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	<title>Legal and Tax | The Daiwa Institute of Research</title>
		<link>https://www.dir.co.jp/english/research/report/law-research/index.html</link>
		<language>en</language>

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			<title>Roadmap for Implementing Refundable Tax Credits</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20251202_025448.html</link>
			<pubDate>Tue, 02 Dec 2025 15:20:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆The Sanae Takaichi administration plans to carry out an integrated reform of the structure of tax and social security burdens and benefits, positioning refundable tax credits as a key instrument. In Japan, low-income households generally face a high net burden from taxes and social security, while benefits and tax relief for low-income families with children are particularly limited.

◆To address these imbalances, we examined proposals for introducing refundable tax credits, referencing examples from other countries and estimating the fiscal scale for four types and 15 cases, as well as considering administrative challenges. In the United States, about 30% of payments are improper, highlighting the need for precise capture of assets and income or a system design that minimizes improper payments.

◆In Japan, households with dependents under social insurance or pensioners already have a low net burden, making them unsuitable as targets for new benefits. Under these constraints, if burden adjustments are to be implemented promptly, introducing “tax credits accompanied by social insurance premium refunds” for labor income would be a strong option.

◆This should serve as the first step, followed by efforts to develop frameworks for capturing income and assets and to review the overall tax and social security system, aiming to update the scheme into a more sophisticated system that accurately reflects needs.

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			<title>Measures Against Dissemination of Inappropriate Investment Information on Social Media</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20241212_024792.html</link>
			<pubDate>Thu, 12 Dec 2024 14:30:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆In recent years, "finfluencers" who disseminate information on investment and finance have gained a large presence on social media in Europe and the U.S. They are particularly influencing investment decisions of Gen Z. While finfluencers' posts have increased people's motivation to invest, especially among the younger generation, they have also caused problems such as (1) investment fraud and market manipulation, (2) inappropriate financial promotions, and (3) inappropriate investment advice.

◆The U.S. Securities and Exchange Commission (SEC) has been exposing investment fraud and inappropriate financial promotions using social media. However, it is unclear whether finfluencers are "investment advisers" as defined in the Investment Advisers Act of 1940, and the reality is that their dissemination of information cannot be fully regulated.

◆On the other hand, in Europe, where regulations have been tightened to protect retail investors, aggressive measures are being taken against finfluencers. Regulators in the Netherlands, Germany, and France have introduced guidance and legislation to prevent inappropriate investment recommendations by finfluencers. In addition, the UK Financial Conduct Authority (FCA) has issued detailed guidance on financial promotions on social media, clarifying the responsibilities of finfluencers and commissioning firms.

◆In Japan, the dissemination of investment information on social media is increasing. The Securities and Exchange Surveillance Commission (SESC) recommended that the Prime Minister and the Commissioner of the Financial Services Agency order the payment of a surcharge for "spreading rumors" for the first time in July 2024. Financial institutions are also using finfluencers to strengthen their contacts with young people. Leading examples from the U.S. and Europe will serve as a reference for the establishment of regulations related to finfluencers.

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			<title>The deregulation of unlisted stock investments through investment trusts in Japan</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20241003_024656.html</link>
			<pubDate>Thu, 03 Oct 2024 15:00:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆As part of a measure to provide growth capital to startups, etc., a partial amendment to the self-regulatory rules of the Investment Trust Association, Japan (ITAJ) was implemented in February 2024, which establishes a framework for investing in unlisted stocks through investment trusts.

◆This report analyzes the regulatory and practical trends surrounding U.S. mutual funds (MFs), which are leading the way in unlisted stocks investments by investment trusts, from two perspectives: (1) liquidity risk management and (2) valuation of unlisted stocks.

◆The median percentage of unlisted stocks in the portfolios of MFs that invest in unlisted stocks is 0.5%, indicating that most funds do not invest in unlisted stocks to the extent that liquidity risk would be a concern. It can also be inferred that funds manage liquidity and other risks through the structure of the preferred stocks in which they invest.

◆Regarding the valuation of unlisted stocks, the U.S. Securities and Exchange Commission (SEC) adopted rules in 2020 that provide a framework for valuation practices. However, when examining the valuation practices of unlisted stocks by MFs, several issues have been identified, including the infrequency of review of valuation, discrepancies in valuations between MFs for the same stocks issued by the same company, and the tendency for valuation revisions to lag behind the movements of stock prices of similar publicly listed companies.


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			<title>Introduction of global minimum tax</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230206_023610.html</link>
			<pubDate>Mon, 06 Feb 2023 10:00:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆The "FY2023 Tax Reform Outline" published on December 16, 2022 clarified that the Income Inclusion Rule for the global minimum tax will be effective for fiscal years beginning on or after April 1, 2024.With the introduction of the Income Inclusion Rule, a multinational corporate group (MNE group) will be subject to additional tax on the ultimate parent company and the like, if the actual tax rate (effective tax rate) borne by the MNE group in a certain country is below the minimum tax rate of "15%."

◆Because the global minimum tax imposes a surcharge if the effective tax rate is below 15%, the MNE group loses the incentive to expand into countries where the effective tax rate is below 15%. This is expected to put a halt to the corporate tax competition since the 1980s.

◆Generally, European and US companies are said to be more aggressive in tax planning, while Japanese companies are said to be more reluctant. The introduction of the global minimum tax is expected to increase the tax burden for fewer Japanese companies than for European and US companies. Therefore, in terms of the ability to acquire after-tax profits, it is expected that the competitiveness of European and US companies will decline and the competitiveness of Japanese companies will be relatively enhanced.

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			<title>Prospects After Lifting of Digital Payroll Ban and Implications Financial Business</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230117_023553.html</link>
			<pubDate>Tue, 17 Jan 2023 11:40:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆Due to the lifting of the ban on digital payroll on April 1, 2023, it is expected that the flow of workers' wages will be partially shifted from banks and other financial institutions that provide deposit accounts to Fund Transfer Service Providers that operate cashless payment services and other services. The consequent impact on financial businesses and the financial system is of interest.

◆While there is a certain level of demand for digital payroll among workers, there are many issues with the spread of such demand. It will take a considerable amount of time to achieve widespread adoption. For the time being, the lifting of the digital payroll ban is not expected to be a game changer that drastically changes the existing financial business environment, particularly for banks.

◆Regarding the size of the wage market, in 2021 there were 59,210,000 salaried employees in the private sector, with salaries totaling about 225 tril yen. The size of the market is quite large. However, due to the upper limit on the account balance related to digital payroll, wage disputes come to as much as approximately 59 tril yen, which is expected to be considerably more limited than this given the actual use situation.

◆In the long run, a scenario could be envisioned in which the development of a cashless society and the widespread use of digital payroll payments positively interact with each other. In addition, with the lifting of the ban on digital payroll, there is a possibility that the development of a corporate business ecosystem in finance that seamlessly links the businesses of banks, securities companies, and Fund Transfer Service Providers will progress in the future.


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			<title>Issues Related to Lifting of Digital Payroll Ban and Worker Protection</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230117_023552.html</link>
			<pubDate>Tue, 17 Jan 2023 11:20:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆The ban on digital payroll, which is provided by Funds Transfer Service Providers, will be lifted on April 1, 2023. Wage payment methods for workers have increased for the first time in about 24 and a half years since September 1998. There is growing public interest in the impact of digital payroll on domestic money flows starting from wages and financial businesses.

◆The discussion of digital payroll developed primarily from the consideration of payroll cards for foreign workers. Japan's government started working in earnest toward the introduction of digital salaries in 2021. Considering actual procedures, it might take more than a few months after the ban has been lifted that workers can actually receive digital salaries.

◆Behind the expansion of wage payment methods are: (1) improvement of convenience for workers; (2) improvement of financial inclusion; (3) wage robbery and theft and loss prevention measures; and (4) development of a level playing field and promotion of private innovation.

◆The issues that need to be addressed seriously are the protection of workers, such as the preservation of funds and the securing of liquidity in the event of the bankruptcy of Fund Transfer Service Providers or the illegal use of funds. 

◆Various countermeasures are to be taken for worker protection. For example, qualified Fund Transfer Service Providers shall be designated by the Minister of Health, Labour and Welfare after satisfying eight requirements concerning worker protection and reporting systems, etc., in advance. It is important to carefully assess whether the measures for protecting workers are functioning properly and effectively.

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			<title>Minimum Tax of 22.5% on Top-Income Earners Introduced</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230113_023550.html</link>
			<pubDate>Fri, 13 Jan 2023 10:45:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆On December 16, 2022, the Liberal Democratic Party and Komeito decided on the "Outline of Tax Reform for Fiscal 2023". This report explains the minimum tax which is to be introduced as an additional taxation measure for the super-wealthy from 2025.

◆The minimum tax is a mechanism for taxpayers with an annual income of more than 330 mil yen whose purpose is to impose an additional tax on the difference occurring when the ratio of the amount of income tax to the portion of income exceeding 330 mil yen is less than 22.5%. The number of taxable persons is expected to be around 200-300 per year, and the estimated tax revenue is about 30-60 billion yen per year.

◆Based on the average income structure for each income bracket, the guideline determining eligibility for Minimum Tax is around 3 bil yen in annual income, but in reality, it differs depending on the income structure of each taxpayer. Taxpayers with progressively taxable income, such as employment income and business income, are not subject to minimum tax, no matter how high their income. On the other hand, taxpayers whose entire income comes from the transfer of shares and long-term real estate transfers are subject to minimum tax from around 1 bil yen in annual income.

◆In Japan as well as in the US, the UK, and Germany, the tax burden rate rises as income increases from the lower range to around 99.9%. However, in the upper 0.1% range, the tax burden falls as income increases (a phenomenon equivalent to the "100-million-yen wall" in Japan). The extent of the decline in the tax burden rate within the top 0.1% of income appeared to be slightly larger in Japan than in the US, the UK, and Germany, but it would be comparable if a minimum tax system was introduced.

◆In the future, when the issue of vertical equity in income tax needs to be further addressed, it is better to adjust the number of taxpayers eligible for minimum tax and the tax rate. Then the necessity of uniformly raising the financial income tax rate, including the tax rate on the middle class, will be reduced. This point can be said to be good news for the majority of investors.

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			<title>Commencement of Electronic Provision System for Shareholders' Meeting Materials (2)</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230112_023548.html</link>
			<pubDate>Thu, 12 Jan 2023 12:00:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆The revised Companies Act of 2019 initiates an electronic provision system for shareholders' meeting materials. This system provides, in principle, materials for shareholders' meetings of listed companies held on or after March 1, 2023 by three weeks prior to the date of the shareholders' meeting electronically rather than on hard copy materials. Originally, a company has stipulated in its Articles of Incorporation that the company shall voluntarily amend its Articles of Incorporation and utilize the system. However, listed companies are effectively subject to the compulsory application of the system under the laws.

◆Among TOPIX500 member companies prior to the adoption of this system (for general shareholders' meetings held between September 2021 and August 2022), 89% posted their shareholders' meeting materials on “Listed Company Search” provided by the Tokyo Stock Exchange three weeks prior to the date of the general shareholders' meeting. In addition, 95% of the companies have submitted resolutions to amend their Articles of Incorporation to their general shareholders’ meeting for the purpose of adopting the system.

◆The majority of the listed companies post their shareholders' meeting materials electronically three weeks before the date of the shareholders' meeting, thus it is unlikely that there will be any major confusion, such as their being a number of listed companies unable to respond to issues such as the prompt dispatch of general shareholders' meeting information due to the start of the application of the system.

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			<title>Commencement of Electronic Provision System for Shareholders' Meeting Materials (1)</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230106_023538.html</link>
			<pubDate>Fri, 06 Jan 2023 16:00:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆Under the revised Companies Act of 2019, a system will be initiated at the shareholders' meetings of listed companies held on or after March 1, 2023 to provide in principle shareholders' meeting materials electronically rather than providing hard copy materials by three weeks prior to the date of the shareholders' meeting (electronic provision system for shareholders' meeting materials). This system is essentially applicable when a company has stipulated the use of this system in the Articles of Incorporation, but it is effectively enforceable for all listed companies.

◆Shareholders' meeting materials may be provided by posting the materials on the website of the issuing company and notifying the shareholders of the address and other pertinent information of the website in writing. “Listed Company Search” provided by the Tokyo Stock Exchange is also considered to be a supplemental source of materials for shareholders' meetings. In applying this system, the issuing company will need to put the materials for the general meeting of shareholders on several websites and prepare backup servers in advance in case of an emergency.

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			<title>Review of Quarterly Disclosure Revealed</title>
			<link>https://www.dir.co.jp/english/research/report/law-research/20230104_023532.html</link>
			<pubDate>Wed, 04 Jan 2023 12:30:00 +0900</pubDate>
			<description><![CDATA[
    
    ◆On December 15, 2022, at the fourth meeting of the Financial Services Agency's Financial Services Council Disclosure Working Group (FY2022), the Financial Services Council Disclosure Working Group Report (draft) was presented, and a general agreement was reached.

◆Regarding the review of quarterly disclosure, the directions were as follows: abolition of quarterly report required by law and unification with quarterly report based on exchange regulations; maintain obligation to disclose quarterly financial report; partial expansion of disclosure content (segment information, cash flow information, etc.); voluntary review (1st and 3rd quarters); enforcement by the exchange; and for 2nd quarter, content and review equivalent to that of the quarterly report.

◆With regard to sustainability information, it was suggested that the Sustainability Standards Board of Japan(SSBJ) and its development standards should be included in the Financial Instruments and Exchange Act. It was also considered possible to incorporate disclosure standards that could be uniformly applied domestically with regard to the disclosure of sustainability information in the annual securities report. Points to be considered for assurance of sustainability information were also indicated.

◆It is envisioned that a bill relating to the review of quarterly disclosure will be submitted to the ordinary session of the Diet in 2023. Regarding the disclosure of sustainability information, a report titled "Roadmap for Sustainability Disclosure in Our Country (draft)" was presented, and it is expected that various discussions will proceed in accordance with this.

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