[World Tax News] Japan to Implement Pillar Two Side-by-Side Package and More

Editorial Team – [2026] 182 taxmann.com 808 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. Japan to Implement Pillar Two Side-by-Side Package

Japan’s Ministry of Finance has issued a Cabinet Decision dated 23 January 2026 to align the country’s Pillar Two global minimum tax framework with the OECD’s side-by-side package released on 5 January 2026. Under this decision, Japan will revise its rules as follows:

Exemption for Certain Parent Jurisdictions – Multinational groups headquartered in specified jurisdictions that maintain internationally recognised minimum tax regimes such as those with a corporate tax rate of at least 20% and a domestic minimum tax will have their GloBE top-up tax reduced to zero.
Extension of Transitional Safe Harbor: The transitional Country-by-Country Reporting (CbCR) safe harbor will be extended by one additional year, remaining in effect through the end of 2027.
Treatment of Investment Tax Credits – Certain investment-related tax credits may be included in covered taxes to mitigate unintended top-up tax exposure, subject to defined limitations.
Revisions to UTPR Residual Tax Allocation – The approach to allocating residual top-up tax under the UTPR-equivalent mechanism will be refined.
Updates to Local Inhabitant Taxes – Conforming amendments will be introduced to Japan’s local corporate inhabitant tax rules.

These revisions will apply to fiscal years beginning on or after 1 January 2026.

Source – Cabinet Decision

2. South Africa Lowers Interest Rates on Outstanding Taxes and Overpayments

The South African Revenue Service (SARS) has released updated interest rate tables dated 22 January 2026, reflecting the following adjustments:

Table 1 – Interest on outstanding taxes and refunds – The interest rate applicable to unpaid taxes, duties, and levies, as well as interest payable on tax refunds arising from successful appeals and certain delayed refunds, has been reduced from 10.50% to 10.25%, effective 1 March 2026. This follows an earlier reduction from 10.75% to 10.50% effective 1 November 2025.
Table 2 – Interest on credit balances – The interest rate payable on credit amounts, including overpayments of provisional tax, has been lowered from 6.50% to 6.25%, effective 1 March 2026. This comes after a prior decrease from 6.75% to 6.50% effective 1 November 2025.

The interest rates under both tables are linked to the rate prescribed under section 80(1)(b) of the Public Finance Management Act, 1999 (PFMA), which sets the standard interest rate for debts owed to the State. The PFMA rate was most recently reduced from 10.50% to 10.25% with effect from 1 January 2026, as announced by the National Treasury. However, for income tax purposes, the revised rate becomes applicable only from the first day of the second month following its implementation under the PFMA namely, 1 March 2026.

Source – South African Revenue Service