This is an English translation of our Japanese article. The Japanese version and the published materials of the National Tax Agency, the Small and Medium Enterprise Agency and the Ministry of Finance are authoritative. The shift from deferral to exemption is, at this point, only a reported policy request — not a decision. For individual tax decisions, consult a tax office or a licensed tax accountant.
Last updated: 24 August 2026. Based on Nikkei reporting dated 23 August 2026 and published materials from the National Tax Agency, the Small and Medium Enterprise Agency and the Ministry of Finance. Every figure and deadline below is sourced.
What was reported: from "we will wait for your payment" to "you do not have to pay"
On 23 August 2026, Nikkei reported that the Ministry of Economy, Trade and Industry (METI) plans to include in its FY2027 tax reform request a proposal to exempt successors of unlisted company shares from inheritance tax and gift tax, instead of merely deferring them. The exemption would reportedly target companies that pursue growth investment and wage increases.
Japan's current business succession tax regime does not waive tax; it defers payment, and the deferral only turns into a de facto exemption decades later. In the meantime the successor carries a tax bill that could come due in full at any time. According to the report, METI sees this lack of predictability as the core problem, and wants a design where meeting the conditions extinguishes the tax burden outright. The concrete design will be negotiated within the government and ruling parties toward the end of the year.
A request is not a decision. Ministries publish their tax reform requests at the end of August every year; whether each one survives is decided in the ruling parties' tax reform outline in December. Requests are dropped or scaled back every year. How to tell a request from a decision is covered in our guide to the FY2027 tax reform requests.
The current system: payment is paused, not cancelled
Under the business succession tax regime (corporate version), when a successor receives unlisted company shares by gift or inheritance, the gift tax or inheritance tax on those shares is deferred. In 2018 Japan introduced a ten-year "special measure" with far more generous terms, which is now the main route in practice.
| Item | Special measure (temporary) | General measure (permanent) |
|---|---|---|
| Eligible shares | All acquired shares | Up to two-thirds of issued shares |
| Deferred portion | 100% of both gift and inheritance tax | 100% of gift tax, 80% of inheritance tax |
| Successors | Up to 3 | 1 |
| Employment condition | Falling below 80% is tolerated with a reasoned report | Must keep 80% on a five-year average |
| Advance plan | Special succession plan required (file by 30 September 2027) | Not required |
| Deadline to succeed | Gift or inheritance by 31 December 2027 | None |
The deferred tax is forgiven mainly in these situations:
- The successor dies — the deferred amount is exempted.
- The shares are passed on to the next successor under a continued deferral — the baton is handed over again.
- The former owner dies during a gift-tax deferral — the deferred gift tax is exempted and the shares are treated as inherited, switching to inheritance tax (which can itself be deferred).
In other words, the current "de facto exemption" means: keep the company and its shares, keep passing them on, and in the end nobody pays.
How large is the tax? (simplified illustration)
If company shares are valued at 300 million yen for inheritance tax and there is a single heir (a child), ignoring all other assets and debts:
Taxable base: 300m − 36m basic deduction = 264 million yen
Inheritance tax: 264m × 45% − 27m = roughly 91.8 million yen
The special measure defers the entire amount. Actual results vary greatly with share valuation and other assets — see our articles on unlisted share valuation and the inheritance tax basic deduction.
Why deferral is hard to live with: exemption is decades away, revocation costs everything plus interest
- The goal line is far away. The main exits are the successor's own death or a further succession. For a successor in their 30s or 40s, exemption is decades out.
- Revocation means the full amount plus interest tax. Stepping down as representative within the first five years, selling the shares, the family group losing majority voting rights, or the company becoming an asset-management company all trigger repayment of the entire deferred tax with interest.
- Missing one annual filing is enough. Forgetting the continuation report to the tax office terminates the deferral by itself.
- It discourages sales and restructuring. Selling the shares during deferral generally ends it (a relief mechanism for changed business circumstances exists, but with conditions).
Many owners and their tax advisers hesitate because they cannot promise decades of flawless compliance. That is the "predictability" problem METI reportedly wants to fix: an exemption that becomes final once the conditions are met would remove much of the uncertainty.
What would change under an exemption — and what is still unknown
- From deferral to exemption: meeting the conditions would extinguish the inheritance and gift tax burden rather than postpone it.
- Conditions tied to growth investment and wage increases: framing the relief as a policy incentive rather than a wealth-transfer break.
- Timing: the FY2027 tax reform. Requests are published at the end of August 2026; the ruling parties' outline in December decides.
Still entirely undecided: which companies qualify (size, sector, required levels of investment or wage increases), how much tax is exempted, whether the measure is permanent or temporary, and how companies already under deferral would transition.
Tax-cut requests are routinely narrowed, reworked or rejected in negotiations with the Ministry of Finance, and an outright exemption of inheritance and gift tax invites the "favoring the wealthy" objection. Do not read September headlines as decisions.
What owners should do now: rush in, or wait?
The dilemma: the current special measure is expiring. The plan must be filed by 30 September 2027 and the succession executed by 31 December 2027 — and the ruling parties' outlines have stated that this deadline will not be extended. Yet the calendar leaves room to decide after seeing the December outline:
- End of August 2026: ministries' tax reform requests are published — the exact wording of METI's request becomes public.
- Mid-December 2026: the ruling parties' tax reform outline shows whether the exemption is adopted and its skeleton.
- First half of 2027: the tax reform bill passes the ordinary Diet session.
- 30 September 2027: filing deadline for the special succession plan — after the outline.
- 31 December 2027: deadline to execute a succession under the special measure.
Filing a special succession plan does not oblige you to use it. A practical course is to prepare the plan with a certified support institution (your tax accountant, chamber of commerce and so on), then decide after the December outline whether to use the current measure or wait for the new one. A parallel regime for sole proprietors also exists (plan by 30 September 2028, succession by 31 December 2028) — see our corporate tax guide.
To do today
- Ask your tax accountant for a rough inheritance-tax valuation of your company shares — without the number you cannot judge either option.
- Put the ruling parties' tax reform outline (mid-December 2026) on your calendar and check how business succession is treated.
- If there is any chance you will use the current special measure, start preparing the special succession plan — filing it creates no obligation.
FAQ
Has the exemption been decided?
No. METI is only reported to be planning to include it in its FY2027 tax reform request. Adoption and design will be settled in the ruling parties' tax reform outline in December 2026 and then in legislation. Requests are dropped or scaled back every year.
What are the deadlines for the current special measure?
File the special succession plan with your prefecture by 30 September 2027, and execute the gift or inheritance by 31 December 2027. The outlines have said the application deadline will not be extended, so do not plan around an extension.
When is the deferral revoked?
Typical triggers: stepping down as representative within five years of the succession, selling the covered shares, the family group losing majority voting rights, or the company qualifying as an asset-management company. Even forgetting the periodic continuation filing terminates the deferral, and the full deferred amount becomes payable with interest tax.
Is it better to wait for the new exemption?
It cannot be judged yet — the scope, conditions and timing are undecided. Companies that need to move soon (an aging owner, currently low share valuation) should evaluate the existing special measure first; companies with time can wait for the December outline. Consult a tax professional for your specific case.
Sources
This article is general information, not advice. The exemption is a reported request and may change or be dropped. Consult a tax office or licensed tax accountant for individual decisions.