Japan's Succession Tax Break Is Up for a "Fundamental Review". What It Means for Buyers

When a Japanese owner hands a company to a son, daughter or other successor, the shares are taxed as a gift or as part of an inheritance. Since 2018 a special measure has let most of those successors defer the whole bill. It runs out in 2027, and the argument over what replaces it has started. On 9 October, the Ministry of Finance (MOF) and the SME Agency set out their evidence at a government tax commission expert meeting on evidence-based policy. The Ministry of Economy, Trade and Industry (METI) has asked for a "fundamental review" (抜本見直し). For buyers, the question is how expensive the family route will be from 2028, because that is what owners weigh a sale against.

Join the buyer register

How the relief works. The business succession tax regime (法人版事業承継税制) defers gift or inheritance tax on the shares of an unlisted company, as long as the successor keeps running the business. The FY2018 reform added a ten-year special measure on top of the older general one. According to MOF's briefing paper for the meeting:

• All the shares, all the tax. The special measure covers every share and defers 100% of the tax. The general measure covers at most two-thirds of the shares and, on inheritance, defers 80% of the tax on them.
• Up to three successors. Shares can also come from more than one giver, such as both parents.
• A looser job rule. The general measure asks the company to keep, on average, 80% of its staff for five years. Under the special measure, a firm that misses that level can still keep the deferral if it gets guidance from a certified support adviser.
• Hard deadlines. Succession plans must reach the prefecture by 30 September 2027, and shares must change hands by 31 December 2027 (SME Agency).

The plan deadline has been pushed back before. In December 2024 the ruling parties wrote that the special measure's end date would not be extended again. A year later, their FY2026 outline left that end date alone but gave owners another 18 months to file plans, to the end of September 2027. It also promised to decide what happens after the deadline in the FY2027 reform, looking at how the measure is used and at fairness between taxpayers. Japan's tax reform outline normally lands in December, so that decision is about two months away.

How much it is used. From FY2018 to FY2022, owners filed roughly 2,700 to 3,200 special succession plans a year. FY2023 brought a spike. METI says that spike came before the plan deadline was extended, and the fall in FY2024 was probably the reaction. METI puts the regime's cost in lost tax at about ¥169 billion.

The Finance Ministry's case. MOF's paper raises several doubts. These are its findings, not yet government policy:

• Users could pay more. With the special measure, users pay roughly half the tax they would otherwise owe. Under the general measure, MOF calculates the bill would rise by only about 10 percentage points (FY2018–2023 average).
• Many could afford it. 68.5% of special-measure successors hold liquid assets larger than the tax they actually pay. If the general measure applied, the figure would still be 49.3%.
• The job rule may not bite. Almost all user companies keep 80% or more of their staff, with little difference between the general measure (80% rule) and the special one (relaxed rule). MOF says it is unclear how much the requirement does.
• Asset-heavy companies. MOF cites a recent real estate leasing company with about ¥40 billion of "specified assets" such as listed shares and rental property (about 97% of its assets), six employees and about ¥1.7 billion of deferred inheritance tax.
• Low take-up. About 13,000 inheritances a year involve shares in family-controlled companies, but about 80% are valued at ¥70 million or less, and fewer than 3% use the regime. MOF notes that the 13,000 also includes cases the regime could never cover, such as minority holdings.

MOF also points out that closures and dissolutions kept rising after the special measure arrived. It quotes a 2023 Japan Finance Corporation survey of small firms planning to close: 45.2% said they did not want anyone to take over, 22.1% saw no future in the business, and 28.4% gave reasons linked to having no successor. Taken together, it calls the measure's effect on continuity likely, and its effect on growth unclear.

The SME Agency's answer. The SME Agency's own analysis for the same meeting defends the measure. It says about 96% of user companies met the job-keeping target. For companies that used the regime in FY2018–2019, labour productivity rose an average of 6.1% in the five years after the handover, against 0.1% for non-users. That figure rests on only 89 of 2,279 companies whose accounts could be traced. Asked what they would have done without the regime, about half of users said they could not have made growth investments. About four in ten said they would have split shares among heirs or could not have raised pay, and about two in ten said they would have closed. The Japan Chamber of Commerce and Industry added its own survey: 79.1% of current presidents (n=2,357) took over from a relative.

What reform could look like. METI's request asks to turn the regime into support for successors who use the handover to build "earning power" (稼ぐ力), in line with its June 2026 strategy for small and mid-sized firms. It gives no detail on conditions, and the application period is listed as "under consideration". Others have put ideas on the table:

• Tax accountants. The Japan Federation of Certified Public Tax Accountants' Associations suggests limiting relief to assets used in the business, leaving out financial assets and idle property. It suggests exempting the tax after a set period instead of deferring it across generations, and rethinking the 80% job rule. It also questions whether performance targets after the event suit a one-off tax like inheritance tax.
• Osaka business lobby. In a September request, the Osaka Chamber of Commerce and Industry asked for the special measure to be made permanent, with exemption after a set period. It also opposed the residual-income method being considered for valuing unlisted shares.

Asked on 6 October about the share valuation review we covered last week, Finance Minister Satsuki Katayama said the ruling party's tax commission would take it up toward year-end. She added that the succession regime's deadline is also coming, that the government will look at it properly, and that the two go together (MOF transcript).

What it means for a foreign buyer. We read it three ways. These are our views, not forecasts:

1. Expect a family rush before the deadline. Owners who want a child to take over have a reason to file plans and move shares before September and December 2027. The FY2023 spike shows how strongly deadlines pull handovers forward. Some companies you might hope to buy will be locked into family succession in the next 14 months.
2. A tougher regime changes the sums. If relief narrows, for example to business assets only or to firms that meet growth tests, the family route gets more expensive for some owners. That makes an outside sale look better by comparison, especially for asset-rich, profitable companies, which is the segment many foreign buyers want. Combined with the share valuation review, the December outline matters for both.
3. It is not your tax. The regime covers gifts and inheritance, not purchases. When you buy shares from an owner, the deal and the owner's tax on the sale follow other rules (see our valuation guide). The relief matters to you because it shapes the owner's choice, not your price.

If you are talking to an owner, it is fair to ask whether their tax accountant has looked at the regime's deadline and what happens if it changes. As our guide to how Japanese owners decide explains, that adviser is often the first person an owner asks. Nothing is decided until the December outline, and we will cover it when it lands.

Join the Keisho X buyer register