Japan · Tax regime
Japanese inheritance and gift tax exposure for foreign residents
In force. The current architecture dates from the 2017 and 2018 reforms, which introduced the Table 1 visa carve-out and the 10-out-of-15-years test. This is not a programme. It is a structural risk that disqualifies Japan for many families.
Japan taxes the recipient, not the estate, and it reaches worldwide assets whenever the heir or the deceased fails the temporary-foreigner test. The trap that catches UHNW families is the visa table. Table 1 work visas, such as Business Manager, Highly Skilled Professional and Engineer, get the 10-out-of-15-years carve-out. Table 2 statuses, such as permanent resident, spouse of a Japanese national and long-term resident, do not. So the J-Skip holder who takes permanent residency after one year, thinking he has found a fast track, has just moved his entire global estate into a 55% net with no grace period at all.
Qualifying routes
JPY 30m plus JPY 6m per statutory heir. For a spouse and two children, that comes to JPY 48m, roughly USD 300k. Everything above that is taxable.
55% applies to each heir's taxable share above JPY 600m.
The facts
- Total landed cost
- The exposure can reach 55% of a worldwide estate. For a family with USD 100m of assets and no Japanese connection other than residence, that exposure runs into tens of millions of dollars.
- Route type
- Tax regime, not a visa
- Physical presence
- Exposure is driven by jusho, or domicile, in Japan. It is not simply a matter of nationality or visa status.
- Permanent residency
- Not applicable
- Citizenship
- Not applicable
- Language test
- Not applicable
- Dual citizenship
- Not permitted. You would have to renounce.
- Requirements
- Table 1 visa holders, meaning work statuses such as Business Manager and Highly Skilled Professional, who have had jusho in Japan for less than 10 of the last 15 years are exempt from Japanese gift and inheritance tax on overseas assets, provided the counterparty is also a temporary foreigner or a non-Japanese national living outside Japan.Table 2 statuses, including permanent resident, spouse or child of a Japanese national, and long-term resident, do not qualify for the carve-out.Assets located in Japan are always within scope.The top rate is 55%. The basic exclusion is JPY 30m, plus JPY 6m per statutory heir.
- Taking Japanese permanent residency converts you from a Table 1 temporary foreigner into someone whose worldwide estate is exposed to Japanese inheritance tax immediately. For most UHNW families, permanent residency in Japan is the wrong move. Rolling a Table 1 visa instead is the right one. This is counterintuitive, but that is the whole point.
- The 10-out-of-15-years test looks both ways. Exposure can arise because of the heir's status, even if the deceased never set foot in Japan. It can also arise because of the deceased's status, even if the heir lives elsewhere. Model both sides.
- Marrying a Japanese national and taking a spouse visa is a Table 2 status. It carries the same immediate worldwide exposure.
- Assets located in Japan are always taxable, regardless of anyone's status. Buy a Tokyo apartment and that property carries permanent Japanese estate exposure.
- A Japanese national who leaves the country still carries worldwide inheritance tax exposure for 10 years after departure. Emigration does not switch this off.
- Gift tax mirrors inheritance tax, running as high as 55%, and it closes the obvious escape route. Giving assets away during your lifetime is not a quick fix.
- Foreign trusts are frequently ineffective. Japan may look through them, and a trust that works for US or UK purposes can be transparent for Japanese purposes. Do not assume your existing structure travels.
- Japan also levies an exit tax of 15.315% on unrealised gains on securities worth JPY 100m or more, if you have been resident for more than 5 of the preceding 10 years. Leaving to escape the inheritance regime can itself trigger a bill. Payment can be deferred for up to 10 years, with the right procedures.
- The 10-year clock is measured against the past 15 years of residence, so time spent in Japan on an earlier posting still counts. Families who lived in Japan before need to count backwards carefully.