Inheritance Tax in Japan for Foreigners

Quick summary (the 10-year rule)

• If you've lived in Japan with a non-Permanent visa for 10 years or less of the past 15 years, only your Japan-located assets are subject to Japanese inheritance tax.
• If you've lived in Japan more than 10 years of the past 15 (or hold Japanese citizenship / Permanent Residency), your worldwide assets may be taxed.
• Rates range from 10% to 55% based on inheritance size — among the world's highest.
• Basic deduction: ¥30M + ¥6M × number of legal heirs.
• Spouse can inherit up to ¥160M tax-free (or the legal share, whichever is higher).

Who pays Japanese inheritance tax?

Japan's inheritance tax can apply when:

• The deceased lived in Japan; or
• The inheritor lives in Japan; or
• The deceased held Japanese assets (real estate, bank accounts in Japan, etc.)

Tax scope depends on:

The 10-year rule is critical for foreign residents to understand. Leaving Japan before crossing 10 years can prevent worldwide asset taxation.

Tax rates

Calculating tax: worked example

Suppose a long-term foreign resident in Japan dies, leaving ¥200M worldwide to spouse + 2 children:

1. Total estate: ¥200M
2. Basic deduction: ¥30M + ¥6M × 3 heirs = ¥48M
3. Taxable estate: ¥200M - ¥48M = ¥152M
4. Apply legal shares: spouse 1/2 = ¥76M, each child 1/4 = ¥38M
5. Calculate tax per share:
   Spouse on ¥76M: ¥76M × 30% - ¥7M = ¥15.8M
   Each child on ¥38M: ¥38M × 20% - ¥2M = ¥5.6M
6. Total household tax: ¥15.8M + ¥5.6M × 2 = ¥27M
7. Apply spouse exemption: spouse pays ¥0 (within ¥160M threshold)
8. Final tax owed: ¥27M - ¥15.8M (spouse exempt) = ¥11.2M

Key deductions and exemptions

• Basic deduction: ¥30M + ¥6M × number of statutory heirs
• Spouse exemption: tax-free up to the higher of ¥160M or the statutory share
• Life insurance non-taxable amount: ¥5M × number of statutory heirs
• Severance pay non-taxable amount: ¥5M × number of statutory heirs
• Small-Scale Residence Special Provision (Shokibo Takuchi): 80% reduction on the assessed value of a residence (up to 330㎡) inherited by a co-resident family member
• Minor child deduction: ¥100K × years until age 18
• Disabled heir deduction: ¥100K (general) or ¥200K (severe) × years until age 85

Filing and payment

• Filing deadline: within 10 months of the date of death
• Where: the tax office of the deceased's last residence
• Documents: family register (Koseki), property valuations, bank statements, financial records — language certified translations needed for foreign documents
• Professional help: highly recommended (Japanese tax accountant specializing in international tax; expect ¥500K-2M in fees for complex estates)
• Payment options: lump-sum cash, real estate transfer (Butsuno), or extended payment plan (Encho-Nofu) up to 20 years
• Penalties: late filing 15-20% surcharge; intentional concealment 35-40%

Avoiding double taxation

Many countries have estate or inheritance tax. Japan has limited tax treaties for inheritance:

• USA: Japan-US Estate Tax Treaty (1955) prevents double taxation; US tax credits allowed against Japanese tax.
• Most other countries: no specific inheritance treaty. Japan allows a Foreign Tax Credit for taxes paid abroad on the same assets.
• UK: no specific treaty; UK Inheritance Tax (40%) can lead to combined tax of 50%+ if both countries claim jurisdiction.
• Practical advice: consult tax advisors in both countries early.

Planning strategies for foreign residents

• Use lifetime gifts: annual ¥1.1M tax-free per recipient — adds up over 10-20 years.
• Life insurance: non-taxable amount provides liquidity for inheritance tax payment.
• Spouse exemption: structure inheritance to use the spouse's ¥160M exemption efficiently.
• Pre-departure planning: if you'll leave Japan before crossing 10 years, structure asset transfers strategically.
• Trust structures (overseas): complex; Japanese law treats some foreign trusts as look-through. Get specialized advice.
• Spousal Gift Exception: married 20+ years, can gift ¥20M home (or home-buying funds) tax-free.

Common questions

Q. I have a house in my home country. Will it be taxed in Japan?

If your heir (or you, when inheriting) has lived in Japan 10+ of the past 15 years, yes — worldwide assets including foreign real estate are taxable. The 10-year rule is the key boundary.

Q. What if I'm a US citizen with assets in both countries?

Both countries may tax the estate. The Japan-US Estate Tax Treaty and Foreign Tax Credits help avoid double taxation, but coordination through tax professionals in both countries is essential.

Q. Can I just not declare foreign assets?

Strongly inadvisable. Common Reporting Standard (CRS) and FATCA share account information internationally. Japan's tax authority can find foreign bank accounts. Penalties for hidden assets reach 40%+.

Q. Can I just leave Japan to avoid this?

Leaving Japan permanently changes your status to non-resident, which generally means only your Japan-located assets are taxable in Japan. Be aware of the Exit Tax (Kokugai Tenshutsu Kazei) on financial assets exceeding ¥100M.

Related guides

• Tax Residency in Japan
• Departing Japan Checklist
• Buying Property as a Foreigner