Changes to Gift/Inheritance Tax Policy in Japan

The International Bankers Association (IBA) Japan is a trade association for foreign banks and securities firms based in Japan and also other associated financial services firms. It carries out a range of services and activities to promote a strong and efficient financial sector and support members’ business interests.

IBA would like to inform BCCJ members about the upcoming changes to gift and inheritance tax policy and the potential effects for expats living in Japan:

From 1 April 2017, the inheritance and gift tax rules in Japan will change.

Foreign nationals whose visa status is that of a permanent resident, spouse of a permanent resident or spouse of a Japanese national will continue to be subject to the full rules with no exemptions.

• Foreign nationals who have lived in Japan for 10 years or less out of the last 15 will no longer be subject to the rules on assets located outside of Japan.
• Foreign nationals who have lived in Japan for more than 10 years out of the last 15 will continue to be subject to the full rules with no exemptions. In addition, if they permanently leave Japan they could be liable to pay these taxes for up to five years after their departure.
• Japanese nationals who decide to relocate their tax residency outside of Japan will now have to wait 10 years (instead of five) to no longer be subject to Japanese inheritance and gift tax.

The International Bankers Association Japan has carried out a considerable amount of advocacy work on this topic including in partnership with the ACCJ and EBC. The outcome is that shorter-term residents will be in a much improved position because up unto the 31st March 2017, regardless of the length of residency, all global assets are/were taken into account.

This link to the IBA website includes advocacy materials which set out the IBA’s case and the likely impact of the current and future rules.

This link is to the IBA manga which shows Jane Smith being interviewed on a TV documentary shown during the 2020 Tokyo Olympics. She explains that after living for many years in Japan she and her husband returned home to the UK. She tells how John Smith unfortunately passed away some two years after returning and that in order to pay the inheritance tax bill that the Japanese authorities claimed was their due, she had to sell her family home.