The Journal The Authority on Global Business in Japan

The American Chamber of Commerce in Japan (ACCJ) SME CEO Advisory Council is focused on making the ACCJ a better place to do business by concentrating on the chamber’s three pillars:

  • Networking
  • Information sharing
  • Advocacy

To help all members, we are spearheading two initiatives that hit each of these pillars and are particularly relevant to small and medium-size enterprises (SMEs).

FAIRER TAXES
On the advocacy front, we have heard from many ACCJ members who are US citizens and own and operate businesses in Japan about the significant potential impact of the Global Intangible Low Taxed Income (GILTI) provision included in the Tax Cuts and Jobs Act of 2017.

In response to these concerns, we have worked with the ACCJ Taxation Committee to reduce the potentially severe consequences some may face, and I am pleased to report that the ACCJ advocacy efforts seem to be working.

The SME CEO Advisory Council continues to monitor the potential for relief from the burdens imposed on SMEs owned by US citizens. This year, we have seen some positive results from the DC Doorknock in September 2018, which focused exclusively on GILTI, the DC Doorknock in April 2019, and separate face-to-face meetings with key contacts at the US Treasury and in Congress (see sidebar).

We encourage our SME members to continue to share their advocacy issues, both in the United States and Japan. This will allow the ACCJ’s positions to better represent and address concerns facing your businesses in our regular advocacy initiatives, including the Diet Doorknocks and the DC Doorknocks.

INFORMATION SHARING
Increasingly, Japan has a number of resources and organizations focused on supporting the development and business activities of SMEs. In addition to the ACCJ, there are programs and resources available through other chambers of commerce as well as government and domestic organizations.

SME CEO Advisory Council member Barbara Hancock has reached out to the Tokyo Metropolitan Small and Medium Enterprise Support Center, which offers support for SMEs looking to expand locally and globally as well as aiming to market new services. They were very interested in how our organizations might mutually support each other, and we will continue to talk to them and seek out similar organizations with the idea of having one of our ACCJ committees host an event.

Also, Hancock has reached out to other foreign chambers with which we regularly partner, such as the British Chamber of Commerce in Japan and the Australian and New Zealand Chamber of Commerce in Japan, to explore ways in which to collaborate on events that support SMEs.

And to ensure that our efforts are not focused only on the Kanto area, SME CEO Advisory Council Member Kiran Sethi has identified a number of local government organizations and non-governmental organizations in the Kansai region that mobilize networks and resources for SMEs. In addition, the World Expo 2025 in Osaka will have a special focus on SMEs, offering exciting opportunities for companies of this size operating in Japan.

NEW ACCJ BUSINESS & SERVICES DIRECTORY
As part of the SME CEO Advisory Council’s mandate to make the ACCJ a better and easier place to find and promote business, we are pleased to announce a new ACCJ Business & Services Directory.

Unlike the current Membership Directory, it will be acces-sible by the general public while maintaining an ACCJ members-only portal.

To better connect ACCJ member businesses with potential opportunities—with both member and non-member partners—the directory will feature a broad description of the businesses and the services that ACCJ membership companies provide.

To add dimension to our dynamic companies—particularly SMEs—profiles of ACCJ member businesses and their achie-vements will also be featured.

Currently, it is not possible for those outside the ACCJ to easily search the types of companies that are chamber members and the services they offer. The new directory will address this by enabling easier, more intuitive searches of businesses and services for members and non-members alike.

Over the next six months, the ACCJ will roll out the Business & Services Directory with a search function to help members find solutions. The public site will offer basic information while the members-only site will offer more specific company details. The directory will feature all companies with commercial memberships, and an opt-out option will be available.

The first version of the directory will become available over the next few months, and we hope that a fully functional version will go live in the first quarter of 2020. As we roll out the directory, we look forward to receiving feedback from members and, over time, improving its usefulness and effectiveness. 

 

 

TAXATION COMMITTEE UPDATE

Global Intangible
Low-Taxed Income (GILTI)

The proposed Internal Revenue Service (IRS) has issued proposed regulations that provide for the exclusion of GILTI income that has been taxed in a “high-tax country.” The IRS has opened a public comment period on these proposed regulations, and the Taxation Committee is drafting and collecting member comments through early September. There may also be an opportunity for a public hearing. It is expected that these regulations will be neither finalized nor effective until the 2019 tax year.

  • The IRS has made some clarifications on GILTI that are favorable, including the 962 election and a GILTI deduction. The IRS is also finalizing regulations on GILTI that affect US citizens abroad being taxed in a “high-tax country” and has opened a public comment period.
  • The Taxation Committee is drafting a comment and collecting member comments through mid-September. There may also be an opportunity for a public hearing.
  • The Internal Revenue Code Section 962 election states that the taxable GILTI income from the foreign company will be taxed at the US corporate tax rate of up to 21 percent, and allows the usage of Japanese corporate tax as a foreign tax credit on the taxpayer’s US individual income tax return.
  • The IRS recently clarified that individual taxpayers making the 962 election are also eligible to claim the 50-percent deduction against their GILTI income (this was previously not available to individual taxpayers).
  • For those taxpayers who have not yet filed their 2018 US individual tax returns, and who have non-calendar year-end foreign corporations, the tax returns can be especially complicated, as both the transition tax and GILTI may be applicable on the 2018 tax return. Impacted individuals should consult with US tax professionals for more specific advice regarding their situations.

Also, for those taxpayers who are interested in making the 962 election and have not yet filed their 2018 tax return, the election should be made with a timely filed tax return. With the additional complexity of the 962 election, impacted taxpayers should be working on this issue now and not wait until closer to the October 15 tax filing deadline.

Harry Hill is member of the board, New Business Development, at Oak Hill Marketing Inc. and chair of the ACCJ SME CEO Advisory Council.
We have worked with the ACCJ Taxation Committee . . . and I am pleased to report that the ACCJ advocacy efforts seem to be working.