Japan tax panel experts question business succession tax break
In short
Experts at a meeting of Japan's Government Tax Commission, an advisory body to the prime minister, on the 9th questioned the business succession tax system, which defers gift and inheritance tax for successors taking over small and medium-sized companies. Some said the benefit was excessive, while the Small and Medium Enterprise Agency presented data linking use of the system to sales growth. In fiscal 2024 the system was applied in 1,296 cases, deferring a total of 147.1 billion yen, Mainichi Shimbun reported.
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Japan's Government Tax Commission, an advisory body to the prime minister, held an expert meeting on the 9th to discuss the business succession tax system, which reduces the tax burden on successors who take over small and medium-sized companies. Under the system, successors who acquire unlisted shares of such companies and take over a business within the family can defer payment of gift tax and inheritance tax, Mainichi Shimbun reported. Nikkei reported that opinions questioning the policy's effect and calling the preferential treatment excessive were prominent, with calls for a review. [ 1 , 2 ]
According to Mainichi, experts repeatedly questioned the significance of the special measure under which inheritance tax payment is deferred in full. One expert said the special measure deferring 100% of inheritance tax, a tax intended to prevent inequality from becoming entrenched, went too far. Another said the system must not become an "asset succession tax system" for wealthy people to avoid tax, and that it should support business successions with social significance. [ 2 ]
The Small and Medium Enterprise Agency presented material at the meeting showing that, in successions within families, companies using the special measure tended to see sales increase, indicating a certain correlation between tax deferral and business growth, Nikkei reported. Mainichi reported the agency's analysis that businesses using the system tended to see sales grow more than those that did not, and that the Japan Chamber of Commerce and Industry stressed it was a necessary system to support the survival of small and medium-sized companies. Yomiuri Shimbun's headline said the discussion covered the impact on productivity improvement. [ 1 , 2 , 3 ]
The system's coverage has been expanded to all shares, but as a special measure that runs until the end of December 2027. In fiscal 2024 it was applied in 1,296 cases for the two taxes combined, with a total of 147.1 billion yen in tax deferred, Mainichi reported. [ 2 ]
Mainichi said the government is discussing a review of special tax measures that reduce the tax burden on companies and individuals, and that the business succession system may become a target. Separately, the National Tax Agency has proposed a new method for valuing unlisted shares for inheritance tax to prevent excessive tax avoidance, though there are concerns it would raise the burden on high-profit companies. That proposal and the special measure are to be discussed in the year-end tax reform, the newspaper reported. [ 2 ]
Why it matters
Mainichi Shimbun reported that the government is reviewing special tax measures that reduce tax burdens for companies and individuals, and that the business succession system could become a target. The special measure runs until the end of December 2027 and, together with a proposed new valuation method for unlisted shares, is to be discussed in the year-end tax reform, according to Mainichi.
Key facts
- The Government Tax Commission, an advisory body to the prime minister, held an expert meeting on the 9th to discuss the business succession tax system. [ 1 , 2 ]
- The system reduces the tax burden on successors who take over small and medium-sized companies by deferring gift and inheritance tax. [ 1 , 2 ]
- Opinions questioning the policy's effect and calling the preferential treatment excessive were prominent, Nikkei reported. [ 1 ]
- The special measure, which currently covers all shares, runs until the end of December 2027. [ 2 ]
- In fiscal 2024 the two taxes combined were deferred in 1,296 cases, totalling 147.1 billion yen. [ 2 ]
- The Small and Medium Enterprise Agency presented analysis showing that businesses using the system tended to see sales rise. [ 1 , 2 ]
- The Japan Chamber of Commerce and Industry called it a necessary system to support the survival of small and medium-sized companies. [ 2 ]
Confirmed by several sources
- The Government Tax Commission discussed the business succession tax system at an expert meeting on the 9th. [ 1 , 2 ]
- Experts at the meeting questioned the special measure. [ 1 , 2 ]
- The Small and Medium Enterprise Agency presented material indicating that companies using the system tended to see sales increase. [ 1 , 2 ]
Still unclear
- Whether the business succession tax system will be revised in the government's review of special tax measures. Mainichi Shimbun said only that it could become a target; no decision is reported.
- What was said about the system's effect on productivity. Yomiuri Shimbun's headline mentions the impact on productivity improvement, but only the headline is available.
What local media are saying
Timeline, local time
- Nikkei reported that experts at the Government Tax Commission meeting questioned the policy effect of the business succession tax system. [ 1 ]
- Mainichi Shimbun reported on the meeting, including expert criticism of the full deferral of inheritance tax. [ 2 ]
- Yomiuri Shimbun reported on the discussion, including the impact on productivity improvement (October 10). [ 3 ]