The Japanese government is moving to provide significant tax incentives for companies that divest unprofitable businesses and invest in high-growth areas. The aim is to reduce the tax burden associated with business sales, thereby encouraging corporate restructuring and investment in new growth sectors.
According to a report by Yonhap News on August 25, the Yomiuri Shimbun and other outlets have confirmed that the Ministry of Economy, Trade and Industry has finalized plans to introduce a new "Business Structure Transition and Enhancement Promotion Tax System" in the upcoming tax reform for the next fiscal year.
Currently, companies in Japan face a corporate tax rate of approximately 30% on profits generated from business sales. The government is considering deferring taxes on profits from these sales, allowing companies to acquire and invest in new businesses without the immediate tax burden.
The initiative comes as many companies with unprofitable operations hesitate to divest due to concerns over tax liabilities, which has delayed industrial restructuring and the development of growth sectors.
According to the Ministry of Economy, Trade and Industry, the net profits of listed companies in Japan have more than doubled from 2013 to 2024. However, during the same period, the proportion of capital investment and research and development (R&D) spending has seen little change, as shareholder returns have taken precedence.
Under the new system, companies will be able to defer tax payments on profits from the sale of existing businesses, using those funds to acquire new ventures. If they retain the acquired business, they will not face immediate taxation; however, if they sell it again, they will be required to pay the deferred taxes retroactively.
There will be no specific restrictions on the size or industry of eligible companies. However, to qualify for the tax incentives, companies will need to commit to a certain level of actual investment in the acquired business.
The Yomiuri Shimbun predicts that if this system effectively promotes corporate transitions and investments in new growth areas, it could also have positive implications for economic security. By encouraging companies to restructure and invest in core technologies domestically, it may help prevent the outflow of key technologies abroad.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.