my actual experience with Japanese inheritance tax

[usian]

I recently provided this information when answering a very old question on the forum, so this is kind of a double post, but I personally would have GREATLY benefited from it, so thought it was worthwhile to create a fresh topic.

This is related only to inheritance of overseas assets, and how taxes are calculated by the Japanese tax office for tax residents of Japan.

I discovered that the calculation is different from expected, leading to zero tax for me and being told I did not even need to report the inheritance.

Hopefully the information can save some others from stressing out about and wasting time on appraisals, keeping expense receipts, or even just calculating your tax and filling out a Japanese tax form. (But that will depend on things like number of legal heirs and value of the estate.)

Anyway, this is how the tax is actually calculated for a Japanese tax resident inheriting overseas assets:

The total value of the estate is calculated first, then divided by the number of legal heirs. After that, ONLY the portion going to the Japanese tax resident has the standard deduction subtracted from it (which is 30 million yen + 6 million yen times the number of legal heirs).

That is, the standard deduction is NOT subtracted from the total value of the estate BEFORE distribution. Only from the portion received by a Japan tax resident.

This means you may be able to do a quick calculation and easily see if your tax liability will definitely be zero - in which case you won't have to worry about any details for Japanese tax purposes. I was told I did not even need to file a tax return.

The rationale is that the Japanese tax authorities have nothing to say about any assets with no connection to Japan. Only the part of an estate that actually passes to a Japanese tax resident is relevant to them.

So to them, that portion is considered *the estate* for tax purposes. And the standard deduction is defined by law as 30 million yen + 6 million times the number of heirs, so they are legally obligated to deduct that amount from whatever your portion is.

[Beaglehound]

That’s really useful info, thanks for posting.

[RetireJapan]

I also learned this last month. Incredibly generous way to handle it on the part of the tax office here

https://www.retirejapan.com/blog/overse ... -in-japan/

[Gulliver]

30 million yen + 6 million yen times the number of legal heirs).

So for two heirs that would be ¥42 million deduction?

[usian]

30 million yen + 6 million yen times the number of legal heirs).

So for two heirs that would be ¥42 million deduction?

That seems right. But that figure is just based on what is stated in English by the government so I'll leave the details up to you. (I'm not an accountant or tax expert.)

What they don't state (or make it very hard to find) is that when the assets are overseas (with no connection to Japan) and partly inherited by others who are not tax residents of Japan, their shares are ignored for tax purposes.

https://www.mof.go.jp/english/policy/ta ... 9/e_04.pdf
https://www.nta.go.jp/english/taxes/others/02/15001.htm

[usian]

I also learned this last month. Incredibly generous way to handle it on the part of the tax office here

https://www.retirejapan.com/blog/overse ... -in-japan/

I just read your new blog post now - previously I had visited the forum to see if anyone else had posted the info, did not find anything, so decided it might be a good idea. But the more the merrier - I think this information deserves to be shouted from the rooftops. Really, it should be common knowledge, easily found.

Though I would not called it "generous" - I have no doubt the tax office would reach out and tax non-Japanese assets and non-Japan tax residents all over the world if they could get away with it. They are limited to what they legally can tax, and then the law specifies that the standard deduction is what it is, so they could hardly claim it is different.