Japan to introduce benefit‑linked tax credit in 2029

In July 2026, the Japanese Council for National Social Security reached a broad agreement to launch a benefit‑linked tax credit (給付付き税額控除) beginning in 2029. The measure would allow low‑income earners to receive a tax deduction and, where the deduction exceeds tax owed, a cash benefit.

The council identified five key design challenges that remain unresolved: (1) whether the benefit should precede the tax credit or be combined from the start; (2) how to secure permanent financing for a permanent scheme; (3) the income threshold that defines eligible households; (4) the division of income‑assessment responsibilities between national and local authorities; and (5) how to treat complex income sources such as investment earnings, stock dividends and NISA accounts. Further legislation will be required to address these issues before implementation.