"It's fully deductible." "You can compress your profit with immediate depreciation." Business owners and high earners face a never-ending stream of sales pitches for these "tax-saving scheme" products. Major accounting media, tied to their advertisers, do not examine this area head-on, but history is clear: tax-saving products that became popular have, almost without exception, been shut down by tax reform. This article looks back at the history of regulation through primary sources, and lays out the common structure and a checklist for spotting the products that will be pitched to you next.
(1) The fate of popular schemes is a repeated cycle of "blocked by reform." Life insurance (the 2019 Valentine Shock) → overseas used real estate (FY2020 reform) → drones, scaffolding, LEDs (FY2022 reform) → coin laundries, crypto mining (FY2023 reform).
(2) The true nature of most schemes is not tax saving but "deferral of taxation." You merely pull expenses forward in the first year, and at the exit (sale, cancellation, end of depreciation) the tax comes back.
(3) To achieve that deferral, buyers take on high fees, business risk unrelated to their main business, and low liquidity — and a steady stream of them lose out on the whole.
(4) How to spot them: be wary of "products that mention the tax benefit first," "vague explanations of the investment yield," and "no explanation of the tax at the exit."
A history of being shut down (timeline)
| Period | Scheme | What happened |
|---|---|---|
| February 2019 | Corporate life insurance (fully deductible term insurance with a high surrender-value ratio) | The National Tax Agency announced a revision of its directive and the industry halted sales (the Valentine Shock). Deductibility became limited according to the surrender-value ratio |
| FY2020 reform (2020) | Overseas used real estate (US timber-frame homes depreciated over 4 years by the simplified method → aggregated with salary income) | Restricted the aggregation of profits and losses using depreciation of overseas used buildings |
| FY2022 reform (2022) | Bulk purchase of drones, construction scaffolding, and LEDs plus rental (mass-producing immediate depreciation of items under ¥100,000) | Excluded assets used for lending (rental) from the special provisions for small-amount depreciation[Zeimu Kenkyukai (in Japanese)] |
| FY2023 reform (2023) | Coin laundries and crypto-asset mining (immediate depreciation under the management-enhancement tax system) | Excluded things not carried out as a main business from the SME management-enhancement tax system |
Going back further, the same history repeats itself with leveraged leasing of aircraft and ships, and the name-change plans of increasing-benefit term insurance. "Tax saving that everyone is doing" starts its countdown to expiry the moment the trend is observed by the tax authorities. That is the empirical lesson of the past 30 years.
The true nature of the schemes: not "tax saving" but "deferral of taxation"
Many of these products are not erasing tax but merely pushing back the timing of when you pay.
- First year: immediately depreciate ¥10 million of equipment → ¥10 million of profit disappears, and the tax burden falls by about ¥3 million (or so it appears)
- After that: rental income is taxed every year. At sale, the book value is zero, so almost the entire sale price becomes profit, and the deferred tax comes back
- What remains on balance is the fee paid to the sales company, the risk of the equipment falling in value, and the operational risk of the business
Deferral itself is not illegal, and there are situations where it is reasonable if you can design the exit (matching it against a loss-making year, offsetting it with a retirement allowance, and so on. The government-run Business Safety Mutual Aid is a representative example, offering the same function with no fee). The problem is private products sold with nothing but the word "tax saving," without any explanation of the exit.
A checklist for spotting them (when you get a sales pitch)
Warning signals
- The first thing in the sales talk is "tax saving" or "immediate depreciation" (investment value comes second or later)
- No explanation, or a vague one, of the tax at the exit (at sale or cancellation)
- Rushing you with "even tax accountants recommend it" or "only now / the slots are filling up"
- Assumes you fully outsource the running of a business unrelated to your main line (laundry, trailers, solar power, etc.)
- No disclosure of fees or intermediary margins
Sound alternatives (government systems, the royal road)
- Small Enterprise Mutual Aid, Business Safety Mutual Aid, iDeCo (deferral/deduction with no fee)
- Designing executive remuneration, salary for family employees (income splitting)
- Capital investment in your main business (the intended use of the management-enhancement tax system, etc.)
A yardstick for judgment: "Would you buy this investment or insurance even if you completely ignored the tax benefit?" If the answer is No, it is not an investment but a high-fee deferral product.
A perspective on what is still being sold today
Real estate small-lot products (using the difference in inheritance valuation), operating leases, trailer houses, captive insurance, and other current products include ones with the same structure. We cannot pronounce on the legality of each individual case, but history shows two things: (1) if it becomes popular, the risk of reform and denial rises (tower-apartment tax saving was scaled back by a 2024 revision of the valuation rules), and (2) cases with a blatant intent to avoid tax can be contested even within the current legal framework, through the denial of acts and calculations of family companies, and the like. In the end, tax saving pays off best when done "within the framework of the systems the government has prepared" (see also the risks of tax evasion).
FAQ
Can you no longer save tax with drones or scaffolding?
Under the FY2022 tax reform, assets provided for lending (rental) were excluded from immediate depreciation of items under ¥100,000, lump-sum depreciation, and the SME ¥300,000 special provision, so the typical scheme can no longer be used. Small-amount depreciation of assets actually used in your own business remains possible as before.
Is investing in a coin laundry illegal?
It is not illegal. If it stands up as a business, it is a legitimate investment. What was shut down was the entry point of a tax preference — "using a coin laundry that is not your main business for immediate depreciation under the management-enhancement tax system" (FY2023 reform) — and since then it has become an investment to be judged purely on business profitability.
I was recommended "fully deductible insurance." Should I take it out?
Since the 2019 directive revision, the higher the surrender-value ratio, the more deductibility is restricted. First judge whether you need it as protection; taking it out for the sole reason that "it saves tax" is often not worth it once you include the exit (taxation of the surrender value) — that is the general understanding after the reform.
What is the difference between legal tax saving and dangerous tax saving?
Things the government has prepared as systems (mutual aid, iDeCo, various deductions, investment tax breaks for your main business) are safe. Popular products that exploit gaps in the systems, on the other hand, carry three risks: being blocked by reform, being denied in a tax audit, and losing out to fees. It is practical to judge by "would you buy it even without the tax benefit."
Sources of data
- Exclusion of assets used for lending from small-amount depreciable assets (FY2022 reform): National Tax Agency No.5403 Small-amount depreciable assets (in Japanese) (note on the exclusion from application) / Zeimu Kenkyukai commentary (in Japanese)
- Review of the scope of the SME management-enhancement tax system (FY2023 reform): Small and Medium Enterprise Agency — Support under the Management Enhancement Act (in Japanese)
- Restriction on aggregating profits and losses of overseas used buildings (FY2020 reform): National Tax Agency No.1391 Aggregation with other income when real estate income is in the red (in Japanese)
- Deductibility rules for corporate insurance (2019 directive revision): National Tax Agency — Treatment of premiums for term insurance and third-sector insurance (in Japanese)
* This article is general information and commentary, and is neither a recommendation or rejection of the purchase of any specific product nor tax advice. For decisions on individual products and transactions, please consult a professional with no vested interest.