Japan's Minimum Tax and Exit Tax: The JPY 600 Million and 3 Billion Lines and Moving Abroad for Startup Founders

October 19, 2026

Taiga Sato

*This article is a general explanation based on information published as of May 2026. Actual tax outcomes depend on individual circumstances, so we recommend confirming with a certified tax accountant or an international tax specialist.

*Amounts and rules are as of May 2026. This article is an English version of our Japanese guide, adapted for foreign residents of Japan and international investors.

Contents

Why the minimum tax and moving abroad are in the spotlight together
What is Japan's minimum tax? The basics of the tougher income tax rules
From JPY 3 billion to JPY 600 million: key points of the stronger minimum tax
Why it matters to startup founders
The link with startup policy: higher taxes and incentives to reinvest
Can moving abroad avoid the minimum tax?
Watch out for the departure taxation system, the so-called exit tax
Practical points startup founders should consider
Is the stronger minimum tax a headwind for startups?
Exit strategy in the era of the JPY 600 million line
Checklist for anyone considering moving abroad
Summary: the stronger minimum tax is not solved simply by moving abroad
References

Why the minimum tax and moving abroad are in the spotlight together

Japan's income tax "minimum tax" is attracting a great deal of attention among startup founders, angel investors and business owners aiming for an IPO or M&A.

The minimum tax is a system that requires an additional payment from people with extremely high incomes when their ordinary income tax falls below a certain level.

In Japan, progressive tax rates have applied to employment income and business income, while financial income such as capital gains and dividends on listed shares has been taxed separately at relatively low rates.

As a result, the effective tax rate can start to fall once income exceeds about JPY 100 million, a phenomenon known as the "JPY 100 million wall".

The minimum tax was introduced to address this problem.

Its official name translates as "measures to ensure an appropriate burden on extremely high levels of income".

As the name suggests, it is a mechanism to secure a minimum income tax burden from people with very high incomes.

Originally, the minimum tax was seen as mainly targeting the ultra-wealthy with incomes of roughly JPY 3 billion or more.

However, under the FY2026 tax reform, the system will be strengthened from income tax for 2027 onward, and the income level at which an additional burden typically arises is expected to drop to roughly JPY 600 million or more.
This change is making it a realistic issue for startup founders and investors as well.

Alongside the heavier tax burden, "moving abroad" has become part of the conversation.
By moving to countries and regions such as Singapore, Dubai or Hong Kong, where capital gains are taxed more lightly than in Japan, could tax on share sale profits be reduced?
It is natural that more founders and investors are thinking this way.

However, moving abroad is not as simple as "leave Japan and you won't be taxed". Many issues need to be sorted out, including the departure taxation system (exit tax), tax residency, tax treaties, the tax system of the destination country and the reality of how the business is run.

What is Japan's minimum tax? The basics of the tougher income tax rules

A system requiring a minimum income tax burden from high earners

Under the minimum tax, if your ordinary income tax is less than an amount calculated in a specified way, you pay the difference as an additional tax.

It is not a uniform tax increase on all high earners. It mainly targets people whose income tax burden relative to their total income is low, for example because a large share of their income is financial income.

For example, progressive rates hit hard for someone earning a high income from salary alone.
On the other hand, someone earning a huge income mainly from capital gains on shares is often taxed separately at a combined rate of about 20% (income tax, special reconstruction income tax and local inhabitant tax).

As a result, even for the same income of several hundred million yen, there can be a large gap in the effective tax rate between someone whose income is mainly salary and someone whose income is mainly capital gains on shares.
The minimum tax is designed to even out this gap.

The "JPY 100 million wall" and the taxation of financial income

Japan's income tax is based on progressive taxation, with higher rates as income rises.
However, separate taxation is widely used for financial income.
While this is reasonable to some extent as a way to encourage investment, the share of financial income tends to be higher the wealthier the taxpayer.

As a result, once income exceeds about JPY 100 million, the share of financial income in total income rises and the effective tax rate can fall. This is the "JPY 100 million wall".

The minimum tax is positioned as a response to this "JPY 100 million wall".
Rather than making all financial income subject to progressive rates, it is designed to require a minimum income tax burden only from people with extremely high incomes.

From JPY 3 billion to JPY 600 million: key points of the stronger minimum tax

Under the current system, income of roughly JPY 3 billion or more is the benchmark

Under the current minimum tax, introduced for income tax from 2025 onward, JPY 330 million is deducted from the "standard income amount" and the remainder is multiplied by 22.5%. That amount is compared with the ordinary "standard income tax amount".
If the ordinary income tax is lower than this calculated amount, the difference must be paid as additional tax.

However, the formula in the rules and the income level at which an additional burden actually tends to arise are not the same. Government materials have explained that the current system covers incomes of roughly JPY 3 billion or more, affecting around 200 people.

For this reason, when it was introduced, the minimum tax was generally seen as applying "only to the truly ultra-wealthy".
Even among startup founders, cases of annual income exceeding JPY 3 billion are limited.
The people affected were quite narrowly defined, such as founders realizing large gains through an IPO or a major M&A, or investors making large-scale share sales.

From 2027 onward, income of roughly JPY 600 million or more becomes the benchmark

The FY2026 tax reform includes a strengthening of the minimum tax.
Specifically, the special deduction is to be reduced from JPY 330 million to JPY 165 million, and the applicable rate raised from 22.5% to 30%.

With this revision, the income level at which an additional burden typically arises is expected to widen from roughly JPY 3 billion or more to roughly JPY 600 million or more. The number of people affected is also explained as increasing from about 200 to about 2,000.

The important point is that JPY 600 million is not a simple legal threshold above which additional tax is always charged.
Whether an additional burden actually arises depends on the types of income, the ordinary income tax amount, the share of financial income, and the treatment of deductions and tax-exempt income.

Even so, the practical impact is significant. In the era of the JPY 3 billion line, it was "a matter for a tiny group of the ultra-wealthy"; with the JPY 600 million line, it becomes a system that can easily reach successful startup founders.

Why it matters to startup founders

IPOs, M&A and share sales create temporarily high incomes

The income structure of startup founders is very different from that of ordinary salaried workers. In the early stages, many founders keep their executive compensation low and put the money into growing the company. In some cases, they build the business for years without drawing an adequate salary.

However, when an IPO or M&A is achieved, large gains on the sale of founder shares can arise all at once. Examples include selling part of one's shares after listing, selling one's shareholding in an M&A, or cashing out part of one's stake in a secondary transaction.

In other words, rather than earning a high income steadily every year, a startup founder may have income of several hundred million to several billion yen in a single year. The minimum tax is relevant precisely to such cases of "high income in one particular year".

In particular, when most of the income is capital gains on shares, the ordinary income tax burden tends to be relatively low, so the additional tax may apply. The JPY 600 million line from 2027 onward is by no means a distant figure for startup founders who go through an IPO or M&A.

Stock options and founder shares are also affected

At startups, not only founders but also directors and early members may hold stock options. Depending on how they are structured (tax-qualified stock options, non-qualified stock options, paid-in stock options, etc.), the timing of taxation and the category of income differ.

Not every stock option leads directly to the minimum tax. However, if profits from share sales after an IPO or from an M&A are large, they may be affected by the tougher income tax rules.

If a founder keeps a large shareholding while the company's value grows and then sells part of the shares at exit, income exceeding JPY 600 million is entirely possible. A system that seemed remote under the former JPY 3 billion line has, with the JPY 600 million line, become an issue that should be built into exit strategy.

The link with startup policy: higher taxes and incentives to reinvest

Taxing success while still encouraging reinvestment

Looking only at the stronger minimum tax, some may feel it is "a headwind for startups". Founders and investors take big risks in building businesses and investing. If taxes on the returns from success rise, there is a concern that the appetite for entrepreneurship and investment may decline.

On the other hand, looking at the tax system as a whole, the government is not simply trying to cool startup investment. Income covered by the tax exemption for reinvestment in startups and tax-exempt income under NISA are treated as outside the scope of the minimum tax.

This is intended to avoid stopping the flow of money earned through success being reinvested in the next growth companies. The idea is to require a minimum income tax burden from those who simply earn huge financial income, while keeping certain incentives where the money is recycled into startups as risk capital.

Not "taxing success" but "how to build a cycle of capital"

What matters for startup founders is not to view the minimum tax as a mere penalty. Of course, the heavier tax burden itself cannot be ignored. It affects wealth building after an M&A or IPO, capacity to reinvest, and family financial planning.

However, the aim of the system is not "to punish the successful" but "to require a certain burden from high earners whose income is skewed towards financial income". And since consideration for reinvestment remains, founders and investors need to plan how they will use their funds after the exit as well.

Will you cash out and hold the money as personal assets? Invest in your next startup? Supply risk capital through a fund? Or review where you base your life and business, including moving abroad or using an overseas company?

In startup tax planning after the stronger minimum tax, "post-exit capital strategy" becomes more important than simply "selling and being done with it".

Can moving abroad avoid the minimum tax?

Why tax savings through moving abroad attract attention

As the minimum tax is strengthened, interest in moving abroad also grows.
Among startup founders and investors in particular, Singapore, Dubai and Hong Kong are popular topics as destinations. In these countries and regions, capital gains may be taxed more lightly than in Japan, or the tax system may be built on a different approach.

Some people therefore think that by moving abroad before selling their shares, they can avoid Japanese income tax and the minimum tax.
Indeed, for people who run businesses globally, choosing where to live is part of both business strategy and lifestyle.

However, tax savings through moving abroad cannot be achieved by simply relocating.
For tax purposes, several issues must be cleared, including residency status, the departure taxation system (exit tax), tax treaties and the tax system of the destination country.

Removing your resident registration alone does not make you a non-resident

The first thing to understand is how Japanese tax residency is determined. Whether you are a resident or non-resident for tax purposes is not decided simply by whether you have deregistered your address in Japan (resident record).

It is judged comprehensively, taking into account where the base of your life is, where your family lives, where your work is centered, where you manage your assets, how many days you stay, and so on.

For example, even if you yourself stay abroad, you may be considered a resident of Japan if your family, your home, your main business activities and the place where management decisions are made remain in Japan.

For startup founders, where the company's substantive management decisions are made can also become an issue. Even if you are abroad, if the company's core decision-making, fundraising, board meetings and work with key team members are concentrated in Japan, explaining your position for tax purposes will not be easy.

When considering moving abroad, the question is not simply moving your address, but how you actually move the substance of your life and business.

Watch out for the departure taxation system, the so-called exit tax

Caution if you hold securities worth JPY 100 million or more

One of the biggest issues when considering tax savings through moving abroad is the departure taxation system (taxation upon emigration), commonly called the "exit tax".

Under the exit tax, when certain residents of Japan leave the country while holding securities and similar assets worth JPY 100 million or more, those assets are treated as if they had been sold, and the unrealized gains are taxed even though nothing has actually been sold. It is not limited to Japanese nationals: foreign residents of Japan can also be subject to it if they meet the residence-period and asset conditions.

What matters for startup founders is that unlisted shares can also be an issue.
Even if you have not yet sold any shares, if the company's valuation has risen and you hold a large number of shares, tax on unrealized gains becomes an issue at the time you move abroad.

In other words, the idea that "if I move abroad before selling, I can avoid Japanese tax" does not easily work because of the exit tax.

The risk of being taxed without having cashed out

The difficulty of the exit tax is that unrealized gains that have not been turned into cash may be taxed. The more the business grows, the higher the value of the unlisted shares a founder holds. But if the shares have not been sold, there is no cash in hand.

Even so, if you are deemed to have unrealized gains when you move abroad, a tax liability may arise first. Procedures such as a tax payment deferral may be available, but the practical burden, including providing collateral and filing notifications, is not light.

In particular, if you consider moving abroad just before an IPO or M&A, the value of your shares may have risen sharply. Moving at that point requires very careful tax analysis.

Practical points startup founders should consider

Plan several years ahead, not just before the exit

If you are thinking about the minimum tax and moving abroad, rushing to act just before the exit is risky. Even if you start considering a move once an IPO or M&A is in sight, the value of your shares may already be high.

You need to look at everything together: the exit tax, tax residency, the timing of share transfers, the exercise of stock options, executive compensation, dividend policy and more.

In particular, if gains from selling founder shares may exceed JPY 600 million, you should consult a certified tax accountant or international tax specialist at an early stage, assuming the stronger minimum tax from 2027 onward.

Tax is not something you optimize after a transaction. It should be considered together with deal structure, place of residence, capital policy and contract terms.

Don't decide to move abroad based on tax alone

Moving abroad involves factors beyond tax: family life, children's education, healthcare, visas, bank accounts, the investment environment, running the company, relationships with investors, responsibilities as a director, and future inheritance and gifts.

Also, even if you move abroad, if you continue to run a Japanese company, your ties with Japan are not completely cut. Other issues arise, such as the company's own taxation, your executive compensation, withholding tax and the application of tax treaties.

Choosing a destination based only on tax rates can bring large costs in terms of daily life and business. For startup founders, moving abroad is less a tax-saving measure than a business decision about where to base their life and business.

Is the stronger minimum tax a headwind for startups?

Concerns about weaker incentives for entrepreneurs

Naturally, there are concerns about strengthening the minimum tax. Startup founders take big risks to launch a business. If they fail, they may lose both time and money. It is precisely because the returns from success are large that people are willing to take those risks.

Some argue that heavier taxes on those returns may weaken incentives for entrepreneurs and investors. Especially as Japan has made fostering startups a national strategy, a system that drives successful founders overseas could, in the long run, be negative for the Japanese economy.

On the other hand, tax fairness cannot be ignored

On the other hand, it is becoming difficult to leave in place a structure in which the effective tax rate falls the more financial income an ultra-high earner has. A situation where salaried workers and small business owners bear high taxes under progressive rates while people with huge capital gains on shares pay a low effective rate is easily criticized from the standpoint of tax fairness.

The minimum tax does not overhaul the taxation of financial income as a whole; it requires a minimum burden only from those with extremely high incomes.

The question, therefore, is not "whether tougher taxation is good or bad in itself" but at what level, on which income and to what extent it is reasonable to require a burden. Not hindering startup growth, recycling the proceeds of success into the next investments, and securing tax fairness: this balance will become increasingly important.

Exit strategy in the era of the JPY 600 million line

Founders and investors should think in terms of "after-tax cash"

From 2027 onward, with the stronger minimum tax, startup founders and investors will need to estimate their "after-tax cash" at exit more carefully.

When selling shares in an M&A, even if the headline sale price is large, the amount you actually keep can change considerably once you take into account income tax, local inhabitant tax, the minimum tax and, in some cases, taxes arising from moving abroad.

In particular, the timing of income depends on whether you sell your shares over several years or all at once. The timing of stock option exercises and share sales also matters.

The best answer for tax purposes is not always the same as the best answer for the business. That is why capital policy, contract negotiation and tax planning must be considered together rather than separately.

Reinvest, move abroad, or plan within Japan

After the minimum tax is strengthened, the options broadly fall into three groups.

The first is to stay in Japan and plan your taxes on the assumption that the system applies. This involves considering the timing of share sales, spreading income, using an asset management company, your reinvestment policy and so on.

The second is to actively use reinvestment in startups. If the investment qualifies for certain tax exemptions, you can limit the impact of the minimum tax while channeling money into the next growth companies.

The third is international planning, including moving abroad. However, this requires sophisticated analysis including the exit tax and tax residency, and should not be treated as a simple tax-saving measure.

Which option is best depends on the founder's assets, the company's stage of growth, family situation and future business plans.

Checklist for anyone considering moving abroad

When considering moving abroad and the minimum tax at the same time, you need to check at least the following points.

Whether your actual situation means you are a non-resident for Japanese tax purposes
Whether you hold securities and similar assets subject to the exit tax
How to determine the value of, and unrealized gains on, unlisted shares
How to plan the timing of share sales and of your move
How capital gains and income are taxed in your destination country
How your executive compensation from, and involvement in managing, a Japanese company will be viewed for tax purposes
Whether there is any impact on inheritance tax, gift tax and wealth succession
Whether practical arrangements for daily life are in place: family, education, healthcare, visas, financial accounts and so on

Moving abroad is not something to decide by looking at tax in isolation. For startup founders in particular, the company's growth, relationships with investors, where management decisions are made and the future exit strategy are closely intertwined. A move made to reduce taxes may end up harming business operations or fundraising.

Summary: the stronger minimum tax is not solved simply by moving abroad

With the strengthening of the minimum tax, Japan's income taxation is set to change significantly. A system that previously centered on the ultra-wealthy with incomes of roughly JPY 3 billion or more is expected to extend, from 2027 onward, to people with incomes of roughly JPY 600 million or more.

This change makes it a realistic issue for startup founders and investors who earn large one-off capital gains on shares through an IPO or M&A.

At the same time, moving abroad is not a cure-all. Japan has an exit tax, and when a person holding securities and similar assets worth JPY 100 million or more moves abroad, tax on unrealized gains may become an issue. Furthermore, tax residency is judged on substance, not form.

What matters is not to act haphazardly out of fear of the minimum tax, but to prepare early, covering your exit strategy, reinvestment, place of residence, capital policy and your family's life plans.

A startup's success is not decided only at the moment the shares are sold. We are now in an era in which a founder's strategy is tested on how the money is used afterwards, where they live, and how they connect it to the next stage of growth.

Minimum tax, startups, tougher income taxation, JPY 600 million, JPY 3 billion, moving abroad: for entrepreneurs, these will no longer be mere tax terms but themes directly tied to life planning and business strategy.