10 steps to reduce inheritance (estate) tax for business owners

There are many options you can take to reduce your inheritance tax. Here are basic steps to reduce the tax. Inheritance tax offers many tax deductions or discount under certain situations. But as a basic, the fundamental aspects should be addressed first.


1) Estimate your inheritance and see how the tax will be reduced if certain conditions are met. You need to know first what are there and how much they are for each items. Without knowing that, you will never know what options are available to reduce your tax. For example, if you take over parent’s (or parent in law) house and will live there with your resident address moved, you will get 80% discount on the valuation of its land.

2) Those tax benefits are only available if its split of the estate is agreed by the deadline of the tax filing (10 months). It is recommended to prepare an agreement in advance among heirs. For example, it is necessary to have an agreement of the split and actually live there by the deadline of the filing to take the above mentioned 80% discount on the land valuation.

Possible options to reduce tax

The below are real world feasible steps to reduce the tax. Some of them require to set up a co:

1) Buy life insurance by parents money. The money received from insurance is still to be counted as taxable base, you will get deduction of the taxable asset by 5 million yen times number of heirs. If the insurance money is 30 million yen, which should be close to the amount that was paid from the decedent money, you have already reduced taxable base by 20 million yen (presuming that the number of heirs is 4 for example).

2) Make gift to heirs every year. 1.1 million yen per year is tax free of gift tax by each person. This will reduce your taxable assets steadily. If you have 4 heirs and have 10 years before die, you will save 44 million yen in tax base (1.1M * 4 persons * 10 years).

3) Create a company and pay salaries to heirs. Real work has to be done to justify the salaries and keep its records of work. If you are a business owner, majority of your estate should likely come from the valuation of your own company. This is to reduce the valuation of the shares.

4) Create companies under names of heirs and pay fees to them. Again, real work has to be provided.

5) Borrow money to buy properties. Valuation of properties are usually much lower than its real market price. If you borrow money of 100 million yen to buy a condominium in Tokyo, the market price of the condominium may be still around 100 million yen but the valuation for the inheritance tax will likely be 70 million yen. You already manage to have reduced the tax base by 30 million yen.

6) Pay rents in advance or pay for other expenses to harm the balance sheet of the company. Then make gift to heirs in form of shares.

7) Make gift in form of properties to spouse for residence. It is tax free up to 20 million yen. It is a special tax benefit designed to stimulate the economy.

8) Same concept as the above. Your parent can make gift for your children’s education by 15 million yen. You need to open a special bank account for this education purpose and all the withdrawal from the account will have to be reported.










1. 共同出資する場合に、キャッシュがなくても現金で出資した人と同等の位置に立てるのでこれはいいと思います。例えば、ソフトウェアの価値が5000万円くらいあるとして、現金で5000万円を出したい人がいた場合に、50%ずつ持分を有する会社を作ることができます。もしこのソフトウェアを1億円と評価すれば、持分を現金で出資した人より多い、2対1とすることも可能です。


2. 将来の減価償却費を多くとることができます。ソフトウェアは減価償却資産ですし、出資した時の金額がこのソフトウェアの簿価(コスト)になりますので、将来にわたって費用にできます。一億円で出資されたソフトウェアでしたら、5年で1億円の減価償却費をとることができます。実効税率が35%くらいとするなら3500万円の法人税が浮くわけです。すごい。。


1 まず、現物出資した時点で、個人でしたら譲渡所得がかかります。ソフトウェアは総合課税になりますので、株みたいな20%一律にはなりません。所得kに応じて累進課税になりますので、45%まで行く可能性があります。住民税を入れると55%までありうります。


2 会社を設立する時には、資本金に登録免許税がかかります。これは1000分の7と結構高いので要注意です。5000万円で評価した場合は、35万円になります。





昨日、BoseのSoundLink Miniを買いました。



Valuation of stocks in private company -1

roadpriceAppropriate valuation is necessary to avoid a future tax problem when you want to sell stock to your relatives or to a company that you own. Selling those stocks too cheap means that the buyer of the stocks will face possible issue of gift tax.

There are variety of Valuation methods like the net asset method, income approach such as discounted cash flow method (DCF), or market approach using price/earning ratio (PER) in the market. But your method is based on the tax law because there will be a wide range in pricing where you can choose the most preferable price for the transfer, and a tax problem is what you want to avoid.

I also need to add that there are a plenty of things that you can do to maneuver the valuation.

-Net Asset Method-
Each asset on its balance sheet is to be assessed separately. Land and building valuation can be very different from market value.

A land plot that is owned by a company whose share is subject to valuation is assessed by the valuations by the National Tax Agency to price by “(road price) “.

The price is presented like “2,940B” in a circce. The number represents the value in thousand yen by one square meter. The alphabet represents percentage of tenant right on land. “A” means 90%, “B” means 80%, and so on, as you can see in the map.

If the land is empty and there is no building on it, the land is assessed 100% of the road price. (It may be interesting for some that a land is more expensive for tax purposes if it does not have any building on it that generates income). If a plot has a building on it, which has tenants, it is assessed by subtracting the value of tenant right from the road price. The percentage of tenant right is “B”, which is 80%, in the example in the map in Minato-ku Tokyo, the unit price of the land with building on it is 20% of the road price.

Local tax office has its valuation for asset tax. They send tax bills every year. Valuation of the building/house is mentioned on the bill. If it is rented out, 30% is subtracted from the valuation.