Outline of Tax Reform Proposals for FY2023 Finalized


On December 16 last year, the outline of tax reform proposals for fiscal year (FY) 2023 was decided. In the area of individual income taxation, the NISA (Nippon (Japan) Individual Savings Account) system* will be expanded and made permanent.

The NISA System's Largess

The new NISA system is the centerpiece of the FY2023 tax reform proposals. it could be said that there were no other items of revision that had a major impact. Let’s examine the NISA system, which is scheduled to undergo major revisions.

The first major change is that there are no longer any restrictions on the NISA intervals. The current NISA system has two types, the "General NISA" and the “Tsumitate NISA (tax-advantaged savings investment account)," but the "General NISA" has been set to continue only until 2028, while the "Tsumitate NISA" type was set to continue until 2042.

In this regard, the new NISA has no fixed term, and is expected to be a permanent system that will be in place indefinitely.

Until now, the tax-free holding period for the "General NISA" was limited to five years, and once that period expired, investors had to either sell their holdings and redeem them, or else go through a renewal procedure called a "rollover".

Under the new NISA, however, the holding period has been extended indefinitely, so the benefits of tax exemption can be enjoyed without a time limit, with respect to dividends and gains obtained from sales.

Although each individual may have his or her own opinion regarding the pros and cons of cutting losses, the new system would allow for stocks, etc., with unrealized losses to be held until they possibly result in unrealized gains - without any procedures needed in the meantime.

Annual Investment Caps Also to be Increased

Until now, the maximum investment amount for the "General NISA" was 1.2 million yen per year for up to 5 years (maximum: 5 years x 1.2 million yen/year = 6 million yen), while the maximum investment amount for the "Tsumitate NISA" was 400,000 yen a year for up to 20 years (maximum: 20 years x 400,000 yen/year = 8 million yen).

The caps will be raised to 2.4 million yen per year for the General NISA (which will be renamed the "Growth Investment Type" in the new NISA system), and 1.2 million yen per year for the Tsumitate NISA (which is to be renamed the "Tsumitate Investment Type").

The new NISA structure has no limits on the intervals during which investments can be made, though maximum lifetime investment amounts have been set. Specifically, the maximum investment amount is 18 million yen for the "Tsumitate Investment Type”, and 12 million yen for the "Growth Investment Type”. The maximum total for both together is 18 million yen.

An Important Point to Keep in Mind Regarding NISA

With both the existing NISA and the new NISA, there is a point that must be noted when investing through NISA. It relates to the incurring of losses.

Although NISA provides tax exemption for dividends and gains from the sale of stocks(and other securities, it does not provide any allowance for losses on sales of stocks. Under normal circumstances, a loss on a sale of stock, etc., can be offset against gains from the sales of other stocks, etc., but this is not possible in a NISA account.

In other words, NISA naturally has disadvantages as well as advantages. Please take this into consideration when making use of the NISA system.

Expansion of the System for Tax Settlement at the Time of Inheritance


In the FY2023 tax reform, along with the NISA system, the taxation of inheritances and gifts, including the expansion of the system for settlement of taxes at the time of inheritance, are expected to be revised. A tentative plan for the integration of inheritance taxes and gift taxes has been proposed. Let's take a look at the details.

Overview of the Outline of Revisions

The interval during which wealthy individuals have repeatedly made calendar-year gifts to avoid the burden of inheritance tax has been the target of criticism, and so the period during which such gifts become effectively invalid during one's lifetime will be extended from the current three years prior to death, to seven years.

On the other hand, the system of tax settlement at the time of inheritance, which had a bad reputation for being difficult to use, will be improved.

The extension of the period for inclusion (addition) of gifts made during one's lifetime in an inheritance, and the improvement/expansion of the system for tax settlement at the time of inheritance are likely to be the two key points of the 2023 tax reforms regarding inheritance and gift taxes.

Extension of the Period during which Gifts Made While Alive Are Added to Inheritances

Until now, in order to contain tax-avoidance measures intended to reduce inheritance taxes by rushing to make gifts before inheritances, etc., took place, there has been a rule regarding the addition of gifts before death, under which if a person who acquired property by inheritance, etc., acquired the property from the decedent through annually-levied gifts within three years before the start of inheritance, the gifted property is added to the inherited property. The rule was called the "addition of gifts made during one's lifetime”.

This means that gifts made in the three years prior to the start of an inheritance have been treated as if they had never been made.

The period during which ‘gifts while alive’ are added to the inheritance total will be extended to seven years from January 2024 onward. So the ’living gifts inclusion’ period will be extended from the current three years to seven years prior to the start of inheritance. Please note, however, that not all such gifts will have their inclusion period lengthened to seven years.

As before, gifts made within the three-year period prior to the start of inheritance are subject to being added; however, gifts made within four to seven years prior to inheritance are subject to the addition for gifts made during one's lifetime after deducting ¥1 million from the total amount of such gifts.

Expansion of the System for Tax Settlement at the Time of Inheritance

The system of tax settlement at the time of inheritance levies a flat 20% gift tax on the total amount of the gifted property after the special deduction of ¥25 million is deducted from the total amount of the gift. The difference between this system and the calendar-year gifting process described above is that the full amount of a gift made under the system for tax settlement at the time of inheritance is subject to inheritance tax.

In addition, once a person chooses the "Tax Settlement at the Time of Inheritance" taxation method, he or she can no longer apply the calendar year taxation method, and cannot take any tax-saving measures by making gifts during his or her lifetime. Because of this difficulty in usage, the tax settlement system has not been widely utilized.

However, according to the recent tax reform outline, even if the taxpayer has opted for tax settlement at the time of inheritance, it is expected that the rules will be changed to allow a separate type of tax exemption of up to 1.1 million yen per year, and no final tax return will be required. Furthermore, the amount of the tax exemption (up to 1.1 million yen) will not be subject to inheritance tax.

In other words, from January 2024, it will seemingly be possible to use the tax exemption to make gifts even if the taxpayer chooses the “tax settlement at the time of inheritance” method.

While gifts made within seven years prior to the start of inheritance are subject to inheritance tax if made through calendar-year gifts, it is quite possible that choosing taxation at the time of inheritance may be more advantageous. This is because by the latter method, gifts made within seven years prior to the start of inheritance are exempt from the seven-year period of addition of ‘gifts while alive’.

How to Choose a Main Bank


Are you opening an account or applying for a loan at a megabank just because it ‘seems cool’? Based on the size of your company, you need to think about the financial institution(s) you are going to deal with. Selecting a main bank which is appropriate for your company's stage of development will enable better financing options.

What is a Main Bank?

One of the terms that often comes up when a company gets a loan from a bank is "main bank”. A main bank can be thought of as the bank that is most frequently used in a company's bank dealings.

In other words, if a company takes out loans, the bank that is used most frequently for borrowing is its main bank, with which the company inevitably has the largest loan balance. Also, most of the deposits from its customers also go into a deposit account at the main bank.

A main bank is not something that a company can designate, and if the bank does not provide loans, it cannot become a main bank. On the other hand, a bank that is actively providing loans will naturally become a main bank as the loan balance with it increases.

Even if a company has a large loan balance with a certain bank, the bank may not be the company’s main bank if it only provides guaranteed loans (i.e., no proprietary loans), or if it does not provide flexible support through bridge loans (stop-gap funds), seasonal funds, etc.

However, just because a bank is a company’s main bank does not mean that it will always provide financing. If the company is constantly losing money and it doesn’t submit a business improvement plan, there are limits to the amount of financing the bank can provide.

If you do not take advantage of your main bank, but instead promptly come up with a business improvement plan if your company’s performance worsens, and then share the plan and demonstrate that you will implement it, most main banks should still be willing to support you.

Main Banks according to Company Size

If loans are available from multiple banks, the business manager can choose which bank to utilize as the company’s main bank.

First, the main bank should be one that has a branch near the company. This is because the borrower/client will often be going to their main bank, and if it is located far away, the client would tend to become estranged from it.

Considering the size of your company, you should view a shinkin bank (credit association) or credit union as your main bank while your annual sales are less than 100 million yen. As sales expand (until annual revenues reach 1 billion yen), shinkin banks, credit unions, and regional banks ought to be considered as one’s main banks; ‘megabanks’ should probably be considered as main banks only after a company’s annual sales exceed 1 billion yen.

Since it is unlikely that a company with annual sales of less than 1 billion yen would be able to obtain a ‘proper’ (direct) loan from a megabank, a regional bank or a shinkin bank or credit union that can offer loans directly would be appropriate as the ‘main bank’ for such a company.


Changing main banks during a company’s growth phase is often a good idea. However, since it is difficult to make changes when a company faces a business crisis, it is necessary to pay attention to the management policies of the main bank, proactively disclose the company's business situation, and maintain a relationship of trust with the contact person at the bank.

  • Russell Bedford

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