Comprehensive Estate Planning

Japanese business start-up consultant

As for the current real property trend in Japan, the number of relatively large-scale real property investment projects by wealthy people in Asia has been increasing.

The aging population and the COVID-19 pandemic has affected the Japanese economy. The government should maximise savings through rapid rationalisation of the estate and the reuse of previously developed land. For example, restructuring public property stock and exploiting surplus government land and buildings contribute to economic growth.

https://www.mlit.go.jp/common/001229088.pdf

Since such cases are intricately connected to the legal issues, a project may not be possible unless the underlying Japanese legal system is understood.

I believe that it is even more important to look at the articles of the relevant laws and precedents with a fresh feeling, and keep up networking with peers and other professionals.

Even if a client is an alien, it is no different from normal work, but it is important to understand what they want to achieve because they might not fully understand the Japanese system and the roles of experts. Clients often talk on the premise of their own system, and it is necessary to explain the Japanese system plainly and clearly. The important thing is to carefully listen to what kind of business the client wants to do. Empathy is essential.

In addition, if the contents of their request is outside the scope of my work, connecting to appropriate specialists is necessary in order for a smooth business operation.

I hope the information is useful.
I will update every Monday.
For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

 

https://lawhelp4u.com/propertyJapan/

Real property in Japan and Highly-Skilled Foreign Professionals

Regarding restrictions on foreign ownership of real property vary from country to country, but Japan is a country which falls into the unregulated category.

Up to now, with respect to the purchase of real property in Japan, the number of people who purchase real property in Japan has steadily increased because of the Tokyo Olympics and the weaker yen.
Popular options are to own apartments or commercial buildings in central Tokyo,  and resort properties in Niseko, Hokkaido.

In Japan, there are no restrictions on non-Japanese purchasing real property regardless of their immigration status, such as permanent residence, nationality, or visa type. The taxation for non-Japanese has no difference from the one for Japanese.

There is no time limit on owning real property, an owner can be freely bought and sold, and can be inherited. However, importantly the inheritance tax or estate tax should be considered.

In principle, there is no visa, such as Tier 1 investor visa (UK) or EB-5 Immigrant Investor Program (US). However, if you have a rental property in Japan with stable income, there is a possibility to be granted permanent residency under the “Highly-Skilled Foreign Professionals” system.

The problem would be a language barrier, but please feel free to contact me in English when buying or selling real property in Japan.

“Highly-Skilled Foreign Professionals”
(高度人材ポイント制)

JPN

http://www.immi-moj.go.jp/newimmiact_3/

ENG

http://www.immi-moj.go.jp/newimmiact_3/en/index.html

I hope the information is useful.
I will update every Monday.
For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

https://lawhelp4u.com/propertyJapan/

The process of buying real property in Japan

Japanese business start-up consultant

Step 1.
The intending seller appoints a real estate agent and the intending purchaser looks for a suitable property through an agent. The real estate agent can either act for both seller and buyer or just the seller.

 

Step 2.
Once the buyer finds a suitable property, they conduct their own due diligence, including whether the price is fair. The intending purchaser (or agent) sends a Letter of Intent as part of the negotiation of price. This is not legally binding.

I provide consulting services for the purchase and sales of real property in Japan.

I research the registration of both company and property on the official record basis, and report it in English. When required, I research the recent property record from the website below.

Public transaction record is available in English.
https://www.land.mlit.go.jp/webland_english/servlet/MainServlet

 

Step 3.
Once the price and any other conditions are agreed, a Real Estate Purchase and Sales Agreement and an Important Disclosure Statement for the property will be prepared by the seller. Broadly speaking, the parties are free to draw up a contract in any form they choose. The buyer should arrange to have the deposit 10% of the purchase price ready for when the contract is signed.

 

Step 4.
The buyer and seller (or authorised agents) sign the contract, which will specify a date for settlement of the balance of payment. The Important Disclosure Statement will be provided either at this time or some time before settlement.

 

Step 5.
On the Settlement date, the impartial Shihoshoshi lawyer deals with the property rights transfer and the outstanding balance of the purchase price (and any costs) is settled. The seller will also hand over various original documents related to the property. It is also possible for the buyer to appoint their own lawyer

I make sure that the transfer of real property on agreed terms is carried out correctly.

I hope the information is useful.
I will update every Monday.

For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)

https://lawhelp4u.com/propertyJapan/

The purpose of the property registration system in Japan

Japanese business start-up consultant

The purpose of the property registration system in Japan is to secure the rights to real property by providing for a registration system to be made to notify the public of real property descriptions and rights, thereby contributing to safe and smooth conduct of transactions.

 

In terms of safe and smooth property transactions, the kind of right that is established in the property is crucial, so the property registration system provides the information concerning property rights below specifying description of the property, the full name(s) of the person(s) and address(es).

1. Ownership
2. Superficies (Surface rights)
3. Farming right
4. Easement (servitude)
5. Priority privilege (Statutory lien)
6. Pledge
7 Mortgage
8. Right of lease
9. Mining right (Right of quarrying)

Registration identification is issued when a holder of a registered right files an application for real property rights, which an identification code is provided in order to confirm that said registered right holder files an application for the registration, with which the registered right holder can be identified.

You can search the property registration.

https://www1.touki.or.jp/beginner/index.html
However, the information is only written in Japanese.
I provide a professional translation services in real estate industry and legal documents.

Akiko HORI

I hope the information is useful.
I will update every Monday.
For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)

https://lawhelp4u.com/propertyJapan/

Tokyo Today : Population Trends in Chiyoda, Chuo and Minato

At the moment, the worldwide economy has been badly damaged by the Covid-19 pandemic. However, as long as people exists, the business never stops.

In the centre of Tokyo, there is always a lively atmosphere because there are many offices and commercial facilities and a lot of people come to work and go shopping in the city. In recent years, the number of residents has been rapidly increasing and it is becoming more active for day-to-day consumption. The graph below shows Population Trends in the three central cities of Tokyo (Chiyoda, Chuo and Minato). The graph is based on the rate of change of population from 2002 to 2019 (Each year is based on October 1st). The total population of Japan was about 126 millions in 2019, in comparison to about 127 millions in 2002, which is about 1% decrease. However the three cities of central Tokyo (Chiyoda, Chuo and Minato) have quite different circumstances. The graph shows the clear difference when comparing three cities with the percentage of Japan as a whole. The main factors are the large supply of apartments at a reasonable cost, combined with every convenience and a well-equipped urban infrastructure.

As such, now is the perfect time to change things for the future investment.

I will update every Monday.

For more information

Japanese business start-up consultant

Shihoshoshi Lawyer

Akiko HORI

http://lawhelp4u.com/propertyJapan/

Estate and Succession planning – 1-7. Making a will Part 2

Japanese business start-up consultant

3. Jurisdiction and applicable law in Succession

 

In Japan, the article 37 of the Act on General Rules for Application of Laws is applied for wills and succession. Article 37 states that the formation and effect of a will shall be governed by the national law of a testator at the time of the formation. Concerning this provision, ‘the formation and effect of a will’ means only matters concerning the transmission of wills, such as the mental capacity, defective evidence of intention, effect of a will or validity of a will. When the will comes into effect at the time of death, the contents of the will, including maintenance obligations arising by reason of death is determined by article 36 of the same law.

Under the Act on the Law Applicable to the Form of Wills, both the governing law of the will (article 37) and the inheritance (article 36) are stated to be the national law, but there is a time gap between the will at the time it was established and the inheritance. If the nationality of the person is different between the time of making the will and at the time of death, the governing law might be different. To avoid the confusion, as a practical matter, a testator can choose which law governs succession to their estate.
In addition, when acknowledging a child or putting an estate in the trust under a will, article 29 (Formation of Parent-Child Relationship with Child Born Out of Wedlock) or article 7 (Choice of Governing Law by the Parties) of the same law is applicable.

As well as the Act on General Rules for Application of Laws, there is the Act on the Law Applicable to the Form of Wills, which was created by ratifying the Convention of The Hague Conference on Private International Law in 1961.
Under the Act on the Law Applicable to the Form of Wills, a formally prepared will becomes valid as long as it complies with the law of the place where the will is established, of the country where the testator has nationality, of the place where the testator had domicile, of the place where the testator had habitual residence or the law of the place where the real property is located.

 

4. Advice

This selective listing of a large number of laws in the Act on the Law Applicable to the Form of Wills allows a statutory will as far as possible, and most wills made under the law of the place where the testator resides will become valid in most of cases. However, in practice, a will which follows the methods of Japanese law is prepared separately in many cases in order to carry out the post-death administrative procedures for Japanese estate smoothly.
It is possible for an individual to make a will for themselves, but that is not without its risks. There might be technical issues that potentially could go wrong. If there are any errors, these could cause problems after the death. I can advise on arrangements for a will, and highlight potential problems that might arise.

I hope the information is useful.

I will update every Monday.

For more information

Japanese business start-up consultant 

Shihoshoshi Lawyer

(Judicial Scrivener)

http://lawhelp4u.com/advice/

http://lawhelp4u.com/propertyJapan/

Estate and Succession planning – 1-7. Making a will Part 1

Japanese business start-up consultant

1. Historical Background

In Japan, since the Middle Ages, the custom was not only for the firstborn legitimate son to inherit most of his parent’s estate, which was generally the case, but also for the eldest girl or youngest son to succeed to and maintain the family business, such as farm fields or business rights.

In the modern era, when an estate was considered as the sum of a person’s assets, the inheritance process was regarded as one of the division of an estate between a small range of close relatives, such as a person’s spouse and their children or parents. Therefore, the principle is that the sum of a person’s assets is distributed equally to the heirs of a certain rank.

As in France and Germany, the Japanese laws have definite rules on who will receive most of a deceased person’s estate, whether there is a will or none, but there is the freedom of making a will.
In addition, there is a system of legally secured portions for certain legal heirs in order to harmonise the legal inheritance rules and the freedom of making a will.

 

2. Legal heirs and the inheritance process under the Japanese law

In Japan, a deceased person’s legitimate surviving spouse will always be their heir, but will only be their sole heir if there are no legal heirs in the first, second or third ranks. Legal heirs in the first rank are the children, lineal ascendants (parents, grandparents, etc.) are in the second rank, and the deceased person’s legal siblings are in the third rank. Heirs of the second rank only inherit if there are no heirs of the first rank, those of the third rank only if there are none of the first two ranks.

If there are several people in the same rank, their portion will be divided equally among all those in the same rank. There is no legal distinction between a biological child or an adopted child or by gender, and even if they become married or adopted, they will still be heirs.

If a deceased person’s child dies before them, and if the child has a child (a grandchild for the deceased person), the grandchild is entitled to inherit and will have the same rank as a living child of the deceased person. Furthermore, if the grandchild also dies before the deceased person, and if the grandchild leaves their child (a great-grandchild for the deceased person), the great-grandchild will be one of the deceased person’s heirs. If the deceased child has several children, they share what would have been their parent’s share equally, and the same principle applies to the children of a deceased grandchild.

If there is no child at all, a deceased person’s lineal ascendant (parents, grandparents, etc.) as the second rank becomes the heir. Amongst lineal ascendants, the heirs will be close relatives (parents will be heirs if there are parents and grandparents). If there are biological parents and adoptive parents, both can be heirs as the same rank.

If there is no lineal ascendant, legal siblings become the heirs as the third rank. Legal siblings mean children who have shared at least one parent in common either by blood or adoption. However, if the legal siblings have shared only one parent in common, their share in the inheritance is one half of the share of a sibling who shares both parents. In addition, in this case, if the siblings who are supposed to be the deceased person’s heirs die before the deceased person, only their child (the deceased person’s nephew and niece) can succeed the third rank of heirs, and not the nephew’s or niece’s child.

If it is not clear who is a deceased person’s heir, the family court will conduct a legal procedure. Under this procedure, an executor for the succession who is appointed by a family court, and will search for the deceased person’s heirs under the family court’s supervision, and deal with matters of succession. If no heirs can be found, the deceased person’s estate may be distributed to those who have physically lived together with the deceased person, such as de facto partner or children, or the family court may consider special circumstances respectively. If there is still any remaining estate, it will become national assets.

An estate consists of various assets such as money, land, movables and loan claims, and the methods of division amongst their heirs is called the inheritance division. If the deceased person determines the method of this division by their will or entrusts their assets to a third party, the division will be followed by the method chosen. If there is no such determination, their joint heirs will decide the method. If no agreement amongst heirs is possible, a family court will be involved. The family court carries out the inheritance division in consideration of the type and nature of the estate, rights relating to the assets and any other circumstances.

To Be Continued.

I hope the information is useful.

I will update every Monday.

For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

https://lawhelp4u.com/propertyJapan/

Estate and Succession planning – 1-6. What happens if someone dies without a will?

Japanese business start-up consultant

In circumstances where someone is living in one country and has assets or property elsewhere in the world and they die without a will, the deceased person’s domicile should first be considered for inheritance purposes. The deceased person might have no permanent residence, but they must have a domicile. Although deciding their domicile would take account of their actions and intentions before their death, proving their domicile ultimately depends on the evidence available at the time. Nationality and residence are not regarded as the only definite evidence but both can have an impact on considering where domicile is. Under the Japanese international inheritance rule, domicile applies to all substantive legal issues related to the inheritance, such as a cause of inheritance, time, place, the heir(s) that are eligible to inherit, inherited property and renunciation.

 

The information below is about the basic principles of the Japanese international inheritance rule.

 

1.  Cause, time and place of death
A death should be registered with a responsible authority.
Whether an official declaration of a person’s disappearance causes inheritance depends on their inheritance law. Under the Japanese principle, when a Japanese court declares a non-Japanese national’s official disappearance, Japanese law has jurisdiction only over their property in Japan.

 

2.  The order of succession and right of inheritance
According to Article 36 of the Act on General Rules for Application of Laws in Japan, inheritance shall be governed by the national law of the decedent, which is based on the deceased person’s domicile. The scope of this rule applies related to eligible heirs, their ability to inherit, such as the inheritance rights of a legal entity or unborn child, and an order of succession.

 

3.  Inherited property
Regarding the inherited property, the same rule of Article 36 of the Act on General Rules for Application of Laws in Japan applies. However, when the inheritance law applying to a deceased person does not permit the inheritance of goods based on its location law or of a damages claim based on a tort, these rights are not inherited.
For example, even though real property ownership may be inherited under the applicable inheritance law of the deceased person’s home country, if its location law limits land ownership, then land ownership is not inherited.

 

4.  Will and testament
Disposal of property by will and choice of law are determined by the inheritance rule.
I will write about will and a choice of law on another occasion.

 

5.  Division of property
Matters relating to the division of inherited property, such as the timing, method, and effects of inheritance are covered by the inheritance rule. Under the Common law system, the division of property may be conducted by a court. However, when the jurisdiction is granted to the law of the deceased person’s domicile, and if it allows jurisdiction where the property is located, a court where the property is located will handle it. Therefore, the Japanese family court might have jurisdiction if the deceased person has a residential address in Japan or if the property is located in Japan. Where the Japanese family court has jurisdiction, the procedural matters are governed by law of the forum, which is Japanese law in this case.

 

6.  Administration of the inherited property
Under Article 882 of the Japanese civil code, the heir(s) succeed to their inheritance on the death of a person, but under the Common law, the inheritance is first attributed to an estate manager or executor, and managed and finalised by those persons, with the involvement of court. If a deceased person domiciled in England left property in Japan, the law initially applicable is the law in England. As previously stated, under the Common law, an executor is needed, and the executor is appointed according to the procedure provided under the law in England.

 

However, when an eligible heir applies for his inheritance to a family court in Japan, based on his property in Japan, the family court in Japan may have jurisdiction. Under the Domestic Relations Case Procedure Act in Japan, there is a procedure for appointing an executor for a succession, provided however this applies only when it is obvious that there is no heir for the deceased person. On the other hand, there is no procedure for the appointment of an executor when there is an eligible heir.

 

If this rule is rigidly applied when it is obvious that there is an heir, it would be impossible to appoint an executor in Japan, and this would not fulfill the objective of the General Rules for Application of Laws. Therefore, it is necessary to interpret the procedure flexibly at a family Court in Japan and apply the appointment procedure to a case which there is an heir, and allow the executor to administer the deceased person’s property in Japan. Importantly, it is necessary to have a family Court understand a case like this, and to explain the international inheritance rule for an individual case.

 

I hope the information is useful.

I will update every Monday.

For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

How to Buy a property in Japan

Estate and Succession planning – 1-5. Beware long-term residents

Japanese business start-up consultant

Importantly, even if a non-Japanese national who lives in outside Japan at the time of his death owns his real property in Japan passes away outside Japan, the person receiving the real property in Japan should file the Japanese inheritance tax form, which is dealt with by a Japanese tax accountant.

 

Moreover, the problem is that long-term residents whose nationality is non-Japanese who have spent longer than 10 years within the past 15 years in Japan before any gift or inheritance or have the residence status set out in Appendix 2 of the Immigration Control and Refugee Recognition Act (such as a spouse visa or permanent resident) are subject to inheritance tax on their global assets even though his heir or the person receiving is non-Japanese national.

 

In comparison with the above case, persons who have the residence status set out in Appendix 1 of the Immigration Control and Refugee Recognition Act and who have been living in Japan for less than 10 years in total within the past 15 years before any gift or inheritance are not subject to gift or inheritance tax on their overseas assets.

 

However, under the inheritance tax rules, if the deceased person is a non-Japanese national and whose address is outside Japan at the time of his death, plus a non-Japanese national who has a domicile outside Japan acquires assets from the deceased through inheritance or bequest, inheritance tax on overseas assets is no longer applicable, regardless of how long those deceased persons and those persons receiving the inheritance or bequest had their address in Japan in the past.

 

In addition, under the gift tax rules, a person who has not had Japanese nationality within the 15 years before the date of no longer having an address in Japan and whose total period of having an address in Japan exceeds 10 years is not subject to the gift tax on their overseas assets after 2 years have passed since leaving Japan.

 

As an additional information, from 1st July 2020, the exit tax rule impose for unrealised capital gains on shares at the time of a departure from Japan. The total amount of the target asset value is 100 million Japanese Yen or more. It is introduced from the viewpoint of preventing tax avoidance for cross border moves.

 

Some long-term foreign residents (10 years or more) in Japan and non-Japanese national whose residence status set out in Appendix 2 of the Immigration Control and Refugee Recognition Act (such as a spouse visa or permanent resident) might be considering undertaking some possible planning. The above explanation is extracted for persons who should be extra careful. A precise advice should be necessary for individual cases.

 

Real property especially has various special rules and discounts for the inheritance tax.
Managing property efficiently and cost-effective is essential in international tax matters.

I hope the information is useful.

I will update every Monday.

For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

How to Buy a property in Japan

Estate and Succession planning – 1-4. Private international law and Inheritance

Japanese business start-up consultant

The inheritance procedure, involving the family law, the matrimonial assets system, and the property ownership system, varies by country or region, and it is important to know in advance which country’s system is applied. Regarding the taxation system, tax types, taxpayers, asset calculation methods or tax rates, also depend on the country or region.
Thinking of the current economic situation, people who do business in Japan and own assets in Japan may consider how to plan the smooth and efficient succession of assets and the business they own. Estate planning costs, but ignoring preparation may cause more complicated problems in the future.
In order to prevent these from those happening, it is a good idea to have a legal professional to deal with possible solutions concerning the assets to reduce the future risk.


1. Continental Law and Common Law

 

  Countries that adopt Continental law, such as Japan, Germany and France, etc. Countries that adopt Common law, such as the United Kingdom and the United States, etc.
Inheritance The doctrine of universal succession The doctrine of Liquidation
Court involvement NO in principle YES in principle

 

2. Which country’s law applies?
(Private international law: Determining applicable law)

Article 36 of the Act on General Rules for Application of Laws in Japan stipulates that inheritance shall be governed by the national law of the deceased persons, which applies regardless of whether the inherited property is personal property or real property.
This principle comes from the tradition of continental law that regards inheritance as a system of inheriting property or status based on kinship. This has been criticised for ignoring the actual location of property and the needs of interested parties.
In consideration of these points, countries such as France, Belgium and China apply the succession law of where the real property is located; that for personal property is determined by the address of the deceased persons at the time of death. However, in this case, when following this principle, problems might occur when real property is located in multiple places or when it is not easy to determine the address of the deceased persons at the time of death.

 

3. New EU inheritance law

In 2015, the EU brought into effect a rule (Regulation No. 650/2012) that defines cross-border inheritance. According to this rule, the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death (Article 21 (1)), which applies whether the inherited property is personal property or real property. However, the Article 21(2) states that, if it is clear from all the circumstances of the case that, at the time of death, the deceased persons were manifestly more closely connected with a State other than the State whose law would be applicable under paragraph 1, the law applicable to the succession shall be the law of that other State. Based on this, the persons can choose the applicable law. The choice must apply to the whole of the succession, and not any part of it. It is important to note that the UK, Denmark and Ireland opted out of this rule. Accordingly, additional steps are desirable.

 

4. Taxation

This regulation only applies to succession to the estates of the deceased persons. It does not apply to revenue, customs or administrative matters. (Article 1(1)). It, therefore, means that the rule does not legislate on the tax position upon death, which is still governed by the laws of individual countries.
In Japan, the scope of duty to pay inheritance tax and gift tax is below.

 

Advance preparation therefore becomes even more important.

I hope the information is useful.

I will update every Monday.

For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

How to Buy a property in Japan