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Japan: Corporate and Tax Quarterly Update

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In brief

On 10 December 2021, Japan announced its 2022 tax reform proposal, which contains a number of changes to the existing tax rules that may impact companies doing business in Japan, including changes that may provide some companies with a chance to reduce their Japanese tax burden, as well as changes that may result in potential pitfalls (eg, disallowance of certain incentives, etc.) for failure to comply with the new provisions.

Additionally, amendments were made to the Japanese Companies Act (JCA) in 2021 introducing a share delivery regime. This regime is now available as another M&A transaction regime under which a target corporation survives and an acquiring corporation delivers shares as consideration. The new share delivery regime can be used for partial acquisitions and does not require inspection by a person elected by the court. As such, it provides certain advantages over the previously existing methods for carrying out such transactions. In addition, the Japanese Corporate Tax Act (JCTA) was amended in 2021 to make it possible to structure transactions using the share delivery regime in a tax-free manner, thus providing potential tax benefits as well.

The following article provides a brief overview of the relevant 2022 tax reform proposal items that would likely have the largest impact on multinational companies doing business in Japan and outlines the recent legal changes related to the share delivery regime.

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Author

Ryutaro Oka has significant experience in the finance, trade, energy and manufacturing industries, where he has developed and maintained good client relationships. He regularly advises on complex international tax issues, working extensively with colleagues in the US, UK, Netherlands, China, Singapore and Thailand. Mr. Oka is a frequent speaker on international tax issues, having been invited to speak on international taxation and cross-border private equity investments at events sponsored by the Association of Taxation Analysis, among others. Prior to joining the Firm in 2006, Mr. Oka was a tax director at Deloitte Touche Tohmatsu's Tokyo office, where he advised on international tax issues. Mr. Oka is fluent in English.

Author

Safari Watanabe is a partner in the Firm's Corporate/M&A Practice Group in Tokyo. She has more than 10 years of experience practicing as a corporate transactional lawyer in Baker McKenzie’s San Francisco and Tokyo offices. Ms. Watanabe has extensive experience advising industry clients on corporate and transactional matters.

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