ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

SoftBank Group completes $4.7bn tax-friendly deal with Yahoo

Share issuance and buyback strategy exempts most proceeds from taxes

Majority ownership of Yahoo Japan now shifts from SoftBank Group to its mobile unit, which will use the deal to diversify its growth strategy.   © Reuters

TOKYO -- SoftBank Group completed transfer of its 514 billion yen ($4.7 billion) stake in Yahoo Japan to mobile unit SoftBank Corp. on Thursday.

Although SoftBank said the deal was "not for tax saving purposes," the combined share issuance and share buyback deal resulted in less taxes than a simple sale would have incurred.

Announced in early May, the deal shifts majority ownership of Yahoo Japan from SoftBank Group to its mobile unit.

SoftBank Corp. President Ken Miyauchi has said he wants to deepen the company's relationship with Yahoo to diversify away from its core telecommunications business.

Yahoo initially issued about 1.5 billion new shares to SoftBank Corp., raising 456.5 billion yen. Yahoo then bought back about 1.8 billion shares from SoftBank Group Japan, the group's subsidiary.

SBGJ receives 514.5 billion yen from the transaction, most of which is tax exempt because the proceeds minus SBGJ's share of Yahoo's equity -- 4.7 billion yen -- will be recognized as a "deemed dividend."

At the time of the transaction, SBGJ held 36% of Yahoo shares. Under Japanese tax law, deemed dividends are not recorded as income for shareholders holding a stake of more than a third, exempting most of SBGJ's dividend from tax.

SBGJ had not disclosed the price it paid for its Yahoo shares. Any profit from the transaction will be taxed while a loss will allow the group to lessen its tax burden by offsetting it with other income.

If SoftBank Group had simply sold its stake in Yahoo to its mobile unit, the difference between its sale and acquisition prices would have been taxed.

Observers differ on implications of the deal. "Authorities will be paying attention to whether the transaction makes sense economically and whether there is anything unnatural or unreasonable," said Hideki Tomonaga, head of the Taxation Institute of Japan.

"This is an obvious method [of lessening tax exposure] if you are a tax professional," said Takafumi Takada of Torikai Law Office. "It is possible to reap tax benefits without having funds leave the group."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media