Estate planning and appointing a lawyer in Japan Part 1

We are all mortal. Realising we live with uncertainty all the time makes us appreciate the moment. However, when we become older, we possess many things, such as money, clothes, goods and even home ownership, so called property. Because of the uncertainty that it never tells when dying, it is very difficult to prepare for the death. Making a will was less common in Japan, because it is believed that will bring bad luck, but things have been changing these days, and Covid-19 crisis is accelerating these trends.

I am giving advice on how to make a will from time to time, but the most difficult to deal with is a tax issue. Long-term planning is essential, because there is no miracle solution.

The most commonly used estate planning is as follows.

Making a contract with a life insurer

There is a life insurance deduction under inheritance tax system in Japan. Inheritance tax in Japan will not be payable within the following limits at the time of spouses death.

Tax exemption limit: JP¥5,000,000 x number of legal heirs

It can be a foreign affiliated insurance company, but it is only applicable for insurance companies which have licensed to sell their insurance products in Japan.

I will continue this theme, but I would like to emphasise that it is hard to distinguish the good from the bad. Building trust takes time, and advice should be specific to the client’s needs and circumstances.

司法書士堀明子 – HORIakiko –
司法書士 / ビジネスコンサルタント / ライフ・コーチ
Shiho-shoshi Lawyer / Business consultant / Life coach
Email:　horiakiko@lawhelp4u.com
Tel: +81-(0)3-3249-1536　https://lawhelp4u.com/%e6%a5%ad%e5%8b%99%e6%a1%88%e5%86%85/%e7%9b%b8%e7%b6%9a%e7%99%bb%e8%a8%98/

Choices about how to succeed

It was after my grandfather’s death that I first became aware of the “inheritance process”. I was already married at the time, and I had never cared about the “law” itself until then. At that time, when my family got into trouble with the division of the estate, I realised that “The law was something that costs money and time, and if I hadn’t prepared for it beforehand, the situation wouldn’t proceed as I want”. That’s why I started studying for the Shihoshoshi lawyer’s exam. Now I am working as a lawyer.

In the past, it was the standard practice for the eldest son to inherit the family’s estate, but today, each heir has the right for a certain portion of the estate. I would like each individual to come to understand the options for the estate succession, and they can make their own choices about how to succeed.

Specifically, the following options could be possible.

Leave it to the potential heirs after death. (This is the current mainstream.)
Make a gift in advance.
Leave a will.
Coming to an agreement into effect before death or by a will.
Using the adult guardianship system.

Every procedure has its pros and cons, and as long as we are alive, we have different individual feelings. It would be impossible for others to understand a person’s heart 100%, but I believe it is important for a lawyer to make an effort to understand individuals’ feelings, feel empathy to their thoughts, and achieve their plan within the framework of the law.

Rather than us not caring about our inheritance problems, we might be so busy in our daily lives that we don’t have time to think about the death of a parent, grandparent or our own death. However, it will definitely happen at some point in the future.

The judicial statistics for 2018 shows that about 76% of the cases that are brought to family courts nationwide are ones of estates under 50 million YEN (equivalent to about 360,000 UK pounds). Any conflict regarding distributing an estate is not uncommon, and all of us might encounter it.

I try to be proactive about inheritance-related procedures and succession planning as my motivation for becoming a lawyer is related to my family’s inheritance issues.

As part of the process, I often talk to a client about how to start their succession planning. I believe that succession planning is a “letter to the family or people who will be heirs or beneficiaries”. My advice is to encourage my clients to write it like a letter first if they don’t know how to distribute their property,

Documents should be finalised under the appropriate law because a succession planning is a legal process, but perfect documents cannot be prepared from the beginning, and the writing from your heart is most important. After that, leave the process to the experts. I want to follow the person’s heart as best I can.

I will update every Monday.
For more information

https://lawhelp4u.com/propertyJapan/
Japanese business start-up consultant
Shihoshoshi Lawyer
(Judicial Scrivener)
Akiko HORI

Family, Inheritance and legally secured portion

The following contents on this subject of legally secured portions are written in accordance with Japanese civil law.
I will write an outline of the “legally secured portion” in relation to the international law another time.

In my work as a Shihoshoshi Lawyer, I often have opportunities to talk with heirs and relatives about the inheritance procedure for the deceased person’s real property. Because of these experiences, I often think about my life and death through a number of legal proceedings. I don’t think I need to think about this too seriously, but as long as I am a human being, I will die one day, and when I do die, I hope that I avoid conflicts between my heirs as much as possible.

In my opinion, Shihoshoshi Lawyers, who are primarily working on non-conflicting cases and legal administrative matters, have a different perspective from Bengoshi lawyers, who are working on any cases including negotiating legal disputes.

In Japan, when a person makes a will or gifts real property to someone before their death, or divides their estate among the heirs after the inheritance occurs, there is often a problem about the “legally secured portion”.

The “legally secured portion” in Japan acknowledges the right of heirs other than the siblings of a deceased person to get a certain percentage of the estate, if the deceased person’s parent is the only heir, the fixed percentage is one-third of the entire estate. If a child is included among the heirs, he or she will be allowed a legally secured portion, even if the child is an adult. When a spouse or a child (or both) are included as an heir, the legally secured portions is one-half of the entire estate. The individual heir multiplies this entire estate by their individual legal percentage.

It is easy to say “a certain percentage” in words, but it’s hard to know what the extent their estate is at the time of death. Even if the heirs clarify what is the whole estate, if a conflict arises because one of the heirs keeps an excessive proportion of the estate, and they refuse to negotiate, the heir who thinks they have not received what is their right should take action in a court. However, it is not always possible for such an heir to be granted their full entitlement in accordance with their wishes.

In today’s nuclear families, it is common for different generations not to live together when children legally become adults at 20 (at 18 from 1st April, 2022), and there might not be many opportunities for them to see each other if they live separately. However, inheritances will always occur at some point. I think the best way to avoid a conflict is actually to find as many opportunities as possible to keep in close contact, see each other once in a while, and keep the relationship between parents and children alive. I believe that with rights always come obligations. I don’t think looking after parents is an obligation, but I do believe that this responsibility as a child exists to some extent.

Please refer to the article about “Estate and Succession planning – 1-7. Making a will Part 1 & Part 2”

https://akikohorishihoshosilawyer.wordpress.com/2020/06/01/estate-and-succession-planning-1-7-making-a-will-part-1/

I will update every Monday.
For more information

https://lawhelp4u.com/propertyJapan/

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

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

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

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

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

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

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?

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

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

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

Estate and Succession planning – 1-3. How to value the assets

The Japanese Law, tax system and inheritance system shall prevail in this blog.
Based on the above premise, the following rules will help you to understand the scheme in Japan. When proceeding this type of scheme, the case should be dealt with a tax accountant.

How to value the assets – For Inheritance Tax purposes

Importantly, the aim of this scheme is to pass on the property in the most effective way from an individual to a private company. Some of clients that come to seek an advice are not 100% confident about the detail of their property when starting a consultation. I can then assist them to create the list of their property. This problem is caused partly because of the format of the documents that are issued from different organisations.

1. Money in bank accounts
In Japan, many banks still use a bank book (See below), and the bank book records all banking transactions, so it is similar bank statement. In order to reduce paper use, the bank book may replace online banking statement, but it is still familiar to elderly people.
The remaining cash balance shall be valued when considering inheritance tax.

2. Stocks and shares
When stocks are listed on the market, they are valued based on their quotation on the Stock Exchange on which the stock is listed. The taxable time is the date on which the person died or his/her heir receives the gift. It is better to make a list of all the shares, including the name, nominal value and types of shares.

Unlisted private shares are valued as below.
If the person who acquires shares through inheritance or gifts is the person who already has the power to control the company, the net asset value method is used, which is the principle evaluation method.
If the acquiring person is not such a person, the dividend return method is used, which is a special evaluation method.
The valuation of unlisted private shares may be valued by a tax accountant because the evaluation method is crucial.

In this blog, a simple calculation method is stated.
A principle evaluation method (Net asset value method)
(Company assets – Company debt) / Number of issued shares x Number of shares to be inherited
A special evaluation method (Dividend return method)
{“(A) Annual dividend amount per share”/ 10%} × {“(B) Capital amount per share”÷ 50 Japanese yen}

3. Buildings
The value of a building for the inheritance tax calculation is the Fixed Assets Tax Evaluation price.

4. Land
In principle, the land value is the price which is published on the National Tax Agency website below, called Land Tax Assessment Value.
The roadside land price is the price per square meter of the residential land alongside the road in question, and the price is displayed in units of 1,000 Japanese yen.

https://www.rosenka.nta.go.jp/

5. Household and personal goods
The term ‘Household and personal goods’ means things such as furniture, paintings, TV, audio and video equipment, jewellery, cars, boats, antiques and so on.
You do not have to get a professional valuation for ordinary household and personal goods but if you do estimate the value, the open market value at the date of death is used. For this purpose, you may use an estimated figure.

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