Wednesday, May 15, 2012. 09:30 According to the new rule of applicable tax deduction for allowance for bad debts, only i) small to medium-sized company and ii) bank, insurance company and other similar legal entity can be eligible to deduct all of its allowance for bad debts while iii) legal entities other than i) and ii) can only deduct part of the allowance for bad debts until year 2014. After then, such iii) legal entities cannot claim its allowance for bad debts as a tax deductible expense. This new rule can be said as a transitional measure to abolish the tax deduction for allowance for bad debts applicable to legal entities other than SME, bank, insurance company etc. Compare amount of tax deduction for allowance of bad debts between SME, bank, insurance company and other legal entities: Impact: Legal entities whose capital is equal to or greater than 100 million JPY (excluding bank and insurance company) can no longer deduct all of its allowance for bad debts that it could otherwise before the new rules applies; instead, it can only deduct 3/4 in 2012, 2/4 in 2013, 1/4 in 2014 and none starting from 2015 compared to the eligible deduction amount before the tax reform. The tax payment for such entities will increase as a result.