Japan Considers Exempting Inheritance and Gift Taxes for SMEs That Invest and Raise Wages

The Japanese government is considering exempting inheritance and gift taxes for successors of small and medium-sized enterprises (SMEs) that promote business investment or wage increases, the Nikkei reported today.

Japan's Ministry of Economy, Trade and Industry is reviewing a tax reform proposal to alleviate the tax burden on SME successors who promise to use the capital secured through tax exemptions to improve corporate productivity or raise wages.

Currently, Japan has been implementing a 10-year limited special measure starting in January 2018 that defers the payment of inheritance and gift taxes for successors who inherit unlisted shares of SMEs.

The plan is to change this system from tax deferral to a complete tax exemption starting at the time of inheritance.

The Japanese government's vision is to increase predictability regarding tax cuts for management and encourage businesses to continue operating even after the death of the previous head, thereby preserving the advanced technological capabilities and jobs of SMEs.

The Ministry of Economy, Trade and Industry plans to finalize the tax reform proposal by the end of the year through coordination with the ruling party, while also discussing measures to prevent side effects where companies with no business activity could exploit the system as a tax avoidance tool.

In addition, citing survey results showing that transferring management rights while business owners are still alive leads to more cases of growth, the Nikkei reported that the government is also considering expanding tax benefits for early successions.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.