As always, please remember that I am just some guy writing a blog, and you should consult a tax professional or the tax office for accurate, up-to-date information. π
Understanding inheritance tax in Japan
Inheritance tax and estate tax are a pretty controversial topic in personal finance. Some countries like Australia don’t have them. Other countries like the US have very high allowances before tax is due.
The Japanese inheritance tax system (ηΈηΆη¨) is less forgiving than these, but for most people should not be too onerous.
There is a lot of misinformation out there though. I often see comments like: “Japanese inheritance taxes are 55%!”, or “Japan tries to tax foreigners unfairly”. This is a distortion of the truth.
As you can see, it’s a far cry from “55% tax rate”! The first thing is that you must declare any inheritances to the tax office within ten months of finding out about them.
Then the diagram above shows the rest of the process:
- The total value of the estate is calculated.
- The standard deduction is subtracted from the value, which is 30m yen plus 6m yen per legal heir (these are family members as described in tax law).
- Liabilities are also deducted, as is tax-exempt property, etc.
- Then the taxable estate is divided across the heirs.
- The total amount of inheritance tax due is calculated, then divided proportionally among the heirs.
Inheritance tax rates
| Amount acquired in proportion to the legal share of inheritance | Tax rate | Deduction |
|---|---|---|
| Up to Β₯10,000,000 (1,000δΈε) | 10% | – |
| Up to Β₯30,000,000 (3,000δΈε) | 15% | Β₯500,000 (50δΈε) |
| Up to Β₯50,000,000 (5,000δΈε) | 20% | Β₯2,000,000 (200δΈε) |
| Up to Β₯100,000,000 (1εε) | 30% | Β₯7,000,000 (700δΈε) |
| Up to Β₯200,000,000 (2εε) | 40% | Β₯17,000,000 (1,700δΈε) |
| Up to Β₯300,000,000 (3εε) | 45% | Β₯27,000,000 (2,700δΈε) |
| Up to Β₯600,000,000 (6εε) | 50% | Β₯42,000,000 (4,200δΈε) |
| Over Β₯600,000,000 (6εε) | 55% | Β₯72,000,000 (7,200δΈε) |
The taxable estate amount is shown on the left, the tax rate in the middle, and the deduction on the right.β Finally any further allowances are applied and the tax is paid. A spouse gets 160m yen, or the statutory allowance, whichever is larger, tax free. Children get 100,000 yen per year they have left until they reach the age of 20.
Foreign inheritances
The same calculation as above is carried out for inheritances from abroad, where the tax is calculated for the inheritance as a whole but only paid on the share actually inherited by the resident of Japan (not on the entire inheritance, another common misconception).
Generally speaking, you will need to declare and pay inheritance tax on foreign inheritances if you have a spouse or permanent resident visa, or if you have lived in Japan for more than ten years.
Getting advice
There are other potential deductions too, so if you receive a large inheritance it may be worth consulting a tax professional. For most people, the tax office will be happy to help you do your paperwork and as you can see from this post, the impact of inheritance tax is likely to be light or non-existent for most families.
Further reading
We have written about the tax implications for foreign residents of Japan before:
- Inheritance Tax in Japan, part 2 (Feb 2018)
- Tax Status in Japan (Sep 2017)
- Tax Residence and Inheritance Tax (Aug 2017)
- Overseas Inheritances in Japan (June 2021)
- βJapan’s Ministry of Finance also has a simple guide to inheritance tax in English.
What do you think? Did I miss anything? Do you have experience of navigating the Japanese inheritance tax system? Please share your thoughts or any questions in the RetireJapan forum.
“A spouse gets 160m yen, or the statuatory allowance, whichever is larger, tax free. Children get 100,000 yen per year they have left until they reach the age of 20.”
Where did this come from? I don’t understand how it is connected with the preceding information.
It’s in the first diagram (step 3). Not the most streamlined process, to be sure!
I’m guessing the tax office will do the actual calculations for you, because I wouldn’t want to π
I’ve had this for a while, so it may be somewhat dated. Not really taxes, but who might qualify as eligible for your assets. If you scroll down far enough, it lists 55 different scenarios for how a deceased person’s assets will be divvied up. Some of them, like when there’s a child outside of the marriage, are a little surprising.
https://souzoku-pro.info/columns/10/
I received a small overseas inheritance a couple of years ago – far, far smaller than the minimum deduction. I was and am on a spouse visa and described it to my bank (where I deposited the cheque) as an inheritance. I haven’t heard anything since from the bank or tax office. Do I need to worry?
Hi Adam
I’m afraid I am not in a position to answer that question. Technically the size of your share of the inheritance is not enough to work out whether you owed any tax: you need to calculate tax for the estate as a whole, and then figure out your share of that tax.
Having said that, if it was a couple of years ago and you haven’t heard from the tax office I would give you good odds that you won’t.
Sorry, bit unfair of me to ask like that – but thanks very much for giving your opinion. If anything goes horribly wrong I’ll be sure to post
Ha, ha, absolutely no problem! Definitely let us know if something happens -it would make a good guest post π
How does double taxation work? Certainly the American government is going to take their share as well, so is there a way to avoid double taxation on the inheritance?
Well, the US inheritance tax now kicks in for estates over $11.18m (twice that for a married couple) so presumably you won’t have to worry about it…
(if you do I recommend getting a lawyer to help you) π