Just the basic facts
As always, please remember that I am just some guy writing a blog, and you should consult a tax professional or the tax office for accurate, up-to-date information ;)
Inheritance taxes are a pretty controversial topic in personal finance. Some countries like Australia don't have them. Other countries like the US have very high allowances before tax is due.
The Japanese inheritance tax system is less forgiving than these, but for most people should not be too onerous.
There is a lot of misinformation out there though. I often see comments like: "Japanese inheritance taxes are 55%!", or "Japan tries to tax foreigners unfairly". This is a distortion of the truth.
We have written about the tax implications for foreign residents of Japan before:
Inheritance Tax in Japan 2 (Feb 2018)
Tax Status in Japan (Sep 2017)
Tax Residence and Inheritance Tax (Aug 2017)
The Exit Tax (July 2016)
You can find a simple guide to inheritance tax in English on the Ministry of Finance website.
As you can see, it's a far cry from "55% tax rate" ;)
The first thing is that you must declare any inheritances to the tax office within ten months of finding out about them.
Then the diagram above shows the rest of the process.
The total value of the estate is calculated. The standard deduction is subtracted from the value. The standard deduction is 30m yen plus 6m per legal heir (these are family members as described in tax law). Liabilities are also deducted, as is tax-exempt property, etc.
Then the taxable estate is divided across the heirs. The total amount of inheritance tax due is calculated, then divided proportionally among the heirs.
You can see the tax rates here:
Finally any further allowances are applied and the tax is paid. A spouse gets 160m yen, or the statuatory allowance, whichever is larger, tax free. Children get 100,000 yen per year they have left until they reach the age of 20.
The same calculation is carried out for inheritances from abroad, where the tax is calculated for the inheritance as a whole but only paid on the share actually inherited by the resident of Japan (not on the entire inheritance, another common misconception).
Generally speaking, you will need to declare and pay inheritance tax on foreign inheritances if you have a spouse or permanent resident visa, or if you have lived in Japan for more than ten years.
There are other potential deductions too, so if you receive a large inheritance it may be worth consulting a tax professional. For most people, the tax office will be happy to help you do your paperwork and as you can see from this post the impact of inheritance tax is likely to be light or non-existent for most families.
What do you think? Did I miss anything? Do you have experience of navigating the Japanese inheritance tax system?