Panel calls for tax cuts for companies’ spinoffs

The Tax Commission, an advisory body to the prime minister, agreed Friday that a measure should be implemented to reduce the tax burden accompanying corporate spinoffs, tax panel officials said Friday.

The measure will be included in the commission’s recommendation for medium-term tax reforms to be mapped out in July, they said.

The move is in response to the planned revision of the Commercial Code, which would make it easier for companies to split off parts of their operations. The enactment of the revised legislation is expected by the end of the current Diet session.

Under the revised law, companies would be allowed to spin off parts of their operations, with board approval, and give shareholders opposed to the splits the right to have the companies buy back their shares.

The revisions are also designed to enable companies to jettison unprofitable divisions without time-consuming procedures. The changes are intended to facilitate much-needed restructuring of companies, thereby uplifting the overall competitiveness of the nation’s economy. Concerns have been voiced, however, that huge tax burdens accompanying the transfer of assets may discourage companies from spinning off.

The tax panel plans to call for companies to be allowed to carry over profits on asset transfers for a certain period of time. The panel will study the details on conditions for applying such preferential tax measures, the officials said.