procure the product for it.  As a result, it became clear that about 18,000 such gifts had been sent out at a cost of approximately 60% - 80% of the total donations amount - far exceeding the Ministry's standard of 30% or less of the donation amount.  This was the reason for the revocation.

Last year, the amount of hometown tax donations to Tsuno-cho was about 8.2 billion yen, ranking 5th in Japan.  Incidentally, in a national ranking, Miyakonojo City (都城市), which is also in Miyazaki Prefecture and has a similarly-written name, is No. 1; it is followed by three municipalities in Hokkaido: Monbetsu City (北海道紋別市) at No. 2, then Nemuro City (北海道根室市, #3), and the town of Shiranuka-cho(北海道白糠町, #4).

In Miyakonojo City, Miyazaki beef (like in Tsuno-cho) and "Takagi no Sato” (高城の里) pork from Miyakonojo are popular as thank-you gifts.  As for the three local governments in Hokkaido, seafood products such as crab, sea urchin, and salmon roe are popular.

This is the Second Case of Such Rescission

This time, Miyazaki Prefecture's town of Tsuno-cho has been excluded from organizations eligible to receive Furusato-nozei tax payments.  This is the second time a municipality has been removed - with the first time being on July 23, 2020, when the town of Nahari, in Aki-gun, Kochi Prefecture (高知県安芸郡奈半利町), had its designation revoked.  Nahari was removed from the system because town officials received bribes totaling nearly 100 million yen from return gift vendors and others, and also made false reports to the national government.

At present, only three municipalities are excluded from the Furusato tax system: the Tokyo Metropolitan Government, and the two others mentioned herein: Miyazaki Prefecture's Tsuno-cho, and Kochi Prefecture's Nahari.  Please note that you cannot donate Furusato-nozei tax to these municipalities.

Izumisano City Won a Related Lawsuit Against the National Government

Izumisano City in Osaka Prefecture, which was initially excluded from the Furusato tax payment system, fought a court battle with the national government, claiming that its exclusion from the system was illegal, and won the case.  As a result, Izumisano City was added after the fact to the list of municipalities eligible for such tax payments, and taxpayers can currently donate Furusato payments to the city without any problem.

Following Izumisano City's victory, the towns Koya-cho, in Ito-gun, Wakayama Prefecture (和歌山県伊都郡高野町), and Miyaki-cho, in Miyagi County, Saga Prefecture (佐賀県三養基郡みやき町), which were also initially excluded from the Furusato system, were added to the list of eligible local governments.  In these ways, there have been various episodes concerning Furusato-nozei between national and local governments.

For businesses that deal in thank-you gift returns, belonging to - or being excluded from - the Furusato-nozei tax system can be a matter of survival.  Actually, it is said that there were some businesses in Nahari-cho that were forced to shut down.

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