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.
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For more information
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI
Akiko Hori-Shihoshosi lawyer@Tokyo, Japan 