There are detailed rules regarding inheritance in Japan, and the methods of inheritance are stipulated by law.

Furthermore, because the procedures for filing and paying inheritance tax arising from inheritance are complex, in many cases the assistance of professionals such as tax accountants is required.

This article provides a clear summary of the procedures and rules when foreign nationals inherit assets in Japan.

If you are a foreign national expecting to inherit or currently own assets in Japan, please read through to the end.

Inheritance by Foreign Nationals with Assets in Japan

Inheritance that occurs in Japan emphasizes the nationality of the decedent and the heir, rather than the type or amount of assets.

When the heir is a foreign national

Inheritance involving a foreign national as an heir is referred to as “international inheritance” or “cross-border inheritance.”

Japan adopts the “unified inheritance principle,” where the inheritance is based on the nationality of the decedent (the person passing on the inheritance).

Therefore, even if the heir (the person receiving the inheritance) is a foreign national, if the decedent is Japanese, the inheritance is carried out according to Japanese law.

This unified inheritance principle is also adopted in countries such as South Korea.

In addition, there are other systems in the world, such as the “lex domicilii principle,” which bases inheritance on the last address of the decedent, and the “inheritance division principle,” in which only real estate is governed by the laws of the country where the property is located.

When the decedent is a foreign national

If the decedent, meaning the person whose estate is being inherited, is a foreign national, the inheritance is governed by the law of the decedent’s home country.

In this case, even if the inheritance occurs within Japan, it is processed according to the laws of the decedent’s country.

However, if the decedent’s country has adopted the “inheritance division principle” (real estate is governed by the law of its location) or the “lex domicilii principle” (the law of the country of the decedent’s last address applies), then inheritance will be carried out under Japanese law in accordance with that country’s rules.

Inheritance Tax Is Unrelated to Nationality

Inheritance tax is unrelated to nationality.

Therefore, even if either or both the decedent and the heir are foreign nationals, Japanese inheritance tax is often imposed.

However, if the decedent had not lived in Japan for more than 10 years or was a foreign national temporarily residing in Japan, inheritance tax may be imposed only on the assets located in Japan.

Differences in Inheritance Based on the Location of the Heir

This section explains the differences in approach when the decedent is a Japanese national and the heir is a foreign national, and inheritance is processed under Japanese law, depending on whether the heir is in Japan or abroad.

When the heir is in Japan

If the decedent is Japanese and the heir is a foreign national residing in Japan, the inheritance procedures are carried out based on Japanese law.

This is due to Japan’s “unified inheritance principle” mentioned earlier.

Although the documents required differ from those of Japanese nationals, the procedure itself is essentially the same. Inheritance tax applies to foreign nationals in the same way as it does to Japanese nationals.

When the heir is overseas

If the heir is overseas, the procedures may become slightly more complicated, but the inheritance division discussions can be conducted via email or phone, so the inheritance can proceed while the heir remains abroad.

Even if the heir is a foreign national living overseas, if the decedent is Japanese, the applicable law is Japanese law.

Those temporarily living abroad are subject to inheritance tax, but in the following cases, inheritance tax will only be applied to assets located within Japan:

• l  The heir does not have an address in Japan

• l  The heir has not had an address in Japan for over 10 years, or had an address within the past 10 years but not at the time of inheritance, or is a foreign national with residence status

Please be aware that the handling of inheritance tax may vary depending on the situation.

Japanese Nationals Living Abroad Can Also Inherit

Just like foreign nationals, Japanese nationals living abroad and not registered as residents in Japan can also receive inheritance.

However, since they cannot obtain a resident certificate or seal registration certificate, a certificate of residence abroad must be used instead.

Individual Procedures and Points of Caution

This section summarizes important points to note when a foreign national receives inheritance.

Foreign currency-denominated assets must be converted into yen

Assets denominated in foreign currencies must be converted into Japanese yen for the inheritance procedure.

In principle, inheritance tax is calculated based on the TTB (Telegraphic Transfer Buying rate) on the date of the decedent’s death.

Additionally, for real estate located abroad, its value must be assessed based on the rules of the respective country.

Inheritance involving foreign nationals should be handled by professionals

When the heir or the decedent is a foreign national, inheritance procedures become more complex.

Even if the inheritance is carried out under Japanese law, foreign certificates may be required instead of family registers or resident certificates.

Furthermore, if the decedent is a foreign national and inheritance must follow the law of that country, the complexity increases.

Inheritance involving foreign nationals should be handled in consultation with professionals such as tax accountants.

Procedures for Real Estate

A Japanese national decedent can leave real estate to a foreign national heir.

This section explains the procedures when a foreign national inherits real estate in Japan.

Inheritance registration to change the name of ownership

Inheritance registration is the procedure required to change the name of the inherited real estate to that of the foreign national heir.

The official term is “ownership transfer registration,” and this is also carried out in inheritance among Japanese nationals.

However, in the case of a foreign national, it may be impossible to obtain family registers, seal registration certificates, or resident certificates.

In such cases, equivalent substitute documents must be prepared.

To prove the identity of someone from a country that does not have a family register system, documents such as a foreign resident certificate may be used.

Additionally, if foreign documents are used, they must be translated into Japanese.

Payment of registration and license tax during inheritance registration

When conducting ownership transfer registration, registration and license tax is imposed in addition to inheritance tax.

As a rule, the tax rate is 0.4% of the real estate value for land or buildings.

Furthermore, inheritance tax must be declared and paid within 10 months from the day after the heir becomes aware of the inheritance.

Points to Note When Foreign Nationals Inherit Real Estate in Japan

Foreign nationals inheriting real estate in Japan should take note of the following points:

Check the management condition of the property

When inheriting real estate, be sure to confirm the management condition of the property.

Real estate that has not been managed for many years may be associated with the following issues:

l  The building may be deteriorated and pose a risk of collapse

l  If a deteriorated building collapses and causes damage to neighbors, compensation liability may arise

l A third party may be unlawfully occupying the building or land

l  Lack of vegetation management may result in pest infestations

In this way, inheriting long-neglected real estate may result in disadvantages.

Especially for heirs living abroad at the time of inheritance, it may be difficult to confirm the property’s condition. Be sure to enlist help—such as a local professional—to check the property’s management condition before proceeding with inheritance.

Disadvantages when the property is not managed by a property management company

When inheriting a building, if no property management company is managing it, the building may be poorly maintained and its value as an asset may have significantly decreased.

Since property owners are responsible for managing the building, they may be held liable in case of trouble regardless of whether they are at fault.

Additionally, if the local government designates the property as a “Specified Vacant House,” fixed asset tax benefits may be lost.

Be aware that inheriting poorly managed real estate may lead to increased tax burdens and legal responsibilities.

wagaya Japan provides management services for foreign property owners.

With over 40 years of experience in Japanese real estate management and multilingual support, please feel free to consult with our company.

Summary

When foreign nationals inherit assets in Japan, they must basically follow Japanese law and pay inheritance tax.

However, please note that the procedures may differ in cases such as when the decedent is a foreign national or the heir does not have an address in Japan.

Inheritance involving foreign nationals is complex and should be entrusted to professionals such as tax accountants.

At wagaya Japan, we collaborate with multilingual professionals. If you have any questions regarding inheritance involving foreign nationals, please feel free to contact us.