The Small and Medium Enterprise (SME) Agency, an external bureau within Japan’s Ministry of Economy, Trade and Industry, has announced a fiscal incentive for corporate venture capital (CVC) investments.
The policy is intended to last for a year and is part of an open innovation promotion scheme set to come into force in the next fiscal year, which will begin in April 2020.
Japan-based firms or dedicated CVC subsidiaries investing over ¥100m ($910,000) in unlisted innovative companies less than 10 years old can benefit from a 25% corporate income tax deduction under the guideline.
The requirement is reduced to 10% of the standard investment amount if the investing entity is classed as an SME, and it increases fivefold if the funding goes to a company based outside Japan.
In addition, the investor must hold its stake in the portfolio company for a fixed period of five years to be eligible for the tax break.
The move comes as the Japanese government looks to foster the country’s local startup ecosystem in a bid to match those of the US, Europe and China, according to Japan Times, which cited sources familiar with the matter.
