The main objective of the 2007 Tax Reform Act is to invigorate small and medium sized enterprises and enhance Japanese competitiveness in the international market. Compared with the 2006 tax reform which was primarily tax increases such as the abolition of Special tax reduction and non-deductible director's compensation for one-man family corporation, the 2007 Tax Reform focuses on the economy. On the other hand, compliance with the New Company Act and cost burdens from the implementation of Japanese SOX is an administrative burden on many corporations. The following summary does not cover all aspects of the Act, but only includes topics which we felt would be of the most interest to our clients.

1.	Related to the Company Act (Edited by Tokyo Roppongi Law Offices)
	The Company Act formalizes the procedures required by corporations. The following are the main points relating to yearend:
	1)	Approval by annual shareholder's meeting on annual financial statements
		Within 2 or 3 months after yearend (depending on the article of incorporation), the annual shareholder's meeting will be held to approve on annual financial statements. ⇒One month extension filing on tax returns is applied if the annual shareholder's meeting is held within 3 months.
	2)	Determination of Director's compensation for coming year
		Under the revised tax laws, when any change to the director's salary should be determined within three months of the new fiscal year. Changing a director's compensation retroactively through an approval of an extraordinary shareholder's meeting, to increase or decrease a director's salary without substantial reason and to pay commissions to directors will no longer be permitted for Japanese corporate income tax purposes (refer to "Directors' Compensation" for details).
	3)	Public Notice of Financial Statements
		Corporations including Japan branches of foreign corporations are required to disclose a summary of their financial statements such as 1) Official Government Gazette 2) Daily newspapers 3) Company website. Corporations should elect how to disclose a summary of their financial statements in the articles of incorporation. Otherwise, corporations are assumed to disclose in the Official Government Gazette.
	4)	Quasi-foreign companies
		Although a company may be established in a foreign country, if the primary purpose of its establishment was to conduct business in Japan, the company is considered a "quasi foreign company." In general, such companies are no longer permitted to conduct business under this structure (Company Law Section 821). If you have concerns about your entity, please contact your attorney for details.
2.	Revise tax rate both National and Local tax
	Inhabitance taxes, which previously had three tax brackets of 5%, 10% and 13% have all converted to a flat 10% (4% prefectural and 6% municipal) rate from this year. As a result, there will be individuals who will incur higher (and lower) inhabitance taxes. However, the income tax rate for individuals in the 10% tax bracket in the previous year will now be in the 5% tax bracket, and those in the highest 37% tax bracket will now be in the 40% tax bracket. The number of tax brackets will increase from four to six. In computing inhabitance taxes, they will also be considerations for dependents. These changes are considered in a shift of income taxes from the federal government to the local governments. With the exception of the abolition of the fixed-rate tax cuts, the total tax burden for individuals remain essentially unchanged.