Inheritance tax in Japan: how is inheritance taxed in Japan?
We don't know anything for sure about what might happen in our lives, except death. We know that life is a Russian roulette of ups and downs that are impossible to predict. The only exception to this rule is death.
Everything and everyone we know, including ourselves, is fated to go through the following cycle: birth, development, ageing and death.
The certainty of this fact causes the tax authorities to levy inheritance tax. The situation is no different in Japan.
Those who intend to live and own property in Japan, or just own property or trade, will eventually have to worry about inheritance tax in addition to income tax itself.
I talked about income tax in Japan in this article.
Before going into the tax itself, it's worth briefly explaining about tax residency.
What is Tax Residency?
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the assertion that, because they have no fixed abode, they don't have to declare their taxes anywhere is false.
It doesn't matter if the digital nomad travels every 3 months, every month or every week, everyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you will have double tax residence, i.e. you will be subject to declaring and paying taxes for two countries at the same time.
Inheritance Tax in Japan
Inheritance tax in Japan is regulated by Law No. 73 of 1950. This law also regulates the taxation of donations.
If you own property in Japan, after your death your heirs will be charged inheritance tax according to their share of the estate.
Let's take a look at the table used to calculate inheritance tax (updated to 2024):
Value of the share | Rate | Deduction amount |
10 million yen or less | 10% | - |
More than 10 million yen to less than 30 million yen | 15% | 500,000 yen |
More than 30 million yen to less than 50 million yen | 20% | 2 million yen |
More than 50 million yen to less than 100 million yen | 30% | 7 milion yen |
More than 100 million yen to less than 200 million yen | 40% | 17 milion yen |
More than 200 million yen to less than 300 million yen | 45% | 27 milion yen |
More than 300 million yen to less than 600 million yen | 50% | 42 milion yen |
More than 600 million yen | 55% | 72 milion yen |
According to the table, depending on the amount of the share, the tax rate minus the deduction value is applied.
Example:
Value of the share: 30 million yen
30 million x 20% = 6 million yen
6 million yen - 2 million yen
Total = 4 million yen.
It is therefore essential that those who have inheritances or donations to receive in Japan, or who have assets of any kind in Japan, do their tax planning in order to avoid problems with the tax authorities.
If you are interested in hiring professional legal services related to tax planning, we are a law firm that specialises in the subject. To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
Alert to Double Tax Residency
Even if you immigrate to Japan, you don't automatically leave your country of origin. In other words, they will remain tax resident in their country of origin.
The mistake that many people make, mainly because they are unfamiliar with tax legislation, is to declare in their country of origin only the income earned in their country of origin, and to declare in Japan only the income earned in Japan.
However, what many people don't realise is that this isn't just a mistake, it's a tax evasion offence.
The big headache of having a criminal conviction is a criminal record. If you have a criminal record, your passport will be invalidated. They won't be able to leave the country.
In addition, Japan requires you to present a valid passport in order to obtain a visa. In other words, no valid passport, no visa.
What's more, in addition to a possible criminal conviction, the tax authorities could demand the amounts evaded retroactively, plus interest and monetary correction.
Japan has co-operation agreements with various countries to exchange information on its taxpayers in order to detect fraud and tax evasion, as well as criminal co-operation treaties.
It is therefore extremely important to carry out tax planning, as in addition to optimising tax payments, it avoids various problems such as tax evasion and double taxation.
Remember: tax evasion is not just a crime in Japan
If you are interested in hiring professional legal services to carry out tax planning, we are a law firm specialising in the subject. To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
