The latest tax reform bill provides that certain multinational companies—those that make their subsidiary in Japan serve as either a center for their R&D business or their headquarters in Asia that controls their other subsidiaries in Asia—are eligible for special tax treatment. In addition to a reduced corporate income tax rate, stock options granted to directors, officers, and/or employees of such Japanese subsidiaries will be treated as tax qualified.

As a result, those options will not be taxable at exercise. Rather, taxation will occur when the underlying shares received at exercise are sold. In order for a multinational corporation with a Japanese subsidiary to be considered a "Specified Multinational Enterprise" and be eligible for these tax advantages, the company must obtain approval from the Ministry of Economy, Trade and Industry by the end of March 2014. Once approval is received, the company has three years from the date of approval to grant qualified options. Requirements for approval have not yet been determined, but Jones Day will continue to monitor developments.