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Tax Reform on Inheritance Tax

Under the 2017 tax reform, foreign properties shall not be subject to Japanese inheritance tax for foreigners who temporarily have an address in Japan. 

Before the tax reform   

Recent years have seen Japanese inheritance tax become severer as some of taxpayers have tried harder to escape from taxation. Some of them have even tried to emigrate to tax haven countries. Strict inheritance tax had a negative impact on foreign expatriates working in Japan. Before tax reform 2017, Japanese inheritance tax would be imposed even on properties located outside Japan when expatriates died during his/her stay in Japan, which made them hesitate to work in Japan. These are some cases and reports disclosed by the tax authority.

[Case examples]

  • He died two months after his assignment to Japan. Japanese inheritance tax was imposed on the world property, and due to payment of inheritance tax in Japan, he had to sell his home in his home country in an European country.

  • If I died in Japan, Japan 's inheritance tax would also be taxed on the property in Europe, so I resigned expatriate duty and came back to my home country.

  • When we prepare an expatriate agreement, we disputed who would bear the Japanese inheritance tax in the case of death in Japan, the company or expatriate.

  • I had considered giving the property to my relatives before I arrived at Japan in order to prevent Japan's inheritance tax from being imposed when I died during the term of my appointment to Japan.

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Before the tax reform, Japanese inheritance tax would also be imposed on foreign property inherited by an expatriate staying in Japan when his/her parent living outside Japan deceased. 

After the tax reform 2017   

Since 1st April 2017, foreign properties shall not be subject to Japanese inheritance tax for foreigners who temporarily have an address in Japan. Tax exemption will be granted to a person who has the status of residence listed in Appended Table 1 of the Immigration Control and Refugee Recognition Act (foreign ambassadors, advanced human resources, professional athletes) and who have had an address in Japan for less than 10 years during 15 years before inheritance.
In the case where a foreign representative of a foreign company is located in Japan, when the expatriate dies while staying in Japan, only Japanese domestic property is subject to taxation of Japanese inheritance tax and the overseas property is not subject to taxation.

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