This document comprehensively explains the legal and tax treatment when companies implement spin-offs, based on the revised guidelines for utilizing 'spin-offs' (Institutional Framework Edition) updated by the Ministry of Economy, Trade and Industry in July 2025.
A spin-off is a method by which a company separates and makes independent a specific business division or wholly-owned subsidiary within the company, with two types: divisive split and stock distribution. This revision reflects the review of stock book value calculation methods for spin-offs by companies subject to the group tax consolidation system in the FY2025 tax reform. This clarifies the treatment of investment book value adjustments when, for example, a company with a March fiscal year-end executes a spin-off in October.
Tax qualification requirements include non-control requirements, stock-only proportional distribution requirements, major asset transfer requirements, employee succession requirements (80% or more), business continuation requirements, and officer succession requirements. Meeting these requirements enables the deferral of capital gains taxation to shareholders and exemption from dividend taxation. Furthermore, revisions to the Tokyo Stock Exchange's securities listing regulations allow stocks of spun-off companies to be listed from the ex-rights date, promoting investor protection and encouraging the use of spin-offs.
The article explains that this guidebook provides detailed answers to practical questions regarding general inquiries, listing procedures, tax treatment, and accounting treatment in Q&A format, serving as a practical guide for companies to utilize spin-offs as a strategic business reorganization method.