Ministry of Finance Amends Real Estate Combined Income Tax Declaration Guidelines

The Ministry of Finance amended three key areas of the existing declaration guidelines. First, for determining whether a company's equity value is more than 50% composed of domestic real estate (triggering combined-tax treatment), the denominator can now use total asset fair-market value rather than net-value figures when supported by accountant-verified actual-price data. Second, the anti-avoidance rule's scope was narrowed: transactions in 'old equity' (acquired before July 1, 2021) attributable to pre-2016 real estate are now explicitly excluded from combined-tax treatment, with an illustrative example provided (Company A selling subsidiary shares with equity value derived entirely from old-system real estate). Third, the MOF consolidated existing interpretive rulings covering spouse-to-spouse gifts, successive inheritances, holding-period start dates, joint-development arrangements, and situations where developers cannot serve as building permit holders.

For affected taxpayers—individuals and businesses transacting in domestically-held real estate via share-dealing structures—this amendment creates clearer compliance pathways and retroactive relief for unassessed cases. Tax advisers should review existing share-dealing arrangements that may have been structured to avoid combined-tax treatment and assess eligibility for the grandfathering exclusion. The revised equity-value calculation may also reduce combined-tax exposure for companies with diversified asset portfolios.