The world of tax saving has a "graveyard." Schemes that the wealthy and companies once flocked to use, that magazines ran features on and that filled seminar halls, were buried one after another by tax reforms and Supreme Court rulings. Mass adoption of adopted children, aircraft leasing, the Takefuji case in which ¥133 billion was returned, consumption-tax refunds via vending machines, the era when social insurance premiums were 1% if you paid by bonus, Furusato Nozei with Amazon gift cards, and tower-apartment tax saving. Looking back over roughly 40 years of the "rise and fall" of taxes and social insurance premiums in a timeline, the essence and future of tax saving come clearly into view.
① A scheme that becomes popular is always closed off. In recent years the lifespan from spreading through magazines and seminars to being reformed has grown ever shorter (a few years).
② In principle, closures apply "going forward" (no retroactivity). But as with the tower-apartment case, there is always a risk of being retroactively denied under a general provision of current law (such as General Rule 6).
③ Even in the one-of-a-kind taxpayer victory, the Takefuji case (¥133 billion plus roughly ¥40 billion in refund interest), the law was reformed after the judgment and the path was blocked. An individual can win, but you cannot beat the system.
Timeline of vanished schemes
| Heyday | Scheme | Cause of death (closure) |
|---|---|---|
| Through 1988 | Mass adoption of adopted children (inflating the inheritance-tax basic exemption) | 1988 (Showa 63) reform: adopted children counted are limited to 1 if there is a biological child, 2 if not |
| Through 2003 | Bonus shift (holding down monthly pay and paying via bonus to escape social insurance premiums) | April 2003 (Heisei 15) total-remuneration system: premiums at the same rate as monthly pay apply to bonuses too |
| 1980s–2000s | Aircraft/ship leveraged leasing / movie film leasing | FY2005 reform: restriction on absorbing partnership losses (film was also denied in precedent) |
| Late 1990s | Overseas-residence gifting (Takefuji type) | The judgment was a taxpayer victory, but reforms tightened the residence requirement (now the 10-year rule) |
| 2000s | Vending-machine scheme (consumption-tax refund on rental buildings) | FY2010 reform → the modified version was also completely ended by the FY2020 reform |
| Through 2017 | Abuse of the "child without a home" special provision (80% reduction for small-scale residential land) | FY2018 reform: closed off disguises such as selling one's own home to a relative |
| Through 2018 | "Permanent avoidance" of inheritance tax via a general incorporated association | FY2018 reform: inheritance tax levied on family-controlled general incorporated associations |
| 2017–2019 | The Furusato Nozei gift-card war (Amazon gift-card rebates) | June 2019 designation system: return gifts legally capped at 30% or less and limited to local products |
| Through 2019 | Full-loss, high-surrender-rate corporate insurance | 2019 Valentine's Day shock (circular revision). The name-change plan was also closed off in 2021 |
| Through 2020 | Overseas used real estate (4-year depreciation of U.S. wood-frame buildings) | FY2020 reform: restriction on loss offsetting |
| Through 2022 | Immediate depreciation of drones, scaffolding, and LED rentals | FY2022 reform: assets for lending excluded |
| Through 2023 | Immediate depreciation of coin laundries and mining | FY2023 reform: excluded from the management-strengthening tax system |
| Through 2023 | Last-minute gifting (calendar-year gifts just before inheritance) | FY2023 reform: the add-back extended from 3 years to 7 years (phased application from 2024) |
| Through 2023 | Tower-apartment tax saving (gap between assessed value and market price) | The Supreme Court, April 19, 2022 denied it under General Rule 6 → a new assessment rule from 2024 (at least 60% of the market price) |
Chronicle ①: Mass adoption of adopted children (died 1988 / Showa 63)
How it worked: Because the inheritance-tax basic exemption and non-taxable allowances increase with the "number of statutory heirs," a Showa-era staple was to adopt many grandchildren or relatives to inflate the deductions. Adoptions of 10 or more children are said to have actually existed.
Cause of death: The December 1988 reform limited the adopted children that can be counted in the tax calculation to "1 if there is a biological child, 2 if not." This is still the rule today (there is also the 20% surcharge for grandchild adoptees). It is a classic of regulation whose traces still remain in how the basic exemption works.
Chronicle ②: The Takefuji case — the man who beat the system, and the road that was sealed (effectively dead)
How it worked: At the time, if a resident overseas received a gift of "foreign-located assets," no Japanese gift tax applied. The founder of a major consumer-finance firm posted his eldest son to Hong Kong and gifted him about ¥165 billion worth of shares in a Dutch company (foreign-located assets). The tax authorities argued the son's domicile was "effectively in Japan" and assessed roughly ¥133 billion in additional tax.
Outcome: The Supreme Court (February 18, 2011) held that "domicile means the objective base of one's life," and from the reality of the Hong Kong stay, the taxpayer won on reversal. The state had to return the roughly ¥133 billion in principal tax plus about ¥40 billion in refund interest — one of the largest "state defeats" in tax history[case commentary].
Afterward: But the law was reformed at once, and successive tightenings of the residence requirement for escaping tax on overseas gifts mean that today both the donor and the recipient must have resided overseas for more than 10 years (see a comparison of inheritance taxes around the world). It is a case that embodies "an individual can win in court, but a scheme is always killed by legislation."
Chronicle ③: The vending-machine scheme — the cat-and-mouse game of consumption-tax refunds (completely dead in 2020 / Reiwa 2)
How it worked: Because rent on a rental apartment is tax-exempt sales, the consumption tax on construction costs is not normally refunded. So a loophole became hugely popular: right after completion, you would place a vending machine on the site to create a "period of taxable sales only," and receive a refund of the consumption tax on construction costs (on the order of millions of yen).
Cause of death: The FY2010 reform closed the first wave → a modified version emerged that created taxable sales by repeatedly buying and selling gold bullion → the FY2020 reform denied the "input tax credit for residential rental buildings" itself, completely ending the cat-and-mouse game. It is a textbook case where, when a loophole is closed, it is not the method but "the entrance itself" that is erased.
Chronicle ④: Tower-apartment tax saving — the "family treasure sword" the Supreme Court swung down (died 2022 / Reiwa 4)
How it worked: A tower apartment's assessed value for inheritance tax is often only about 30–40% of its market price, so by buying a high floor with borrowed money you could compress inheritance tax through the valuation gap plus the debt deduction. A representative case: a person in their 90s bought about ¥1.4 billion worth with a loan and filed inheritance tax as "zero."
Cause of death: The Supreme Court (April 19, 2022) allowed the application of the exception provision of the Basic Valuation Circular, "General Rule 6," and approved taxation based on an appraisal (about ¥1.27 billion) rather than the circular valuation = upholding roughly ¥300 million in additional tax[case commentary]. Furthermore, from January 2024 a new rule for apartment valuation (at least 60% of the theoretical market-price value) was introduced, shrinking it structurally too. "Even a valuation done by the rules can be denied under a general provision if it goes too far." It is a case that showed the terror of retroactive risk.
Chronicle ⑤: The lineage of insurance, leasing, and immediate depreciation (2005–2023, buried in sequence)
The profit-compression family for corporations is a history of the abolition and revision of "tax-deferral" devices. Movie film leasing and aircraft leveraged leasing (closed in 2005) → full-loss insurance (the 2019 Valentine's Day shock) → the name-change plan for low-surrender-value insurance (closed in 2021) → drones, scaffolding, LED (2022) → coin laundries, mining (2023). The mechanism of each, and "how to spot the product that will be sold to you next," are explained in detail in our sister article Why "tax-saving schemes" get crushed.
Chronicle ⑥: The bonus shift — the golden age of "escaping social insurance premiums" (died 2003 / Heisei 15)
How it worked: Until March 2003 (Heisei 15), social insurance premiums fell in earnest only on monthly pay, and bonuses carried a "special premium" of merely 1%. So simply by "keeping monthly pay to a minimum and paying most of the annual salary as bonus," both the company and the individual could dramatically cut premiums — a simple yet enormous loophole widely used, especially at companies with annual-salary systems.
Cause of death: The introduction of the "total-remuneration system" in April 2003 applied the same premium rate to bonuses as to monthly pay, and it vanished overnight[Ministry of Health, Labour and Welfare]. There is still a lingering trace of compression using the cap on the standard bonus amount (¥1.5 million per payment for employees' pension), but it comes at the cost of investigation by the pension office and a lower future pension (how social insurance premiums on bonuses work).
Where "escaping national/social insurance" stands today: (1) Switching from national health insurance to social insurance via a micro-corporation is still legal today, but a paper company with no actual business faces the risk of denial and retroactive enrollment. (2) A company's trick of "disguising employees as freelancers" to escape the social-insurance burden is illegal, and crackdowns continue in which premiums are collected retroactively based on a determination of employee status. (3) The corporate practice of "hiding part-timers inside the ¥1.06 million wall" to keep them out of social insurance is also a vanishing scheme as coverage expands (the phased removal of the company-size requirement).
Chronicle ⑦: The Furusato Nozei "Amazon gift-card war" (died 2019)
How it worked: In 2017–2019, when the return-gift competition overheated, some local governments gathered donations with highly cash-convertible return gifts such as Amazon gift cards worth 40–50% of the donation amount. From the user's view, "with an effective burden of ¥2,000 you got hundreds of thousands of yen in gift cards" — alchemy that went beyond tax saving. Izumisano City in Osaka Prefecture, billing it as a closing-down sale, gathered ¥49.7 billion in a year at its peak.
Cause of death: The June 2019 system reform legally set "return gifts must be 30% or less of the donation and limited to local products," ending the gift-card war. Izumisano City, which had been excluded, sued the state, and the Supreme Court (June 30, 2020) ruled that "exclusion on the grounds of past conduct is illegal," giving the city a reversal victory. Yet the regulation itself remained valid — a twisted ending[Izumisano City]. Today's Furusato Nozei rules stand atop the postwar settlement of this war.
Chronicle ⑧: A short history of inheritance schemes — child without a home, general association, last-minute gifting (from 2018 / Heisei 30, buried in sequence)
Abuse of the "child without a home" special provision (closed in 2018 / Heisei 30): Because a "relative living separately who owns no home" and inherits the family residence can use the special provision for an 80% land-value reduction, a trick became popular of selling one's own home to a relative or one's own company to become a "child without a home" in form → the FY2018 reform tightened it into a requirement that looks even at past ownership history[NTA No.4124].
The general incorporated association scheme (closed in 2018 / Heisei 30): If you moved assets into a general incorporated association with no equity interests, inheritance tax would never apply even as relatives succeeded to the directorships generation after generation. This hole was closed by levying inheritance tax on associations where family-controlled officers are a majority (Inheritance Tax Act Article 66-2).
Shrinking last-minute gifting (FY2023 reform): The add-back of calendar-year gifts just before inheritance was extended from 3 years to 7 years (phased from gifts made in 2024 onward), sharply reducing the effect of "¥1.1 million every year just before death"[NTA No.4161]. The lump-sum gifting of education funds also ends in March 2026, and inheritance planning has fully turned toward "early, steady, and backed by real substance."
Lessons we can learn from history
- Lifespans are getting shorter: adoption lived for decades, but recent schemes go from a magazine feature to reform in a few years. In the social-media era the authorities also catch on faster.
- "Legal, so safe" comes with two caveats: (1) reform blocks the future (the sweetness disappears before you recover the investment), and (2) as in the tower-apartment case, it can be denied under the current law as-is via a general provision such as General Rule 6 or the denial of acts and calculations by a family company.
- Retroactive taxation is, in principle, absent: what you did lawfully in the past does not become illegal through reform. But "going too far" is within the reach of (2) above.
- In the end, what keeps surviving is only "systems the state deliberately prepared" — mutual-aid schemes, iDeCo, calendar-year gifting, and various deductions. The conclusion of history is simple.
FAQ
Can you still do tower-apartment tax saving today?
The sweetness has greatly diminished. From January 2024, the inheritance-tax valuation of a condominium unit became at least 60% of the theoretical market-price value, shrinking the valuation gap. Furthermore, excessive compression done with borrowing carries the risk of denial under General Rule 6, which the Supreme Court has approved. The valuation gap on real estate itself remains, so it has not disappeared, but the era of "dramatically reducing it to zero" is over.
Why was the taxpayer able to win the Takefuji case?
The law at the time clearly stated that "if the recipient's domicile is overseas, a gift of foreign-located assets is tax-exempt," and the Supreme Court found, from the reality of the Hong Kong stay, that the domicile was Hong Kong. It was a judgment that upheld the principle of no taxation without law (you cannot tax what is not written in law). However, subsequent reforms mean the same method can no longer be used (now the 10-year rule).
Will people who used a scheme that was legal in the past be taxed after the reform?
In principle, no. Tax reforms apply going forward, and the principle is that retroactive taxation is not carried out. However, if it was judged to have gone too far as an interpretation of the current law at the time (within the reach of General Rule 6 or the denial of acts and calculations), the past portion can be denied regardless of the reform. The tower-apartment case was exactly this type.
Are similar schemes still being sold today?
Yes. Fractional real estate products, operating leases, various immediate-depreciation products — things with the same structure keep appearing in changed forms. For how to face "a product that leads with the tax benefit," see the checklist in our sister article, "Why 'tax-saving schemes' get crushed."
Will escaping national health insurance via a micro-corporation become a "vanishing scheme"?
At present it is a combination of legal systems, and there is no problem if the corporation has real business substance. However, a paper company with no substance carries the risk of retroactive social-insurance enrollment and denial for tax purposes, and if users increase, the possibility that the system side will be reviewed — as with the bonus shift — cannot be denied. As history teaches, it is safest to use it "within the bounds of the legitimate path, backed by real substance."
Data sources
- Takefuji case (Supreme Court judgment of February 18, 2011; gift tax about ¥133 billion; refund interest about ¥40 billion): Commentary on key tax precedents (in Japanese) / National Tax College, Tax College Journal (the meaning of domicile) (in Japanese)
- Tower-apartment case (Supreme Court judgment of April 19, 2022; General Rule 6): Commentary on key tax precedents (in Japanese) / apartment valuation from 2024: National Tax Agency, On the valuation of residential condominium property (in Japanese)
- Limit on the number of adopted children: Inheritance Tax Act Article 15(2) / input tax credit for residential rental buildings (FY2020 reform): National Tax Agency No.6461 (in Japanese)
- Introduction of the total-remuneration system (April 2003; ending the special premium on bonuses): Ministry of Health, Labour and Welfare, explanatory material on the pension system (in Japanese)
- The Furusato Nozei designation system and the Izumisano City Supreme Court judgment (June 30, 2020): Izumisano City, the mayor's comment on the Supreme Court judgment (in Japanese)
- Special provision for small-scale residential land (the "child without a home" requirement): National Tax Agency No.4124 (in Japanese) / add-back of lifetime gifts (7 years): National Tax Agency No.4161 (in Japanese)
- History of reforms to insurance, small-value assets, and the management-strengthening tax system: see the sources column of our sister article Why "tax-saving schemes" get crushed
* This article is an explanation of historical fact and is not intended to recommend any specific method or encourage its imitation. Many of the past schemes carry the risk of denial and taxation if carried out today. For individual judgments, please confirm with a tax accountant or tax office.