I’m a US citizen with PR here in Japan. My parents are in their mid-70s and have begun to do some estate planning. They were asking me about estate/inheritance tax laws in Japan and I started to dig into the topic, and I found [retirewiki.jp](https://retirewiki.jp) to be a comprehensive resource.
One question I have is about the basic deduction:
Let’s say, for example, that my father’s net estate amount after debts and funeral expenses are subtracted is 200 million yen. I have a mother and 3 other siblings, so the basic deduction is 60 million yen (30 million + 6 million per statutory heir). This leaves a total taxable estate of 140 million yen.
Let’s say that my mother gets 100 million yen and each child (including me) gets 25 million yen, and this split is not contested within the family.
I don’t think I would be taxed on the entire 25 million, but how do I calculate it? by percentage? 25 million is 12.5% of the 200 million net estate. Therefore 12.5% of the 140 million taxable estate is 17.5 million. Is that correct?
If so, a 15% tax on 17.5 million (2,625,000) minus a further 500,000 yen deduction would be 2,125,000 yen tax, an effective rate of 8.5%.
Can any of you wizards confirm or correct this? Thanks.
\*\*Edit:\*\*
Three things I got wrong.
The following links are great:
[https://japanfinance.github.io/tax/inheritance/](https://japanfinance.github.io/tax/inheritance/) \- this is a good overview with examples.
[https://www.reddit.com/r/JapanFinance/comments/vc3cu4/inheritance\_tax\_questions\_after\_reading\_past/](https://www.reddit.com/r/JapanFinance/comments/vc3cu4/inheritance_tax_questions_after_reading_past/) \- this is a good example with a large inheritance.
First error:
In the case of me, a foreigner living in Japan (as a PR tax resident), inheriting from abroad with no other family in Japan, then only the amount I inherit is “visible” to the National Tax Agency (NTA). So, in my example, the visible portion would be 25 million.
Second error:
the TOTAL TAX OWED on the estate is calculated based on houtei souzoku-bun (法定相続分) . It doesn’t matter if the eventual distribution of the estate is different. In my hypothetical case above, the houtei souzoku-bun says that my mother should get 50% and each sibling should get 12.5%. In my case, the basic deduction of 60 million yen covers the 25 million “visible” estate, so no tax should be due.
Third error:
Were any tax to be owed, the hypothetical houtei souzoku-bun split would determine the total tax owed, and then the actual distribution (% of “visible/taxable” estate received) would be the % of the total tax owed. But as the sole inheritor in Japan, I would owe 100% of the tax bill.
Confused? Go read the links above, they lay it out possibly more clearly.
For me, with 3 siblings, the bottom line seems to be that I will not owe inheritance tax to Japan unless I inherit more than 60 million yen (roughly $400,000).
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by Tatsuwashi