This is an English translation of the Japanese original. The Japanese version and the materials published by Japan's National Tax Agency are authoritative. Whether an asset management company makes sense depends heavily on the type of property, the size of the income and the inheritance outlook. Consult a Japanese tax accountant before acting.
Last updated: 6 September 2026. Based on National Tax Agency tax answers and the Property Valuation Basic Circular, Ministry of Finance tax reform materials, and Tokyo Metropolitan Government tax rate tables. All figures are approximate.
The short version. An asset management company works through three levers: it replaces individual progressive rates (up to 55%) with a corporate effective rate of roughly 21–34%; it splits income across family members paid as directors so the low brackets get used several times; and it converts cash into unlisted shares whose inheritance tax valuation is lower. But how well it works depends entirely on what kind of property you hold. Real estate and closely held operating businesses fit well. Moving a listed-share portfolio into a company usually makes things worse. As a rule of thumb, individual and corporate rates draw level at 9 million yen of taxable income, and the arrangement starts to pay for its running costs somewhere around 10–12 million yen.
It is a company that holds property, not one that runs a business
An asset management company (often called a private company in Japan) is a corporation set up to hold and manage property an individual already owns — rental real estate, shares in their own operating company, securities. There is no special legal form. It is an ordinary kabushiki kaisha or godo kaisha, registered the same way a noodle shop would be.
What differs is the purpose. An operating company exists to earn money by selling something. An asset management company exists as a receptacle for income that already flows from property you own. So the work is not about growing revenue. It is about deciding in whose name, and in what form, the same income is received.
In practice the godo kaisha (LLC) is the common choice, because there is no plan to take outside investment or go public. The cost difference:
| Item | Kabushiki kaisha | Godo kaisha |
|---|---|---|
| Articles notarisation fee | 30,000–50,000 yen | Not required |
| Registration and licence tax | 150,000 yen (or 0.7% of capital, whichever is higher) | 60,000 yen (same rule) |
| Stamp duty on articles | 40,000 yen on paper, zero if filed electronically | |
| Typical set-up cost | About 200,000–250,000 yen | About 60,000–100,000 yen |
| Director terms | Up to 10 years, renewal must be registered | No fixed term |
| Publication of accounts | Required | Not required |
The tax treatment — corporate rates, deductible expenses, inheritance tax valuation — is identical for both forms. Interests in a godo kaisha are valued under Article 194 of the Property Valuation Basic Circular by analogy to unlisted shares. There is no valuation advantage in choosing an LLC.
Why the tax falls: four engines
The saving is not a vague sense that companies pay less. Four distinct mechanisms are at work, and which of them applies to you determines whether the structure is worth building.
Swapping a progressive rate for a nearly flat one
Japan's income tax is progressive: the portion of taxable income above 40 million yen is taxed at 45%, and adding 10% resident tax brings the top marginal rate to 55%. A small company with capital of 10 million yen or less faces roughly the effective rates below (approximate, Tokyo's 23 wards, standard rates).
| Annual income | Individual (income + resident tax, marginal) | Company (effective rate) |
|---|---|---|
| Up to 1.95m yen | 15% | About 21% |
| 1.95m–3.30m yen | 20% | |
| 3.30m–6.95m yen | 30% | About 23% |
| 6.95m–9.00m yen | 33% | About 34% (on income above 8m yen) |
| 9.00m–18.00m yen | 43% | |
| 18.00m–40.00m yen | 50% | |
| Above 40.00m yen | 55% |
Individual figures are income tax (NTA No. 2260) plus 10% resident tax, excluding the special reconstruction surtax. Corporate figures combine corporation tax (NTA No. 5759), local corporation tax, corporate inhabitant tax, enterprise tax and special corporate enterprise tax.
The line that matters is 9 million yen of taxable income. That is where the individual marginal rate reaches 43% and clearly exceeds the corporate 34%. Below 6.95 million yen the company is not cheaper — misreading this leaves you paying running costs for nothing.
Splitting income among family directors, and using the salary deduction more than once
This is the strongest lever in practice. As a sole proprietor, all the income lands on one person and the top slice is taxed hardest. Route it through a company and pay director's remuneration to a spouse or parent, and each person starts again at the 5% and 10% brackets, and each gets their own employment income deduction. That deduction is at least 650,000 yen and is capped at 1.95 million yen for salary above 8.5 million yen (from the 2025 tax year onward).
But lending a name is not enough. The family member must actually perform work, and the amount must match that work. Without substance, the payment is denied as a deduction.
Ten years of loss carryforward, and a retirement payment as an exit
A blue-return sole proprietor carries losses forward for three years. A company carries them for ten, with no cap on the deductible proportion for small companies. For rental property, where a year of major repairs or vacancies can produce a loss, that gap matters.
The other item is director's retirement pay. A reasonable amount is deductible for the company and taxed to the recipient as retirement income, which carries its own deduction based on years of service and is then halved. Sole proprietorships have no equivalent exit.
Turning cash into an unlisted interest, and freezing the valuation
100 million yen in cash is valued at 100 million yen on death. Contribute it to a company that then holds real estate or business assets, and the estate holds unlisted shares or an LLC interest instead. Unlisted shares are valued by the comparable-industry or net-asset methods, which in many cases produce a lower figure than holding the underlying property directly.
Bring children or grandchildren in as shareholders at formation and future profits accumulate inside their holdings from the start, never becoming the parent's property. This is not moving wealth — it is not letting it pile up in the first place.
Three structural types
Type 1: Real estate — the best fit, but there are three methods
Moving rental income into the company. The three methods trade off how much profit actually moves against what it costs to move it.
| Method | What happens | Income moved | Up-front cost |
|---|---|---|---|
| Management contract | The individual keeps the property; the company is paid to manage it | About 5–8% of rent | Near zero |
| Master lease (sublease) | The company leases the whole building and sublets to tenants | About 10–15% of rent | Near zero |
| Ownership | The building is sold to the company, which becomes the landlord | Almost all the rent | Registration tax, acquisition tax, capital gains tax |
The first two are easy to start but move very little profit. And if the management fee is above market, it becomes the classic ground for denial under the family-company anti-avoidance rules (Corporation Tax Act Article 132, Income Tax Act Article 157). The tax office computes a reasonable fee by comparison with what unrelated managers charge for similar buildings. Practitioners treat about 8% for management and about 15% for a master lease as ceilings, but what really decides the case is whether the workload justifies the fee.
If you are serious, the ownership method is the one. All the rent becomes corporate revenue, but the transfer costs money: registration and licence tax (2.0% as a rule) and real property acquisition tax (3% for housing and land under the special measure, 4% for non-residential buildings), plus capital gains tax on the individual if there is a gain. Because moving land as well is expensive, the common design is to move only the building and keep the land in personal ownership, leasing it to the company.
Type 2: Securities — usually the wrong move
Moving a listed-share or fund portfolio into a company. Think hard about this one. An individual pays a flat 20.315% on listed share gains and dividends under separate taxation. A company aggregates that income with everything else and pays an effective rate of about 34% on income above 8 million yen. The rate simply goes up.
Companies do have a dividend-received exclusion, but for listed shares held at 5% or less — "non-controlling purpose shares" — only 20% is excluded. The other 80% is taxed. There is no corporate equivalent of NISA.
Since dividends paid on or after 1 October 2023, there is a further rule: where an individual's holding and their family company's holding together reach 3% or more, that individual's listed dividends fall under aggregate taxation at up to 55% (2022 tax reform). The old technique of parking shares in a private company to push the individual below 3% no longer works.
Securities structures still get used where losses need to be offset against rental or business income, where the ten-year carryforward matters, or where inheritance valuation is the real goal. If the motive is simply "pay less tax on my share trading," it usually backfires.
Type 3: Holding company — for business owners
A newly formed holding company acquires the shares of the owner's operating company. The owner's estate shifts from operating shares to sale proceeds plus holding company shares, and subsequent growth in the business is absorbed at the holding company level. Common in succession planning, but it requires financing for the buyout, a defensible share valuation and bank cooperation.
How much income do you need? Work back from the running cost
A company has costs that go out even in a loss year. The per-capita portion of corporate inhabitant tax is 70,000 yen a year in Tokyo's 23 wards for a company with capital of 10 million yen or less and 50 or fewer employees. Corporate filings are more complex than an individual return, so a tax accountant is normal. Together that is 300,000 to 600,000 yen of fixed cost.
| Taxable income to be moved into the company | Verdict |
|---|---|
| Up to 7m yen | Rates barely differ; the running cost makes it a net loss |
| 7m–9m yen | Rates draw level but the saving is eaten by costs — grey zone |
| 9m–12m yen | Turns positive if income splitting is used |
| Above 12m yen | Benefit clearly exceeds cost — worth building |
Where inheritance planning is the goal, the benchmark is total assets rather than income — commonly around 100 million yen. Inheritance tax applies only above the basic exclusion (30 million yen plus 6 million per statutory heir), so if no tax would arise anyway, there is nothing to compress.
Worked example: an employee landlord with 6 million yen of rental income
Assumptions: salary already puts taxable income above 9 million yen (43% marginal). Rental income after expenses is 6 million yen a year. The spouse does not work elsewhere and helps with the property. Only the building moves to the company; transfer costs arise once and are excluded from the comparison below.
[A] Stay personal
6,000,000 × 43% = about 2,580,000 yen
[B] Move to the company
Spouse paid 1,200,000 yen as a director, leaving 4,800,000 of corporate income
Corporate taxes: about 21% on the first 4m, about 23% on the next 0.8m = about 1,030,000 yen
Per-capita inhabitant tax: 70,000 yen
Spouse: 1.2m salary less the 650,000 employment income deduction leaves 550,000 of income — no income tax after the basic deduction, about 20,000 yen of resident tax
The owner takes no remuneration, so no social insurance arises at the company (already covered through the day job)
Total: about 1,120,000 yen
Difference: roughly 1,460,000 yen a year. Deduct 400,000 of running costs and about 1,060,000 yen a year remains.
Approximate. Depreciation carryover, consumption tax registration thresholds, spousal deduction eligibility, health insurance dependency tests and ground rent arrangements all bear on the result. Spousal and dependant income thresholds have been revised repeatedly — check the current figures before fixing the remuneration.
This example works because it is designed not to increase social insurance. Convert a sole proprietorship wholesale and pay yourself a large director's salary instead, and new employer and employee health and pension contributions will claw back much of the tax saved.
What changed in 2026: the special defence corporation tax
From fiscal years beginning on or after 1 April 2026, a special defence corporation tax applies (created in the 2025 tax reform). The formula is (base corporation tax − 5 million yen) × 4%.
Because of the 5 million yen allowance, companies with corporation tax of 5 million yen or less — roughly 24 million yen of income — are unaffected in practice. Most asset management companies sit well inside that. Above it, the effective rate rises.
Separately, the 2025 reform changed the reduced 15% rate on the first 8 million yen of a small company's income to 17% for fiscal years where income exceeds 1 billion yen (fiscal years beginning on or after 1 April 2025). Asset management companies will not reach that, but "small company always means 15%" is no longer strictly true.
Six things people discover after they have already incorporated
Good fit
- Rental income above 9m yen a year
- Already in a high bracket from salary
- Family members who can genuinely work
- Estate planning for 100m yen or more
- A ten-year horizon
Poor fit
- Income of 7m yen or less
- The goal is listed share trading
- You want to cash out within a few years
- No real work for family members
- No appetite for books and minutes
1. The company's money is not your money. To spend it personally you must take director's remuneration (income tax, resident tax, social insurance) or a dividend (taxed again after corporation tax). Lower corporation tax is followed by a second layer on the way out. The structure only makes sense if you reinvest rather than withdraw, take a retirement payment as the exit, or pass the interest on at death.
2. Social insurance can be avoided or triggered by design. Companies are compulsorily covered, but a director paid nothing generally cannot be an insured person (the pension office decides). Take remuneration and contributions start; take none and you cannot cover dependants through the company.
3. Transfer costs never come back. Registration tax, acquisition tax, judicial scrivener fees, and capital gains tax on the individual. The real test is how many years it takes to recover them. A 300,000 yen up-front cost against a 1,000,000 yen annual benefit is fine; reverse the ratio and it is not.
4. The small residential land relief can be lost. Land leased to a family company qualifies for the "specified family company business land" relief (80% off, up to 400 sqm) — but the relief excludes companies whose business is real estate leasing or car parking. An asset management company is exactly that, so the land falls into the "leased business land" category instead (50% off, up to 200 sqm). The allowance can shrink compared with holding the property personally.
5. The company itself can become unfavourable to value. If shares and similar assets reach 50% or more of total assets, the company is a "specified share-holding company" and must be valued by the net asset method rather than the more favourable comparable-industry method (Circular 189 and 189-3). A high land ratio triggers the parallel land-holding rule. The company built to lower the valuation ends up unable to lower it.
6. Property bought in the last three years is valued at market. Land and buildings acquired or newly built by the company within three years before the valuation date are valued at their ordinary transaction price for net asset purposes (Circular 185, proviso). Compression using the gap between roadside land prices and market value needs at least three years to work. Buying property through a company because a death is close does not work.
And finally, the risk of denial. Where a family company acts or calculates in a way that unreasonably reduces tax, the authorities may recompute it (Corporation Tax Act 132, Income Tax Act 157, Inheritance Tax Act 64). Correct paperwork is not enough without economic substance. Remuneration for work not done, management fees far from market, service contracts with nothing behind them — these are the standard battlegrounds. An asset management company is not a box that makes tax smaller. It is a structure that has to be genuinely operated, year after year.
What to do today
- Find your last tax return and read off your taxable income. If it is under 9 million yen, this is not yet your decision to make.
- Separate the income that can move from the income that cannot. Rental and business income can; listed share returns usually should not.
- Write down which family member would do what. Tenant handling, bookkeeping, property inspections — without describable work, income splitting does not stand up.
Frequently asked questions
How much do I need before an asset management company is worth it?
It depends on the goal. To reduce annual tax, the first threshold is whether the income you can move exceeds 9 million yen, since that is where the individual marginal rate reaches 43% and clearly exceeds the corporate effective rate of about 34%. Because running costs are 300,000 to 600,000 yen a year, the arrangement usually only turns positive around 10 to 12 million yen. If the goal is inheritance planning, the benchmark is total assets of around 100 million yen. If your estate falls below the basic exclusion, there is nothing to compress.
Will moving my share portfolio into a company save tax?
Usually the opposite. An individual pays a flat 20.315% on listed share gains and dividends under separate taxation, whereas a company aggregates that income and pays an effective rate of about 34% on income above 8 million yen. The dividend-received exclusion only covers 20% for listed shares held at 5% or less, and there is no corporate equivalent of NISA. Companies are used for securities mainly where losses need offsetting against rental or business income, where the ten-year carryforward matters, or where inheritance valuation is the real objective.
Is there any tax difference between a kabushiki kaisha and a godo kaisha?
No. Corporate rates, deductible expenses, director's remuneration rules and inheritance valuation are identical. An interest in a godo kaisha is valued under Article 194 of the Property Valuation Basic Circular by analogy to unlisted shares. The differences are corporate law ones: set-up cost (about 200,000 to 250,000 yen versus 60,000 to 100,000 yen), director terms (no fixed term for an LLC, so no renewal registration) and publication of accounts (not required for an LLC).
Should I transfer the property itself or just the management?
It is a trade-off between how much profit moves and what it costs. A management contract starts at almost no cost but moves only about 5 to 8% of the rent. The ownership method moves nearly all the rent but triggers registration and licence tax, real property acquisition tax and capital gains tax on the individual. For a large, long-term position the ownership method is standard; for a small or exploratory position, a management contract. Note that management fees far above market can be denied under the family-company anti-avoidance rules.
Can I use the money accumulated in the company freely?
No. To use it personally you must take director's remuneration, which attracts income tax, resident tax and social insurance, or a dividend, which is taxed again on top of corporation tax already paid. Lower corporation tax is followed by a second layer on withdrawal. So the structure needs to be paired with a long-term plan: reinvest rather than withdraw, take a director's retirement payment as the exit, or pass the interest on at death. Winding up after a few years leaves only the set-up, transfer and liquidation costs.
Can I set up a company just before a death and buy property to cut the valuation?
No. Land and buildings acquired or newly built by the company within three years before the valuation date must be valued at their ordinary transaction price for net asset purposes (Property Valuation Basic Circular 185, proviso). Compression using the gap between roadside prices or fixed asset values and market value needs at least three years to take effect. In addition, once shares and similar assets reach 50% of total assets the company becomes a specified share-holding company valued by the net asset method, and the compression disappears.
Sources
This article is general information about Japanese taxation and does not assess any individual case. Whether an asset management company is appropriate depends on the type of property, the size of the income, the family situation and the inheritance outlook, and a poorly designed structure can increase the overall burden. All figures are approximate and vary by municipality and tax year. Consult a Japanese tax accountant before acting.
