The Ministry of Economy, Trade and Industry announced the creation of the Business Portfolio Transformation and Strengthening Promotion Tax Incentive in its FY2027 tax reform requests. The proposal would defer taxation on gains from sales for a specified period, supporting M&A by companies expected to improve productivity.
In the FY2027 tax reform requests published on 31 August, the Ministry of Economy, Trade and Industry included the creation of the Business Portfolio Transformation and Strengthening Promotion Tax Incentive. The proposal would defer taxation on gains from sales for companies seeking to transform their portfolios by combining the sale and acquisition of businesses.
Eligibility for the new tax incentive would require the sale and acquisition to be carried out as a set within a specified period, the transformation to be expected to produce at least a specified level of productivity improvement, and approval for application of the tax incentive to be obtained. The aim is to promote the reallocation of capital to segments expected to create value in excess of the cost of capital.
However, concerns remain over its practical usability, including the difficulty of meeting the requirements and the fact that the measure would defer taxation rather than provide an exemption. In practice, the perspective of planning sales and acquisitions as an integrated transaction is likely to become more important in M&A.