The inheritance tax in Japan is based on the residence status of an Individual and any beneficiary is subject to an Inheritance Tax on the property he/she receives, having stayed in Japan. In the event that the beneficiary has not been staying in Japan, he/she will still be liable to pay the tax for the property they’ve inherited and the property is located in Japan.
A non-resident individual will be subject to pay the inheritance tax if he has a Japanese nationality, and/or he or the owner of the property have lived in Japan anytime within the recent 5 years of the deceased’s death.
TYPES OF INHERITANCE TAX
This tax usually applies to assets, property or money and the tax covers a number of items in terms of inheritance, namely – ship or aircraft, personal property, bank deposits, company shares & bonds, mining or quarry rights, insurance proceeds, retirement allowance, interest on investments, patents, copyrights or trademarks, Domestic or Foreign Govt. Bonds and trade receivables.
In Japan, the property isn’t taxable, but the heirs to the inheritance who are taxed. Inheritance tax is applicable on the increasing rates at a fair market value of the inherited property, minus the funeral expense and taxes.
The calculation is done for each legal heir separately, irrespective of whether they have a share in the inheritance or not. These amounts are then summed up and divided between those who end up inheriting the property in whatever portion.
Further deduction: JPY 5million JPY x number of legal heir + JPY30million.
APPLICABLE INHERITANCE LAWS
Under Japanese laws, the inheritance laws always apply to an individual with Japanese nationality, irrespective of the location of the property. The general rules of Application of Law, Civil Code, Governing law of formalities of wills, & Code of Civil procedure & domestic relations trial act are applicable on the inheritance, more so in the case of expatriate heirs.
In terms of inheritance, only the deceased property owner’s laws of inheritance are applicable, with no regard to the spouse’s nationality. If an expat male is married to a Japanese woman and he owns a property in the country, then his country’s laws will be applicable to the property’s inheritance and not Japanese law.
If the deceased expat’s country law states that the inheritance law applicable lies with the country where the property is located, then the Japanese law shall prevail.
Foreigners, who’ve had temporary stay in Japan with a Table I visa, are liable to pay tax only on an inheritance or gift they may have received, which is located in the country. These foreigners denote those individuals who’ve been residing in Japan for a maximum of 10 years.
In the absence of a will, the law in Japan requires that assets are distributed as per the deceased’s national law. If the deceased was a Japanese national, then his family would be entitled to his assets, with a balanced distribution, beginning with the closest relations to the deceased, and in most cases the spouse and children.
In the event of a will being present, where the spouse hasn’t been included as legal heir, the surviving spouse can claim a portion of the property still.
KEYWORDS: Japan inheritance tax 2018