Outline of Inheritance Tax and Gift Tax

I. Inheritance tax

1. Overview
Inheritance tax is levied on increase in the asset of an individual as of the time of death. The heir, legatee or other individual beneficiary of the decedent’s estate resulting from inheritance, bequest, devise, gift effected by the death (collectively “the successor”) is obliged to file an inheritance tax return and pay the tax jointly and severally by due date of 10 months after acknowledgement of the death. The estate or the executer is not required to file or pay the inheritance tax.

2. Governing law
When an inheritance has any foreign element in either decedent, successor or asset, the related party needs to see which country of law governs the inheritance. Act on General Rules for Application of Laws provides that inheritance shall be governed by the national law of the decedent. Japan charges inheritance tax based on Japan tax law, but distribution of estate and substance of inheritance, on which Japan charges inheritance tax, is governed primarily by law of the country of decedent’s nationality at the time of the death.
  • When a decedent is foreign national, the foreign law primarily applies to the inheritance including administration such as probate, successor, statutory share of the successor. Japan charges the successor Japan inheritance tax on the inheritance governed by the foreign law. When law of the nationality of the decedent provides real estate be governed by county of location of the real estate, inheritance of the real estate is governed by the county of the location of real estate separately from other assets governed by the country of the nationality of the decedent. For example, US national decedent’s real estate located in Japan could be transferred to the successor through Japan’s statutory procedure separately from US probate for other assets.
  • When a decedent is Japan national, Japan law on inheritance primarily applies. All assets and liabilities of decedent transfers to the successor immediately upon the death without interposition of a fiduciary or a trustee like US probate. Assets outside Japan is recognized in light of law of Japan, which might be different from the governing law of the asset. For example, interest in US LLC is generally regarded by Japan tax authority as investment in a corporation regardless of US tax pass-through or LLC’s portfolio.
All information in this web-site refers to the case under the governing law of solely Japan unless otherwise stated explicitly.

3. Married couple
Property ownership and taxation on married couple generally treats each spouse as a separate individual with separate legal and property rights, similar to US common law property system as opposed to US community property system. Joint bank account is not available in Japan. Inheritance of foreign joint account originated from the spouse income would be regarded as taxable event by Japan tax authority.

However, the spouse credit generally alleviates or eliminates the spouse’s inheritance tax burden as described in I.8.(5),(b).

4. Inheritance tax and gift tax
In contrast to US unified transfer tax on the lifetime cumulative basis of both gift and death time transfer, Japan inheritance tax is levied on the death time transfer separately from the gift tax charged on the gift during the life time, except for the designated gifts from the parent or the grandparent during the life time to be included in the inheritance tax base as explained in II.3.

5. Scope of the taxable asset
Scope of the inheritance taxable asset of the decedent varies on nationality and domicile of successor and decedent as follows;

Successor at the time of death of the decedent

Decedent is either (A), (B) or (C);

Scope of the taxable assets

See I.9.(3) & I.11

Resident in Japan (including foreign national) at the time of the death of the decedent foreign national having certain VISA (note 1) whose aggregated resident periods in Japan do not exceed 10 years equivalent during 15 years prior to the death of the decedent (A)non-resident at the time of the death who did not domicile in Japan anytime during the period of 10 years prior o the death of the decedent,
(B) non-resident at the time of the death whose aggregated resident periods in Japan (i) do not exceed 10 years equivalent during 15 years prior to the death, and (ii) lasts without Japan nationality throughout the period, or
(C) foreign national resident in Japan with certain VISA (note 1) at the time of the death whose aggregated resident periods in Japan do not exceed 10 years equivalent during 15 years prior to the death
Yes Only asset in Japan A
No Worldwide asset B
other than above Yes Worldwide asset C
No Worldwide asset D
Japan national non-resident at the time of the death of the decedent domiciled in Japan anytime during the period of 10 years prior to the death of the decedent Yes Worldwide asset E
No Worldwide asset F
not domiciled in Japan anytime during the period of 10 years prior to the death of the decedent Yes Only asset in Japan G
No Worldwide asset H
Foreign national non-resident at the time of the death of the decedent Yes Only asset in Japan I
No Certain decedent of foreign national non-resident (Note 2)
Other than above Worldwide asset J

Note 1. "certain VISA type" is either of; Diplomat, Official, Professor, Artist, Religious activities, Journalists, Highly skilled professional, Business manager, Legal/Accounting services, Medical services, Researcher, Instructor, Engineer/Specialist in humanities/international services, Intra-company transferee, Nursing care, Entertainer, Skilled labor, Training, Cultural activities, Temporary, Student, Technical intern training, Dependent(Family stays)

Note 2. As transitory relief until March 31, 2022, the foreign national non-resident successor of the foreign national non-resident decedent who did not domicile in Japan anytime during the period from April 1, 2017 to the date of death is taxed only on asset in Japan.

Decedent’s asset in Japan is always subject to inheritance tax even when both the successor and the decedent are foreign national non-resident.

Country of both resident and/or domicile should be read as country of principal base of life judged by actual facts rather than person’s intention. Location of residence, spouse and other dependent, work and major assets are generally paid attention to determine country of resident and domicile. None should not underestimate risk of tax authority’s judgement on the country of resident and/or domicile different from the tax payer’s intention.

6. Asset in Japan is generally defined as follows;

Type of asset

Asset in Japan

Tangible asset Located in Japan
Real property Located in Japan
Bank deposit, life insurance deposited with the office in Japan
Retirement allowance paid by the payer in Japan
Loan asset on the debtor domiciled or has its head office in Japan
Bond, Stock of the original issuer having the head office  in Japan
Patent, industrial intangible right registered in Japan
Copy right of the publisher in Japan


7. The basis of the inheritance tax includes;
  • Gift from the decedent within 3 years prior to the death and the cumulative gifts from the parent or the grandparent subject to the unified tax as declared in advance as explained in II.3. The gift tax thereon is creditable against the inheritance tax.
  • Gift from the decedent in the year of the death. It is not subject to the gift tax.
  • Life insurance proceeds realized because of the death if the insurance premium was born by the decedent. (The beneficiary on the insurance policy is liable to the tax, but the income tax if the insurance premium was born by the beneficiary him or herself, and the gift tax if the insurance premium was born by the third person.)
    Taxable amount of the life insurance proceeds is the net of exclusion equivalent to 5 million yen x the number of the heir at law.
  • Retirement allowance realized within 3 years after the death. Similarly to the life insurance proceeds, the exclusion of 5 million yen per the number of the heir at law applies to the taxable amount.
  • Unrealized insurance policy evaluated on the insurance premium paid.
Evaluation of the assset for the inheritance tax purpose is statutory provided e.g. land in Japan valued at roughly 70% of the market price. Real estate outside Japan would be valued on appraisal report or local property tax assessment.

8. Computation of inheritance tax is summarized as follows;
  • (1) Evaluate the taxable assets transferred to each successors in the net amount after deduction of the inherited liabilities and/or the funeral expenses (“net taxable asset”), aggregate the net taxable asset of all successors (“aggregated net taxable asset”) and then deduct the basic exclusion calculated by 30 million + 6 million x the number of the heir at law. The outcome is “aggregated tax base”.
Sample: In a family of 4, decedent, the spouse and 2 children age 20 or over, 3 successors acquired net taxable asset of JPY68,000,000 as follows;
Succeeded Net taxable asset
Successor Taxable assets Liabilities and/or Funeral expenses
Spouse 50,000,000  12,000,000 38,000,000
Child 1 15,000,000 - 15,000,000
Child 2 15,000,000 - 15,000,000
Total 80,000,000 12,000,000 68,000,000

Aggregated net taxable asset (A) 68,000,000
Basic exclusion (B) 30,000,000 + 6,000,000 per person x 3 persons = 48,000,000
The aggregated tax base (A)-(B) = 20,000,000
  • (2) Allocate the aggregated tax base to each heir at law according to the statutory share of each heir (in a family of 4, the spouse of the decedent ½, each of 2 children ¼ in case of Japan national decedent. See I.2.) as if the decedent had not left any will and anyone had not abandoned the right of inheritance. The outcome is “statutory share of the inheritance tax base” of each heir..
  • (3) Apply the progressive inheritance tax rate to the statutory share of the inheritance tax base of each heir, then aggregate the tax amount of each heir. The outcome is the aggregated inheritance tax.
Tax rate
Tax base Tax rate Threshold concession
up to 10,000,000 10%  -
up to 30,000,000 15% 500,000 
up to 50,000,000 20%  2,000,000 
up to 100,000,000 30% 7,000,000 
up to 200,000,000 40% 17,000,000 
up to 300,000,000 45% 27,000,000 
up to 600,000,000 50% 42,000,000 
above 600,000,000 55% 72,000,000 

Sample calculation of the aggregated inheritance tax
Successor The statutory share of each heir The aggregated tax base Calculation
20,000,000 Tax rate Threshold concession Tax amount
Spouse ½ 10,000,000 10% - 1,000,000
Child 1 ¼ 5,000,000 10% - 500,000
Child 2 ¼ 5,000,000 10% - 500,000
Total   20,000,000     2,000,000
The aggregated inheritance tax is 2,000,000
  • (4) Allocate the aggregated inheritance tax to each successor by prorating the net taxable asset each successor actually acquired among the aggregated net taxable asset. Similar to US generation-skipping transfer tax, 20% surcharge is levied to the successor who is neither the spouse, the decedent’s child by blood nor the decedent’s parent by blood. The outcome is the gross tax before tax credit.
Sample allocation of inheritance tax to each successor
Successor

Aggregated net taxable asset

68,000,000

Aggregated inheritance tax

2,000,000
Net taxable asset actually acquired pro-rata Allocation to each successor (gross tax before tax credit)
Spouse 38,000,000 56% 1,120,000
Child 1 15,000,000 22% 440,000
Child 2 15,000,000 22% 440,000
Total 68,000,000 100% 2,000,000
  • (5) Each successor is liable to the inheritance in the net amount after deduction of the tax credits applicable to each successor. Tax credit are;
    (a) Gift tax credit as explained in I.7.(1) and II.3
    (b) Spouse credit. Creditable in the amount of the aggregated inheritance tax prorated by (i) or (ii) whichever smaller among the aggregated net taxable asset
     (i) the spouse’s statutory share of the aggregated net taxable asset or JPY160 million whichever larger
     (ii) the net taxable asset the spouse actually acquired It results in the spouse’s entire relief from the inheritance tax liability as long as the spouse acquires the aggregated net taxable asset up to JPY160 million or the spouse acquires the net taxable asset up to the statutory share (1/2 in the sample above).
    (c) Credit for the minor (See I.9.(3)
    (d) Credit for the handicapped person (See I.9.(3))
    (e) Credit for chain succession, against the inheritance tax on the second succession within 10 years after the first succession
    (f) Foreign tax credit (see I.9.)

Sample calculation of each successor’s inheritance tax liability
Successor Gross tax before tax credit Tax credit applied Net tax after tax credit
Spouse 1,120,000 Spouse credit 0
Child 1 440,000 - 440,000
Child 2 440,000 - 440,000
Only 2 children needs to pay 440,000 each.

9. Foreign tax credit and Tax treaty

(1) Effect and limit of foreign tax credit
When foreign country of location of asset levies the inheritance tax on the asset, the successor of the asset can apply to foreign tax credit against Japan inheritance tax as described below no matter the estate or the successor whichever paid.

Sample A; in million
Foreign asset 10 (A)
Foreign tax paid on (A) 2 (B)
Aggregated taxable asset value including (A) 500 (C)
Japan inheritance tax on (C) before foreign tax credit; 250 (D)
Ceiling of foreign tax credit (E) = (A) / (C) x (D) 5 (E)
Foreign tax credit (B) or (E) whichever smaller; 2 (F)
resulting in eliminating the tax duplication.

However foreign tax credit is not allowable to inheritance tax charged by country other than location of the asset. Because Japan’s scope of taxable asset can extend worldwide, inheritance tax can be duplicated with another country’s tax on worldwide scope.

(2) Application of US-Japan inheritance tax treaty
Japan concluded only with US a special tax treaty for avoidance of duplication of inheritance (and gift) tax charged by the third country.
US-Japan inheritance tax treaty provides additional foreign tax credit of both countries by allocating inheritance tax of either US or Japan whichever higher in proportion to total tax before foreign tax credit.
Effect of US-Japan inheritance tax treaty is described by samples B and C as follows;
(Assuming estate is located only in the third country and disregarding US’s estate tax exclusion of USD5.49million and any other actual tax rates/deductions for simplicity)

Sample B. When US-Japan inheritance tax treaty does not apply;
Foreign asset   500 (A)
Foreign tax (the third country) paid on (A)   50 (B)
Japan inheritance tax on (A)      
(A) x 45% 225   (C)
- foreign tax credit 50= (50) 175 (D)
US estate tax on (A)      
(A) x 40% 200   (E)
- foreign tax credit (50) 150 (F)
Total tax   375 (E)=(B)+(D)+(F)
Total tax rate   75% (E)/(A)


Sample C. When US-Japan inheritance tax treaty applies;
Foreign asset   500 (A)
Foreign tax (the third country) paid on (A)   50 (B)
Japan tax (D) or US tax (F) before application of tax treaty whichever smaller   150 (G)
Japan inheritance tax on (A) with application of tax treaty      
(A) x 45% 225   (C)
- foreign tax credit 50 (50)    
- (G) x  (C) / ((C)+(E)) = (79) 96 (H)
       
US estate tax on (A) with application of tax treat      
(A) x 40% 200   (E)
- foreign tax credit (50)    
- (G) x  (E) / ((C)+(E)) = (71) 79 (I)
Total tax   225 (J)=(B)+(H)+(I)
Total tax rate reduces to the higher rate of either Japan or US   45% (E)/(A)


(3) Other merit of US-Japan inheritance tax treaty
Tax credit for the minor or the handicapped successor is applicable to heir at law of type at B,C,D, E, F, H and J in I.5, for the minor and B,C and D for the handicapped. US-Japan inheritance tax treaty extends to the scope to all types of A to J but in the amount pro rata of the value of asset in US among the total taxable value.

  Scope of tax credit in case of; (See I.5)
Absence of tax treaty Application of tax treaty
Tax credit for minor sucessor B,C,D,E,F,H,J All (A to J)
Tax credit for handicapped sucessor B,C,D


10. Tax filing and payment obligation

When the aggregated net taxable asset exceeds the basic deduction (30 million + 60 million x the number of the heir at law), the successor is obliged to file the inheritance tax return and settle the tax liability by 10 months after acknowledgement of the death. When the successor leaves Japan permanently before the 10 months after, the departure date is due.

Non-resident needs to appoint the tax representative in Japan to administrate Japan tax as the agent. The agreement of division of the asset among the successors needs the certificate of the seal or sign.

The successor is jointly and severally liable to the inheritance tax up to the amount of the net asset which each successor acquires.

11. Tax planning

When it is estimated that the aggregated net taxable asset would exceed the basic deduction resulting in the inheritance tax liability, it is the time to start tax planning. The sooner plan is deployed, the more asset could be passed to the successor without tax.

Any plan on inheritance having foreign element in either decedent, successor or asset should seek legal advisor of each relevant country. Japan law primarily governs inheritance of Japan national decedent. But it does not mean the foreign country accepts it. Furthermore basis of estate and related party might be governed by foreign country, e.g. legitimacy of marriage under the law of the couple’s nationality is prerequisite for spouse deduction in Japan.

Other than assistance of lawyer of each relevant country, essential is estimation of total tax liability in various combination between asset and its successor in the light of foreign tax credit, tax treaty, tax rate of relevant country. Considering Japan’s much higher inheritance tax rate than many others, it would be beneficial to divide estate among the successor to minimize exposure to Japan inheritance tax, e.g. asset outside Japan is transferred to the successor illustrated as A, G or I in I.5. whose scope of the taxable asset is limited in Japan.

Followings, a bit drastic though, merit attention especially for the foreigner/the non-resident;
  • Immigration to the country of inheritance tax-free
    Japan inheritance tax is not levied on the asset outside Japan when both the decedent and the successor are non-resident who did not domicile in Japan anytime during the period of 10 years prior to the death of the decedent as illustrated as G or I in I.5. Countries of inheritance tax-free, Singapore, Hong Kong, Australia, New Zealand are popular destination.

  • Relocate asset to foreign country
    Relocation of the assets in Japan to foreign country would be effective in either case of the successor of A, G or I as illustrated in I. 5., in which the asset outside Japan is not subject to Japan inheritance tax.
  • Buy or build real estate
    Inheritance tax base of real estate is generally much smaller than the cost, especially in case of high-rise condo. In addition certain small scale land is entitled to exclusion from the value at (1) 80% (thereby taxable only at 20% of the value) for the site up to 330m² for the residence of the designated heir, (2) 50% for the site up to 400m²used for the decedent’s business except for the rent and (3) 50% for the site up to 200m² used for the decedent’s rent business.
  • Foreign national successor of spouse or other family member under certain conditions also can apply for this small-scale land exclusion on the site in and outside Japan. The outstanding mortgage of the decedent, if any, is deductive from the tax base.

  • Insurance
    Life insurance proceeds can ease distribution of the estate to the successors and secure the cash for the tax payment. In addition, the exclusion for the life insurance proceeds described in I.7(2) applies also to the insurance outside Japan. While the resident has certain restriction to use the foreign insurance company having no office in Japan, the non-resident might benefit from the foreign insurance of attractive yield/structure more easily than the resident.

II. Gift tax

1. Overview
Gift tax is levied on individual donee of gift (excluding gift through devise or bequest subject to inheritance tax) from individual donor on a calendar year basis. The donee is obliged to file a gift tax return and pay the tax by 15th of March of the following year of the gift. The donor is not required to file or pay the gift tax.

2. Married couple
Property ownership and taxation on married couple generally treats each spouse as a separate individual with separate legal and property rights similar to US common law property system as opposed to US community property system. Joint bank account is not available in Japan. Withdrawal from foreign joint account originated from the spouse income would be regarded as taxable event by Japan tax authority.

Not as generously as unlimited marital deduction in US, however, following relief is provided for the spouse;
  • Gifts to the family member (not limited to spouse) for livelihood or education is generally non-taxable.
  • Spouse credit on the gift of the residence as described in II. 7.(1)(c)
Divorce settlement by a lump-sum cash or property by a former spouse is not subject to the gift tax unless it is regarded as unreasonable or tax-evasion. However, the transferor (former spouse) is subject to income tax on the capital gain on the property settlement using the fair market value at the time of the transfer, which is different from US tax of “no gain or loss” on the property settlement.

3. Inheritance tax and gift tax (Unified taxation on gifts from parent or grandparent)


In contrast to US unified transfer tax on the lifetime cumulative basis of both taxable gift and death time transfer, Japan’s gift tax is levied on gift during the life time separately from the inheritance tax on the death time transfer.
However, unified tax on the lifetime gifts and the death-time transfer is acceptable for the certain gift from the parent or the grandparent under the following conditions:
(1) donor (the parent or the grandparent) is at age 60 or over.
(2) donee (the child or the grandchild by blood) is at age 20 or over.
(3) donee notifies the tax office by March 15 of the following year of the initial gift subject to the unified taxation on the gift from the same donor.
After the election, the gifts from the designated donor continues to be exempt from the gift tax up to the cumulative basis of JPY25 million after the election until the death of the donor. The gifts from the designated donor in excess of the cumulative basis of JPY25 million is taxed annually at the fixed rate of 20% separately from the gifts from any other donors. If foreign country levied the gift tax thereon (the donor or the donee, whichever paid), the foreign tax is creditable against and up to the amount of Japan gift tax. In calculating the inheritance tax on the estate of the designated donor, the inheritance tax base includes the cumulative gifts from the designated donor after the election and the gift tax paid is creditable against the inheritance tax. If the gift tax exceeds the inheritance tax liability, the excess will be refundable.
Merit of the unified taxation;
  • Even when the gifted asset is appreciated after the gift, the inheritance tax base of the gifted asset is fixed as of the date of the gift resulting in tax saving on the appreciation.
  • Exempt from the gift tax up to the cumulative basis of JPY25 million
  • Cash gift for the donee’s early repayment of the loan saves the interest cost.

4. Scope of the taxable assets

Scope of the gift taxable asset varies on nationality and domicile of the donee and the donor as follows;

Donee

Donor is either(A), (B) or (C);

Scope of the taxable assets

Resident in Japan (including foreign national) at the time of the gift foreign national having certain VISA (note 1) whose aggregated resident periods in Japan do not exceed 10 years equivalent during 15 years prior to the death of the gift (A)non-resident at the time of the gift who did not domicile in Japan anytime during the period of 10 years prior to the gift,
(B) non-resident at the time of the gift whose aggregated resident periods in Japan (i) do not exceed 10 years equivalent during 15 years prior to the gift, and (ii) lasts without Japan nationality throughout the period, or
(C) foreign national resident in Japan with certain VISA (note 1) at the time of the gift whose aggregated resident periods in Japan do not exceed 10 years equivalent during 15 years prior to the gift
Yes Only asset in Japan
No Worldwide asset
other than above Yes Worldwide asset
No Worldwide asset
Japan national non-resident at the time of the gift domiciled in Japan anytime during the period of 10 years prior to the gift Yes Worldwide asset
No Worldwide asset
not domiciled in Japan anytime during the period of 10 years prior to the gift Yes Only asset in Japan
No Worldwide asset
Foreign national non-resident at the time of the gift Yes Only asset in Japan
No Certain donor of foreign national non-resident (Note 2)
Other than above Worldwide asset

Note 1. "certain VISA type" is either of; Diplomat, Official, Professor, Artist, Religious activities, Journalists, Highly skilled professional, Business manager, Legal/Accounting services, Medical services, Researcher, Instructor, Engineer/Specialist in humanities/international services, Intra-company transferee, Nursing care, Entertainer, Skilled labor, Training, Cultural activities, Temporary, Student, Technical intern training, Dependent(Family stays)

Note 2. As transitory relief until March 31, 2022, the foreign national non-resident donee of the foreign national non-resident donor who did not domicile in Japan anytime during the period from April 1, 2017 to the date of the gift is taxed only on asset in Japan.

Country of both resident and/or domicile should be read as country of principal base of life judged by actual facts rather than person’s intention. Location of residence, spouse and other dependent, work and major assets are generally paid attention to determine country of resident and domicile. None should not underestimate risk of tax authority’s judgement on the country of resident and/or domicile different from the tax payer’s intention.

5. Location of asset is generally described as follows;

The same as of the inheritance tax described in I.5.

6. The basis of the gift tax includes;
  • Trust property the grantor conveys for the benefit of other individual
  • Life insurance proceeds if the insurance premium was born by neither the insured nor the donee as explained in I.7.(3).
  • Annuity bought by other individual
  • Cancellation of debt except for the insolvency
  • Property purchase from individual at an unreasonably low pricet
7. Computation of gift tax is summarized as follows;
  • (1) Categorize and evaluate the taxable gift into ether of 3 types of ; (a) gift subject to the unified taxation on gifts from parent or grandparent as described in II.3. (“unified taxation”),
    (b) gift from the lineal ascendant (usually the parent or the grandparent by blood) to the donee at age over 20 other than (a) (“special gift”), or
    (c) any other taxable gift. When spouse exclusion described below is applicable, use the net amount after the exclusion. (“general gift”)
    • Spouse exclusion; Spouse exclusion up to JPY20 million is deductible from the taxable gift of the residence in Japan or the cash for purchase of the residence in Japan from the spouse married more than 20 years ago. The residence must be actually used as domicile by March 15 of the following year of the gift
Sample: Donee (son at age over 20) received gifts from the grandfather at age over 60, the mother and the brother in a calendar year as follows. The donee elected unified taxation on the gift from the grandfather and notified the tax office accordingly. The gifts from the grandfather do not reach JPY25 million on the cumulative basis after the election. No foreign tax is levied on any gits.
Donor Gift Value Category
Grandfather Stock 5,000,000 (a) "Unified taxation"
Mother Cash 4,000,000 (b) "Special gift"
Brother Land 1,000,000 (c) "General gift"

  • (2) Tax amount of (a) unified taxation is calculated separately from (b) and (c) as described in II.3.
In the sample, gifts from the grandfather do not reach JPY25 million after the election, resulting in no gift tax liability for the year.
  • (3) Tax amount of (b) and (c) is calculated as follows;
    Deduct the annual exclusion of JPY1,100,000 from the aggregated value of (b) and (c). The outcome is “aggregated net taxable value”.
    The tax amount of (b) = the aggregated next taxable value X the tax rate applicable to (b) below x (the value of (b) / the aggregated next taxable value)
    The tax amount of (c) = the aggregated next taxable value X the tax rate applicable to (c) below x (the value of (c) / the aggregated next taxable value)
Aggregated net taxable value Tax rate applicable to
Over  Up to

 (b)                    Threshold

 concession

(c)                       Threshold

concession
- 2,000,000 10% - 10% -
2,000,000 3,000,000 15% 100,000 15% 100,000
3,000,000 4,000,000 15% 100,000 20% 250,000
4,000,000 6,000,000 20% 300,000 30% 650,000
6,000,000 10,000,000 30% 900,000 40% 1,250,000
10,000,000 15,000,000 40% 1,900,000 45% 1,750,000
15,000,000 30,000,000 45% 2,650,000 50% 2,500,000
30,000,000 45,000,000 50% 4,150,000 55% 4,000,000
45,000,000   55% 6,400,000 55% 4,000,000

The tax amount of (b) and (c) is aggregated. If the foreign country charged the gift tax thereon (the donor or the donee, whichever paid), the foreign tax is creditable against and up to Japan gift tax as described in I.9.

  • In the sample,
    Aggregated taxable value: 4,000,000 + 1,000,000 = 5,000,000
    Aggregated net taxble value: 5,000,000 - 1,1000,000 = 3,9000,000
    Tax amount of (b) = (3,9000,000 x 15% -100,000) x 4,000,000 / 5,000,000 = 388,000
    Tax amount of (c) = (3,9000,000 x 20% -250,000) x 1,000,000 / 5,000,000 = 106,000
    Tax on (b) and (c) total 494,000
  • (4) The annual tax is the total of (2) and (3).
In the sample, only tax on (b) and (c) is payable in the amount of 494,000 for the year. Tax on (a) is settled through inheritance tax at death of the grandfather.

8. Tax filing and payment obligation
Donee is obliged to file the gift tax return by March 15 of the following year of the gift in case of either;
  • (1) donee of the gift of  II.7. (1) (b) and (c) whose aggregated taxable value exceed the annual exclusion of JPY1,100,000., or
  • (2) donee of the gift of  II.7. (1) (a) no matter how small amount of the gift is. Information return until using up the life time exclusion of 25 million explained in II.3.
If the tax payer leaves Japan permanently during the period from Jan 1 to March 15 of the following year of the gift, the tax filing and the tax payment is due on the date of the permanent departure, unless the tax payer appoints a tax representative in Japan and notifies the tax office before the departure.

Ata Tax Accountant Office provides services on the gift tax return and the tax representative especially for the non-resident and the foreigner.
Disclaimer:
The information contained in this presentation is for general information only.
While very attempt is made to ensure that the information has been obtained from reliable source, no guarantee is provided to any information or the use of the information.
In addition, it should be understood that presentations of this nature are for purposes of education and discussion and necessarily involve simplification and compression. Descriptions of tax law in this presentation should be the subject of additional more detailed analysis before compliance or planning is implemented in reliance thereon.
All information is available without charge and is provided strictly not as rendering any professional service nor constituting professional-client relationship.
Any advice in this is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of (i) avoiding penalties that may be imposed under tax laws in any countries or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter(s) addressed herein.
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