Estate and Succession planning – 1-1-1. How is Inheritance Tax calculated in Japan?

Japanese business start-up consultant

The Japanese Law, tax system and inheritance system shall prevail in this blog.
When proceeding this type of scheme, the case should be dealt with a tax accountant.

I previously promised in this blog about writing the calculation for the inheritance tax in Japan. In Japan, the Inheritance tax is a tax on beneficiaries, each heirs should file the inheritance tax return individually. However, generally speaking, legal heirs ask for this task to the same tax accountant. That’s why it looks as if legal heirs file the Inheritance tax return all together at once.

Firstly, the Inheritance tax in Japan will be incurred as shown below.

STEP 1: Calculation of the taxable gross estate, including the receivable amount of life insurance.

STEP 2: Debt deduction and other fees, such as a funeral ceremony fee.

STEP 3: Basic deduction. This is statutory deduction, and if the taxable gross estate is under this deduction, heirs should not need to declare the inheritance tax return.
30,000,000 Japanese Yen + 6,000,000 Japanese Yen x The number of heirs.

STEP 4: Calculation the total amount of inheritance tax assuming that the heirs divide the deceased person’s estate in a legal portion.

¥100,000,000 – ¥48,000,000 = 52,000,000

Ex.) 1. Taxable estate amount.

  Total estate

After Basic Deduction

Legal

portion

Acquired amount on the law basis
Spouse ¥ 52,000,000 × 2/4= ¥26,000,000
Child 1 1/4= ¥13, 000,000
Child 2 1/4= ¥13, 000,000
  1. Tax calculation

By using the table below, the amount of tax for each legal heir is calculated.

Table for deduction amount

Acquisition amount of

each legal heir (A)

Tax Rate (B) Deduction amount (C)
¥10,000,000 and under 10% ¥0
¥30,000,000  and under 15% ¥500,000
¥50,000,000  and under 20% ¥2,000,000
¥100,000,000  and under 30% ¥7,000,000
¥200,000 ,000 and under 40% ¥17,000,000
¥300,000,000  and under 45% ¥27,000,000
¥600,000,000  and under 50% ¥42,000,000
Over ¥600,000,000 55% ¥72,000,000

 

 

  Legally acquired amount (A)×(B)-(C)  
Spouse ¥26,000,000 ×15%- ¥500,000 = ¥ 3,400,000
Child 1 ¥13, 000,000 ×15%- ¥500,000 = ¥ 1,450,000
Child 2 ¥13, 000,000 ×15%-- ¥500,000 = ¥ 1,450,000
    Total Inheritance Tax ¥ 6,300,000

 

STEP 5: Proportional distribution the total amount of inheritance tax by the actual inheritance amount that each heir inherits. The Inheritance tax in Japan is calculated based on the actual received amount. If each legal heir get one-third of the estate, the actual inheritance tax ratio is shown below.

  Total Inheritance tax Actual receivable ratio  
Spouse ¥ 6,300,000 ×1/3 = ¥ 2,100,000
Child 1 ×1/3 = ¥ 2,100,000
Child 2 ×1/3 = ¥ 2,100,000
There is a Marital Deduction (Until ¥160,000,000) for the legitimate spouse in Japan. There are various types of deduction. Further consultation is needed.

The Japanese tax authority doesn’t recognise the joint account under the Common law because they always put their importance to the actual contribution to a married couple’s estate. Sometimes, this might lead to the mismatch of cross-border taxation.

 

It is so easy to make mistakes and, if there are any errors, this can cause problems after the death that will go on to create unintentional upset for the family. A good lawyer or tax accountant is likely to save money in the long term because we can deal with things quickly.

 

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

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