Information on Investment and doing business in Japan for Foreign Investors / Foreign Companies Vol.3”Revision of inheritance tax related to foreigners in the 2021 Tax Reform Charter”
Along with the structural change of the global business model, foreign companies and multinational companies are actively being attracted in Japan as well, while the strengthening of international taxation is increasing in speed and complexity. This report provides foreign investors and foreign companies with practical information on doing business and taxation in Japan.
Commentary：Nihonkeiei Will Tax Co.,LTD
Representative Tax Accountant Shuji Niwa
Outline of 2021 tax reform
In order to establish Japan’s position as a Global Financial Center, the following tax measures will be taken for inheritance tax from the viewpoint of attracting businesses, human resources, and funds from overseas as tax measures for becoming an international financial cities.
the amendments will exclude overseas properties acquired by a non-japanese national who resides overseas or stays in Japan for a short term as heir/donee from the scope of inheritance tax/gift tax regardless of the residence period of decedent/donor who has domicile in Japan for employment, etc.
It is still in the stage of tax reform, and details would be announced at a later date, but the outline is as follows. （”resident status” means that the statuses of residence listed in Appended ‘Tables 1’ of Immigration Control and Refugee Recognition Act.）
|1.Heir or donee||A non-Japanese national with resident status who resides in Japan for a short term.|
A non-Japanese national who resides overseas, etc.
|2.Decedent or donor||A non-Japanese national with resident status who resides in Japan when an event occurs causing the inheritance.|
|3.Property to be acquired and taxation||Where the heir or donee of 1 above acquired overseas properties from the decedent or donor of 2 above by inheritance or gift of, the overseas properties would be excluded from scope of the tax payment obligations of inheritance tax or gift tax.|
Example case by this amendment
For example, in the following cases; Twelve years have passed since a foreign employee of a US company was assigned to Japan as an expatriate with the above the “resident status”, and inheritance occurred at that time. Then, the spouse residing in the United States acquired assets in Japan (domestic property) and assets outside Japan (foreign property). After the amendment, only Japanese domestic property acquired by a spouse residing in the United States is subject to Japanese inheritance tax.
In this case, under the inheritance tax before the revision, the decedent (expatriate) has lived in Japan for more than 10 years (if he / she has lived for 10 years or more within 15 years before the start of inheritance), so the resident spouse who live in the United States will be subject to Japanese inheritance tax on both domestic and foreign property acquired.
Therefore, this amendment will ease the taxable object of inheritance tax related to foreigners if certain conditions are met.
(Note) This article is an excerpt of the outline based on the 2021 Tax Reform Proposals announced on December 10, 2020, and there may be difference between the actual law revision and detailed provisions.
For specific business, please consult with a tax accountant or other specialist in advance after confirming the law, ministerial ordinances, notifications, etc.
- Vol.1 “Strengthening of International Taxation in Japan”
- Vol.2 “Selection of business form / institutional design of corporation”
Nihonkeiei Will Co.,LTD
Representative tax accountant Shuji Niwa
This article makes general comments based on information available at the time of publication. Actual tax and management decisions need to be considered individually, so please consult a tax accountant or other expert before making any decisions. We cannot take any responsibility even if you make a decision based on this article and suffer damage directly or indirectly.
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