Accounting Ver15. “Business Succession & Inheritance Tax in Japan”
Jun 26, 2026
Thank you for reading.
In this article, I would like to discuss business succession and inheritance tax in Japan
—a topic that is often misunderstood by business owners outside the country.
■ Introduction
Business succession in Japan is fundamentally different from that in many other countries. One of the biggest reasons is Japan’s exceptionally high inheritance tax, which is difficult for many Asian business owners to comprehend.
Indonesia, Singapore, Hong Kong: 0% inheritance tax
Japan: up to 55%
This gap fundamentally changes how succession planning must be designed in Japan.
As a result, it is often said that “without proper inheritance tax planning, a company will not survive beyond the third generation.”
If succession planning fails, many companies are forced into M&A sell-offs or even closure.
Of course, going public is the ultimate solution, but for most companies, this is not a realistic option.
1. Business Succession in Japan Should Be Divided into “Management” and “Shares”
Business succession in Japan consists of two distinct components:
■ Succession of Management (Developing the Next Leader)
Strategic planning and decision-making
Understanding financials and KPIs
Organizational management
Building relationships with key customers and suppliers
This is fundamentally a people-development issue, typically requiring 3–5 years.
■ Succession of Shares (Inheritance Tax & Valuation)
Valuation of company shares
Inheritance and gift tax rules
Establishing a holding company
Corporate restructuring
This is a technical and numerical issue, and if the overall concept is clear, it can be designed in less than a year with the help of specialists.
However, the two processes move at different speeds, and there is always the risk that a successor may later prove unsuitable.
For these reasons, I do not recommend progressing both tracks simultaneously.
2. Beware of Inheritance Tax Strategies That “Weaken the Company”
Because Japan’s inheritance tax is so high, some tax accountants promote strategies that intentionally weaken the company to reduce share valuation.
■ Common Problematic Tactics
Pushing excessive life insurance policies
Forcing profit suppression and intentional losses
Reducing equity capital to the minimum
Selling unrelated products such as solar power investments under the name of “tax planning”
Many of these accountants also act as insurance or solar power brokers, seeking to profit from commissions rather than focusing on the company’s long-term health.
While reducing equity capital may lower the valuation for inheritance tax purposes, the consequences can be severe:
Weakened financial structure
Lower credit rating from banks
Inability to invest in equipment
Lost opportunities for business expansion
Ultimately, the company’s survival may be at risk, which defeats the purpose of succession planning.
3. A Real Case: What Happened in My Relative’s Company
A relative of mine experienced exactly this situation:
Their tax accountant pushed them to purchase excessive insurance
Profits were continuously suppressed, weakening the company
The owner (my uncle) suddenly passed away
The family, confused and anxious, approached me during the funeral
I analyzed the situation and partnered with a tax accountant who prioritizes business growth, then led a full restructuring.
■ What We Did
Eliminated unnecessary insurance policies
Rebuilt the company’s financial structure
Redesigned the succession plan
Terminated the contract with the previous tax accountant
Restored balance between management and tax planning
As a result, the company returned to a growth trajectory and achieved inheritance tax planning without weakening the business.
4. Proper Inheritance Tax Planning Should Strengthen the Company, Not Weaken It
The essence of inheritance tax planning is to protect the company, not to damage it.
■ The Right Approach Includes:
Strengthening management
Maintaining profitability
Understanding share valuation
Utilizing Japan’s business succession tax system
Considering a holding company structure when appropriate
In short, “Control inheritance tax while strengthening the company.” This is what true business succession should look like.
5. Another Case I Was Involved In
In a previous role at an owner-operated company, we also faced succession and inheritance tax challenges.
With the owner’s approval, I led the establishment of a fully functional holding company and built the following functions from scratch:
Finance
HR
IT
Marketing
New business development
■ This Achieved:
A shift away from owner-dependent management
A transition to group governance by an organization
Smooth succession to the next generation
Significant reduction of gift and inheritance tax by leveraging temporary performance declines during the Lehman Shock
■ Summary
Japan’s inheritance tax is exceptionally high by global standards
Business succession must separate “management succession” and “share succession”
Strategies that weaken the company are dangerous
The correct approach is to strengthen the company while transferring shares
Choosing the right tax accountant is critical
Economic downturns can present opportunities for succession planning
■ Contact
If you are considering business succession, inheritance tax planning, establishing a holding company, or developing future leaders, please feel free to reach out.
I would be glad to support you in reducing inheritance tax burdens while ensuring sustainable growth.
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