Corporate reorganizations and related transactions in Japan: Tax accounting and legal issues.

The last few years have seen the introduction of an increasing volume of tax law related to Japanese corporate re-organizations (in Japanese ‘soshiki saihen sei’), vastly extending the range of transactions that may qualify for tax deferral or other tax benefits.

These rules, together with the rules relating to Japanese group taxation such as the scheme allowing deferral of tax on intra-group transfers, have introduced welcome flexibility to structuring transactions in a manner that can defer taxation or avoid adverse or uneconomic tax effects.


Transactions impacted by these rules include mergers, triangular mergers, corporate splits, business transfers, incorporations and tax preferred distributions and other types of reorganization. The Japanese Corporate Law has also been revised to accommodate many of these transactions and the Japanese IFRS convergence process is also helping clarify their accounting treatment.


This section collates tax, legal and accounting articles and resources directly related to corporate reorganizations.

Other sections on this site relating withholding taxes, or to thin capitalization and shareholder distributions may also be useful in planning financing or other aspects of the transaction.

Cross border aspects

The site will expand to include articles on international aspects of cross border re-organisations, for example looking at their inbound and outbound treatment for US-Japan and Japan-China, Japan-Singapore and other transactions.


Diagrams and flowcharts explaining corporate reorganizations and related transactions.

Types of reorganization

These diagrams and flowcharts outline some basic corporate reorganisations such as mergers, illustrate different types of merger recognised for tax purposes and flow charts show how criteria are applied to qualify the transaction for tax purposes or to understand how it may be treated for Japanese GAAP purposes.

Legal aspects

Shareholder and creditor protection, legal process of merger or other reorganizations, rights to debt and equity created or extinguished in the transaction.

Corporate law

This article provides an introduction to legal aspects of a Japanese merger such as timing, terms of the merger contract, procedures for creditor protection and similar.

Steps in a merger

This article considers the timing and nature of the legal steps required in a typical merger transaction.


Diagrammatic representation of issues arising in Japanese corporate reorganizations

Click on the diagram below to see an overview of tax, accounting and legal issues arising in Japanese corporate reorganisations. This diagram includes links to further information on this topic and will be updated from time to time as further articles are written.

The diagram can be printed out from the external site on A4, A3 and other sizes.


Key issues in the Japanese taxation of corporate reorganizations include the application of criteria for deferral of tax, recognition of intangible assets in the transaction including goodwill and the financing of the transaction.


The article here outlines the Japanese taxation of merger transactions and diagrams out criteria for tax qualification. Similar criteria for tax deferral are applied to other forms of corporate reorganization.

Financing issues

The sections on shareholder distributions, thin capitalisation and withholding taxes are relevant to decisions on how cost effectively finance a TOB or other corporate reorganization from a Japanese tax perspective.

Guidance, controversy

Tax authority guidance on corporate reorganisations, important legal and tax precedent or controversy in the area.


Existing articles on the site address cases on the consideration paid in a post TOB minority squeeze out, how impairment losses on purchased shares are dealt with post acquisition and reporting tax controversy around merger qualification.


Key areas of overlap between tax and accounting issues in corporate reorganisations include whether entities involved in the transaction are part of a consolidated group, the valuation of assets for tax and accounting purposes and alternatives to purchase accounting under Japanese GAAP.

Enterprise combination

This article and the related flowchart addresses how to identify the purchaser when applying purchase accounting under Japanese GAAP and an exception to the application of purchase accounting for certain “enterprise combination” transactions.

Intangible assets

Intangible assets including goodwill and separable intangibles such as marketing rights are often a key driver in a corporate reorganisation.