The focus is on whether to abolish, extend or expand the special measures under the business succession tax system supporting the succession of small and medium-sized businesses. Discussions are reportedly under way on the system's future, based on the expiration of the measures at the end of December 2027.
The special measures under the business succession tax system, which allow up to 100% of inheritance and gift taxes on unlisted shares to be deferred and then effectively exempted, will expire at the end of December 2027. The ruling parties' tax reform outline explicitly states a policy of not permitting any further extension of the application deadline, and the system's future is expected to be examined as part of the FY2027 tax reform process.
Small and medium-sized businesses are stepping up calls for an extension and expansion. The Japan Chamber of Commerce and Industry is calling for the special measures to be made permanent, while the Ministry of Finance has indicated that their effectiveness is unclear. The government and ruling parties intend to advance discussions and work out the details toward the end of the year.
Related organizations are intensifying their lobbying efforts, and some analyses have found that companies using the special measures improved labor productivity and maintained employment. At the same time, criticism that the asset succession tax system favors wealthy individuals remains strong, and the government has indicated a policy of reviewing the rules governing inheritance of unlisted shares and the tax system as an integrated package.
As the Ministry of Finance points out issues at the Government Tax Commission, the actual state of tax deferrals has come under scrutiny, including the composition of assets and the extent to which they are converted into cash. The situation is reportedly expected to involve twists and turns in year-end discussions.