8. Tax-Qualified Squeeze-Outs in Japan 株式交換等の適格要件

税務上の「株式交換等（スクイーズアウト）」の適格要件を英語で書いてみました。

The below is a summary of the requirements in order for a squeeze-out to be tax-qualified in Japan as provided in Article 2, subparagraph 12-17 of Japanese Corporate Income Tax Law. 

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(1) Business relatedness test 事業関連性要件
(2) Business size test or management continuity test 事業規模要件又は特定役員引継要件
(3) Employee continuity test 従業者引継要件
(4) Business continuity test 事業継続要件
(5) Shareholding continuity test 株式継続保有要件
(6) Fully controlling continuity test 支配継続要件

Gains or losses on any of the following squeeze-outs are deferred if no assets other than shares in either of the acquiring company or its parent company (i.e., the company directly or indirectly owning all the issued shares of the acquiring company) are distributed to the shareholders of the target company: 

A. A squeeze-out where the target company is fully controlled by the acquiring company before the squeeze-out, and such fully controlling relationship is expected to continue after the squeeze out. A company is fully controlled by another company:

• if all the outstanding shares or investments in capital of the company are directly or indirectly owned by the other company; or 
• if all the outstanding shares or investments in capital of each of these companies are directly or indirectly owned by a party.

B. A squeeze-out where the target company is controlled by the acquiring company or vice versa before the squeeze-out, and such controlling relationship is expected to continue after the squeeze-out subject to the tests below. A company is controlled by another company: 

• if at least 50% of the outstanding shares or investments in capital of the company are directly or indirectly owned by the other company; or 
• if at least 50% of the outstanding shares or investments in capital of each of these companies are directly or indirectly owned by a party.

(1) Employee continuity test

About at least 80% of the employees of the target company immediately before the squeeze-out are expected to continue to be engaged in the business of the target company after the squeeze-out.

(2) Business continuity test 

The business of the target company before the squeeze-out is expected to continue to be conducted by the target company after the squeeze-out. 

C. A squeeze-out defined in the Cabinet Order as a share-for-share exchange carried out in order for the target company and the acquiring company to conduct business together, which satisfies the following joint business tests: 

(1) Business relatedness test 

The business of the target company and the business of the acquiring company are related to each other. 

(2) Business size test or management continuity test

• The business size test is satisfied if the percentage of the sales or the number of employees or any equivalent indicator of the business of the target company to the business of the acquiring company is approximately 20% or more and 500% or less.  
• The management continuity test is satisfied if at least one of the directors or specified directors of the target company stays as such after the squeeze-out. 

(3) Employee continuity test

About at least 80% of the employees of the target company immediately before the squeeze-out are expected to continue to be engaged in the business of the target company after the squeeze-out.

(4) Business continuity test

The business of the target company before the squeeze-out is expected to continue to be conducted by the target company after the squeeze-out. 

(5) Shareholding continuity test

All the shares in either of the acquiring company or its parent company distributed to controlling shareholders in the squeeze-out are expected to continue to be owned by the controlling shareholders. 

(6) Fully controlling continuity test

The target company is expected to continue to be fully controlled by the acquiring company after the squeeze-out. 

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