Inheritance and Gift Tax in Japan for Foreigners

Inheritance tax overview 相続税の概要

Japan's inheritance tax (相続税, souzokuzei) is levied on the person who receives inherited property — not on the estate itself. This is an important distinction from countries like the US or UK, where the estate pays the tax before assets are distributed. In Japan, each heir calculates and pays their own share of inheritance tax based on what they receive.

Japan has some of the highest inheritance tax rates in the world, with a top marginal rate of 55% on inherited amounts exceeding ¥600,000,000. For context, the US top rate is 40%, the UK is 40%, and France is 45%. The combination of high rates and relatively low exemptions makes Japan a jurisdiction where estate planning matters — especially for foreigners with assets in multiple countries.

However, the basic exemption is generous enough that most ordinary families do not owe inheritance tax. The NTA reports that only about 8-9% of deaths in Japan result in an inheritance tax liability. The tax primarily affects families with substantial assets — typically those with combined estates (including real estate, financial assets, and life insurance) exceeding ¥30,000,000-¥48,000,000 depending on the number of heirs.

Who pays inheritance tax in Japan 誰が相続税を払うか

Whether you owe Japanese inheritance tax depends on the residency status of both the deceased and the heir, and the location of the assets. Japan's inheritance tax law classifies people into several categories, and the scope of taxation varies accordingly.

The bottom line for most foreigners living in Japan: if you are living in Japan and you inherit assets from anyone (including family back home), Japan may tax those assets. If a parent in your home country passes away and you inherit their house or savings, Japan considers that taxable — on top of whatever tax your home country charges. Double taxation treaties can help reduce the burden, but you need to plan for this.

Inheritance tax rates 相続税の税率

Japan uses a progressive tax rate structure for inheritance tax. The rates apply to each heir's statutory share (法定相続分) of the taxable estate — not to the total estate value. The calculation method is somewhat complex (see below), but the rate table itself is straightforward:

How the calculation works

Japan's inheritance tax calculation is not as simple as applying the rate table to what each person inherits. Instead, it follows a multi-step process:

1. Calculate the total taxable estate — add up all assets (real estate, financial assets, life insurance proceeds, etc.) and subtract debts and funeral expenses.
2. Subtract the basic exemption — ¥30,000,000 + (¥6,000,000 x number of legal heirs). If the estate is below this amount, no tax is owed.
3. Divide by statutory shares — divide the remaining amount according to each heir's statutory share (法定相続分) under Japan's Civil Code, regardless of how the estate is actually divided.
4. Apply the tax rate table — calculate the tax on each heir's statutory share using the progressive rates above.
5. Sum up the total tax — add together the tax amounts from all heirs to get the total inheritance tax.
6. Redistribute by actual inheritance — divide the total tax among heirs based on the proportion each person actually receives (which may differ from the statutory shares).

Example: A foreigner living in Japan inherits from their Japanese spouse who passes away. The estate is valued at ¥100,000,000. There are 2 heirs: the surviving spouse and 1 child. The basic exemption is ¥30,000,000 + (¥6,000,000 x 2) = ¥42,000,000. Taxable estate: ¥100,000,000 - ¥42,000,000 = ¥58,000,000. The statutory share for the spouse is 1/2 (¥29,000,000) and the child is 1/2 (¥29,000,000). Tax on ¥29,000,000 each = ¥29,000,000 x 15% - ¥500,000 = ¥3,850,000 per share. Total tax: ¥7,700,000. Note: the spouse would likely qualify for the spousal deduction (see below), reducing their actual tax to zero.

Basic exemption (基礎控除) きそこうじょ

The basic exemption is the threshold below which no inheritance tax is owed. It is calculated as:

The number of "legal heirs" is determined by Japan's Civil Code (民法), not by the actual will. Legal heirs include the surviving spouse and children of the deceased. Here are some common scenarios:

If the total estate value is below the basic exemption, no inheritance tax return needs to be filed and no tax is owed. This is why the majority of inheritances in Japan do not result in any tax liability — for a typical family with a spouse and two children, the estate must exceed ¥48,000,000 before any tax applies.

Other key deductions and credits

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  Life insurance exemption (生命保険金の非課税): Life insurance proceeds paid to heirs are exempt up to ¥5,000,000 x number of legal heirs. For example, with 2 heirs, up to ¥10,000,000 of life insurance payouts is tax-free.
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  Retirement allowance exemption (退職手当金の非課税): Death retirement payments from the deceased's employer are exempt up to ¥5,000,000 x number of legal heirs.
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  Debt and funeral expense deduction (債務・葬式費用): Outstanding debts of the deceased and reasonable funeral expenses can be deducted from the estate value.
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  Small-scale residential land reduction (小規模宅地等の特例): Up to 80% reduction in land valuation for the deceased's primary residence (up to 330m²), if the heir continues to live there. This is one of the most powerful tax-saving provisions in Japanese inheritance tax law.
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  20% surcharge for non-close relatives (2割加算): Heirs who are not the spouse, children, or parents of the deceased pay a 20% surcharge on their inheritance tax. This includes siblings, nieces/nephews, and unrelated recipients. Grandchildren who inherit through a will (not through representation of a deceased parent) also face this surcharge.

Gift tax (贈与税) ぞうよぜい

Gift tax in Japan exists primarily to prevent people from avoiding inheritance tax by giving away their assets before death. The rules are similar to inheritance tax but with lower exemptions and different rate structures. Gift tax applies when you receive a gift — the recipient pays, not the giver.

Annual exemption: ¥1,100,000

Each person can receive gifts of up to ¥1,100,000 per year tax-free. This is the total from all givers combined — if your parents each give you ¥600,000 in a year, the total is ¥1,200,000, and ¥100,000 is taxable. The ¥1,100,000 exemption resets every calendar year (January 1 to December 31).

Gift tax rates

Gift tax uses two rate schedules: a preferential rate for gifts from parents/grandparents to adult children/grandchildren (特例税率), and a general rate for all other gifts (一般税率). Both are progressive:

Example: Your parent in your home country sends you ¥5,000,000 while you are living in Japan. Taxable amount: ¥5,000,000 - ¥1,100,000 = ¥3,900,000. Using the special rate (parent to child): ¥2,000,000 x 10% + ¥1,000,000 x 15% + ¥900,000 x 15% = ¥200,000 + ¥150,000 + ¥135,000 = ¥485,000 in gift tax. You must file a gift tax return (贈与税の申告) by March 15 of the following year.

Special gift tax exemptions

Japan provides several large one-time gift tax exemptions for specific purposes. These can be used strategically for financial planning:

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  Housing purchase funds (住宅取得等資金の贈与税の非課税): Parents or grandparents can gift up to ¥10,000,000 tax-free to adult children/grandchildren for purchasing or building a primary residence in Japan. The exact amount varies depending on the property's energy efficiency and earthquake resistance standards. This exemption must be claimed on a gift tax return.
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  Education funds (教育資金の一括贈与の非課税): Parents or grandparents can gift up to ¥15,000,000 tax-free for educational expenses (tuition, school supplies, extracurricular activities) via a dedicated trust account at a bank. The funds must be used by the time the recipient turns 30. Unused funds become taxable.
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  Marriage and childcare funds (結婚・子育て資金の一括贈与の非課税): Parents or grandparents can gift up to ¥10,000,000 tax-free for marriage expenses (up to ¥3,000,000) and childcare costs via a dedicated trust account. The recipient must be aged 18-49. Unused funds become taxable when the recipient turns 50.
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  Spousal gift for residential property (贈与税の配偶者控除): A spouse married for 20+ years can gift up to ¥20,000,000 tax-free in the form of residential property or funds to purchase a primary residence. This is a once-in-a-lifetime exemption.

相続時精算課税 (Settlement at inheritance system)

Japan offers an alternative gift tax system called 相続時精算課税制度, where gifts from parents/grandparents (age 60+) to children/grandchildren (age 18+) are taxed at a flat 20% rate after a lifetime exemption of ¥25,000,000. However, when the giver eventually passes away, all gifts made under this system are added back to the estate for inheritance tax calculation. Starting from 2024, an additional ¥1,100,000 annual exemption was added to this system, making it more attractive for gradual wealth transfer. Once you elect this system, you cannot revert to the standard annual exemption system for gifts from that specific giver.

The 10-year rule for foreigners 外国人の10年ルール

This is the section that matters most to long-term foreign residents. The 2017 tax reform significantly expanded Japan's inheritance and gift tax reach over foreigners through what is informally called the "10-year rule" (formally: the revision of 相続税法 and 贈与税法 regarding non-permanent residents).

How it works

Before the 2017 reform, foreigners living in Japan on a table-listed visa (work visa, spouse visa, etc.) were only taxed on Japan-located assets for inheritance and gift tax purposes — worldwide assets were not covered. This made Japan relatively foreigner-friendly for inheritance planning.

The 2017 reform changed this by introducing a residency duration test. Now, if a foreign national has had an address in Japan for 10 or more years out of the 15 years preceding the event (inheritance or gift), they are treated as an "unlimited taxpayer" (無制限納税義務者) and are taxed on worldwide assets — the same as a Japanese national.

Planning considerations

For foreigners approaching the 10-year threshold, there are several things to consider:

• ● Track your residency carefully: Count the exact years you have had an address registered in Japan over the past 15 years. Gaps count — if you lived abroad for several years, those years reduce your count.
• ● Consider gift timing: If you are approaching the 10-year mark and your parents want to transfer wealth, doing so before you cross the threshold means only Japan-located assets are taxable.
• ● Foreign tax credits (外国税額控除): If your home country also taxes the inheritance, you can claim a credit on your Japanese tax return for the foreign tax paid — but the credit is limited to the Japanese tax amount. You will not be fully double-taxed, but the higher of the two countries' rates effectively applies.
• ● Leaving Japan resets the clock: If you leave Japan and reduce your residence to below 10 of the last 15 years, you revert to limited taxation (Japan assets only) for inheritance and gift tax purposes.

International estate planning for foreigners 国際的な相続対策

Living in Japan as a foreigner adds layers of complexity to estate planning because your assets, heirs, and legal systems may span multiple countries. Here are the key issues to be aware of:

Which country's law governs the inheritance?

Japan's conflict-of-laws rules (法の適用に関する通則法, Article 36) provide that inheritance is governed by the national law of the deceased. This means if an American citizen dies while living in Japan, American law (specifically the law of their domicile state) governs who inherits and how the estate is divided — not Japanese law. However, Japanese inheritance tax law still applies to tax the transfer.

This creates a common confusion: the inheritance rules (who gets what) follow one country's law, while the tax rules (how much tax is owed) follow another. You may need legal professionals in both countries.

Double taxation treaties for inheritance

Japan has very few estate/inheritance tax treaties — only with the United States (1954 treaty, updated 2004). Unlike income tax, where Japan has treaties with over 70 countries, most countries have no specific inheritance tax treaty with Japan. For countries without a treaty, relief from double taxation relies on each country's domestic foreign tax credit rules.

Asset valuation for Japanese inheritance tax

Japan uses specific valuation methods for different asset types:

• ● Real estate in Japan: Land is valued using 路線価 (roadside land value) — typically 70-80% of market value. Buildings are valued using 固定資産税評価額 (fixed asset tax assessment) — typically 50-70% of market value. This means real estate is taxed at below market value, which can be advantageous.
• ● Real estate overseas: Valued at fair market value (時価) on the date of death. You will need an appraisal in the local market, converted to JPY at the exchange rate on that date.
• ● Listed stocks: Valued at the lower of: (1) closing price on the date of death, (2) average closing price for the month of death, (3) average for the month before death, or (4) average for two months before death.
• ● Bank deposits: Valued at the balance on the date of death, plus accrued interest. Foreign currency deposits are converted to JPY at the exchange rate on that date.

Filing and deadlines

The inheritance tax return (相続税申告書) must be filed within 10 months from the date of the deceased's death. The filing is made at the tax office (税務署) that has jurisdiction over the deceased's address. If the deceased lived overseas, the filing is based on the heir's address in Japan.

All heirs who are subject to Japanese inheritance tax must file jointly or individually. Payment is due at the same time as the filing — within 10 months. If you cannot pay in full, installment payments (延納, up to 20 years for certain asset types) or payment in kind (物納, using inherited assets to pay the tax) may be available with prior approval.

Frequently asked questions よくある質問