Quick Review

Inheritance Tax

Did you know that decedent’s asset located in Japan is subject to inheritance tax even when both the successor and the decedent are foreign national and non-resident? If you inherit Japan stocks from the deceased, Japanese inheritance tax will be imposed regardless of the residency/nationality of the decedent or heir. Here's our Quick Review.

Tax rate:   

Japanese inheritance tax rates begin at 10% for amounts up to ¥10 million, ending up at the top rate of 55% for amounts over ¥600 million.

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Basic exemption:   

The exemptions on inheritance tax were cut significantly from January 2015. The basic exemption has been reduced to the first ¥30 million (previously \50 million), plus ¥6 million (previously \10 million) for each heir. For a wife and two children, that had added up to ¥80 million, now it’s only ¥48 million. If the value of assets in Japan is over basic exemption, you are required to file a tax return.

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What’s a foreign investor to do?

One tax planning measure available is to own your investments through a foreign corporation. You may wish to set up a foreign company out of Japan, and let this foreign company invest in Japan. All you own is the shares of the foreign company, which are not subject to Japanese inheritance tax.
In the united states, this kind of tax plan would fail. Assets located in the US owned by a foreign company might be deemed as taxable estate if the decedent had obtained the income from the entity, enjoyed the property (such as living in the property), or had the power to revoke the entity (the sole shareholder can revoke a company at any time). In Japan, there are no specific rules stipulating such treatments.