People from other countries seem to have the impression that Japanese inheritance taxes are high.
If you have assets either in Japan or abroad, you are probably worrying about things such as whether [your estate] will be subject to Japanese inheritance taxes upon your death, despite your being a foreign national, whether assets in Japan are subject to Japanese inheritance taxes even if you do not live in Japan, and whether assets outside Japan are subject to Japanese inheritance taxes.
This article provides a brief overview of the Japanese inheritance tax system.
Overview of Japan’s Inheritance Taxes
In Japan, whether inheritance taxes are imposed depends on the number of legal heirs and the value of the inherited property. There is a basic exemption of 30 million yen (roughly equivalent to US$300,000) plus an amount equivalent to 6 million yen (roughly equivalent to USS$60,000) multiplied by the number of legal heirs. Any amount that exceeds the total amount based on the formula in the preceding sentence is subject to inheritance taxes in Japan.
For example, if there are three legal heirs (a spouse and two children), the amount of the basic exemption would be 48 million yen. If the value of the inherited property exceeds 48 million yen, inheritance taxes would be imposed on any amount over that 48 million yen basic exemption.
The inheritance tax is progressive, ranging from 10% to 55% depending on the value of the assets. Since the calculation of inheritance taxes is complicated, we will not go into greater detail here.
Criteria for determining whether the inheritance tax is imposed only on property in Japan or on all assets worldwide
The following table indicates whether inheritance taxes are imposed only on property in Japan or on property outside Japan as well based on the residence of the decedent and legal heirs.
The part marked "◯" the table indicates when assets outside Japan are taxed as well as those in Japan while the part marked "✗" indicates when only assets in Japan are taxed.
|
Heir Decedent | Address in Japan | No address in Japan | ||||
| Temporary resident | Japanese citizenship | Non-Japanese citizen | ||||
| Address within 10 years | No address within 10 years | |||||
| Address in Japan | ◯ | ◯ | ◯ | ◯ | ◯ | |
| Temporary resident | ◯ | ✗ | ◯ | ✗ | ✗ | |
| No address in Japan | Address within 10 years | ◯ | ◯ | ◯ | ◯ | ◯ |
| Temporary resident | ◯ | ✗ | ◯ | ✗ | ✗ | |
| No address within 10 years | ◯ | ✗ | ◯ | ✗ | ✗ | |
※ “Address” refers to whether or not you have a place of residence, not necessarily whether or not you have a residence certificate.
※A temporary resident is a person who has a status of residence and has resided in Japan for less than 10 years within the past 15 years.
As you can see from the table above, nationality has nothing to do with whether or not Japanese inheritance taxes are imposed; rather, whether inheritance taxes will be imposed only on assets in Japan or also on assets outside Japan depends on whether or not the heirs or the decedent's domicile is in Japan or has been within the past 10 years.
For example, if the decedent's address is in Japan and the heirs also have an address in Japan, the top left of the table will apply, and all of the decedent's assets, including those outside of Japan, will be subject to inheritance taxes.
Since inheritance taxes in Japan are high, it is very important for those with assets in Japan and abroad to take appropriate measures for inheritance before death. Kobe Legal Partners will be happy to advise you about inheritance planning in cooperation with a tax accountant's office with expertise in international asset taxation.
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