Japan National Tax Agency reviews unlisted stock valuation rules

The Japanese National Tax Agency has established an expert panel to review the valuation methods for unlisted stocks, aiming to address long-standing issues regarding tax avoidance and valuation accuracy. The current system, which includes the “comparative industry method,” has faced criticism for allowing schemes that artificially compress stock values for inheritance and gift tax purposes.

Discussions at the expert meetings highlight a tension between ensuring tax fairness and supporting smooth business succession for small and medium-sized enterprises (SMEs). While some experts suggest that current methods may undervalue companies by failing to account for modern intangible assets, others warn that increasing valuations could force owners to sell business assets to cover rising tax burdens.

One proposed approach, inspired by the German model, suggests separating the strict valuation of corporate assets from policy-driven tax incentives. This would involve conducting accurate valuations while providing separate tax relief for business succession, rather than using undervalued stock prices as a primary tool for support.