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Japan inheritance tax in 2026: rates, rules, and what US expats must know
Japan levies inheritance tax on each heir’s share at progressive rates from 10% to 55%.
The basic exemption is ¥30 million plus ¥6 million per statutory heir. For a surviving spouse and two children, the first ¥48 million of the estate is tax-free.
US citizens and green card holders who inherit assets connected to Japan may owe tax in both countries. The US-Japan Estate Tax Treaty provides a credit mechanism to reduce double taxation, but it does not eliminate the filing requirements on either side.
If you live in Japan or stand to inherit Japanese assets, you will likely need to file a Japanese inheritance tax return within 10 months of the date of death. You must also separately report the inheritance to the IRS.
Does Japan have an inheritance tax?
Yes, Japan imposes one of the world’s highest inheritance tax rates, reaching up to 55% on the largest taxable shares.
Japan’s inheritance tax – known as sozoku-zei – is levied on each heir’s share of the estate, not on the estate as a whole. This is a key structural difference from the US estate tax, which is assessed against the total estate before distribution.
The tax is calculated after subtracting the basic exemption. Because each heir is taxed on their own share, two siblings who inherit unequal amounts from the same parent will each pay a different amount of tax.
Who is taxed on worldwide assets?
Whether an heir is taxed on worldwide assets or only on Japan-situs assets depends on the heir’s own citizenship and history of living in Japan, as well as the decedent’s domicile, nationality, and visa status:
- Heirs living in Japan are generally taxed on their worldwide inherited assets.
- Japanese-citizen heirs living abroad are generally taxed on worldwide assets if they had a Japan address at any point in the 10 years before the inheritance, regardless of where the decedent lived.
- Non-Japanese-citizen heirs with no recent Japan ties are generally taxed on worldwide assets only if the decedent was domiciled in Japan long-term.
- Japan-situs-only taxation usually applies to non-Japanese-citizen heirs when the decedent was a foreign national with temporary status or a non-resident who left Japan well before death.
Japan inheritance tax rates and brackets for 2025
Japan inheritance tax rates range from 10% on the smallest taxable shares to 55% on shares exceeding ¥600 million.
The full 8-bracket schedule for tax year 2025 is below. The first ¥10 million is taxed at 10%; anything above ¥600 million is taxed at the top rate of 55%.
| Taxable share (¥) | Rate | Deduction (¥) |
|---|---|---|
| Up to 10,000,000 | 10% | 0 |
| 10,000,001 – 30,000,000 | 15% | 500,000 |
| 30,000,001 – 50,000,000 | 20% | 2,000,000 |
| 50,000,001 – 100,000,000 | 30% | 7,000,000 |
| 100,000,001 – 200,000,000 | 40% | 17,000,000 |
| 200,000,001 – 300,000,000 | 45% | 27,000,000 |
| 300,000,001 – 600,000,000 | 50% | 42,000,000 |
| Over 600,000,000 | 55% | 72,000,000 |
Japan’s top inheritance tax rate of 55% is among the highest of any developed nation. The deduction column lets you calculate tax in a single formula: multiply the taxable share by the rate, then subtract the deduction.
The 20% surcharge applies to anyone who isn’t the decedent’s spouse, child, or parent: siblings, nieces and nephews, unrelated beneficiaries, and grandchildren who inherit directly rather than stepping into a deceased parent’s place.
A grandchild named directly in a will, for example, pays the standard rate plus 20%, even though they’re a lineal descendant.
How Japan calculates the basic exemption – kiso kojo
The Japan inheritance tax basic exemption determines how much of an estate passes tax-free. Japan uses a four-step calculation to determine each heir’s tax liability.
- Identify the number of statutory heirs under Japanese civil law. Statutory heirs include the surviving spouse and children, regardless of what the will says.
- Apply the exemption formula: ¥30 million + ¥6 million × number of statutory heirs. A family with a surviving spouse and two children has a basic exemption of ¥48 million.
- Subtract the exemption from the gross estate value. Only the amount above the exemption is taxable.
- Allocate the taxable estate among heirs by their legal share. Each heir’s tax is calculated separately using the rate table above.
Who is subject to Japan’s inheritance tax – residency and domicile rules
Inheritance tax in Japan applies based on the domicile of both the decedent and the heir. Japan uses a domicile-based system with broad reach. The rules differ depending on your residency category.
- Heirs with a domicile in Japan are generally taxed on worldwide inherited assets. This includes all real estate, financial accounts, and investments anywhere in the world.
- Non-resident heirs may be taxed on worldwide assets based on their own citizenship and Japan ties, not only the decedent’s status. A Japanese-citizen heir who had a Japan address at any point in the 10 years before the inheritance is generally taxed on worldwide assets, regardless of where the decedent lived. A non-Japanese-citizen heir with no recent Japan ties is generally taxed on worldwide assets only if the decedent was domiciled in Japan long-term. Taxation limited to assets located in Japan – property, bank accounts, and securities held there – generally applies to that heir only when the decedent was a foreign national with temporary status or a non-resident decedent who had left Japan well before death.
- Former residents can still trigger worldwide taxation. A decedent who had a Japanese address within the 10 years before death is generally treated as domiciled in Japan for inheritance tax purposes. Their worldwide assets may be subject to Japanese inheritance tax even if they had moved abroad before dying. A separate 15-year/10-year test applies only to foreign nationals currently living in Japan on limited-term visa status.
- Long-term visa holders, including those on work or spouse visas, may be treated as residents. They owe inheritance tax if the decedent was domiciled in Japan at the time of death.
Inheritance tax in Japan for foreigners and US expats
A US citizen domiciled in Japan is treated as a Japanese tax resident for inheritance purposes. Their worldwide estate – including US retirement accounts, brokerage holdings, and real property – is subject to Japanese inheritance tax.
A foreign heir who receives assets from a Japan-domiciled decedent also faces Japanese inheritance tax on those assets. This applies even if the heir has never lived in Japan.
The 20% surcharge applies to foreign beneficiaries who are not the spouse, child, or parent of the decedent – this includes grandchildren who inherit directly rather than as a substitute for a deceased parent.
An American niece inheriting from a Japan-based uncle, for example, would pay the standard rate plus 20%.
The US-Japan estate tax treaty
Per the UN Treaty Series, the US-Japan estate tax treaty was signed in 1954 and has been in force since April 1, 1955. It provides relief from double taxation but does not eliminate inheritance tax obligations for US citizens domiciled in Japan.
Key provisions of the treaty:
- Foreign tax credit. If a US citizen in Japan pays Japanese inheritance tax, they can credit that amount against their US estate tax liability – and vice versa.
- Situs-based allocation. The treaty assigns taxing rights based on the domicile of the decedent and the location of the assets.
- Active claim required. Treaty benefits are not automatic. Under IRC §2014(e), the credit must generally be claimed within four years of filing the estate tax return, with limited extensions if a Tax Court deficiency case is pending or the IRS granted a payment extension.
- Unified credit interaction. The treaty’s credit provisions interact with both countries’ exemption amounts. Careful coordination is necessary to avoid overpaying.
See our TFX guide to US tax obligations in Japan for the broader tax picture facing Americans in Japan.
Japan inheritance tax deductions and exemptions
Japan offers several deductions that can substantially reduce or eliminate inheritance tax for qualifying heirs.
Spousal deduction
The Japan inheritance tax spouse exemption is one of the most powerful tools in Japanese estate planning. A surviving spouse pays no tax on the greater of ¥160 million or their statutory legal share of the estate.
In practice, a surviving spouse can inherit up to ¥160 million completely tax-free – and often more, depending on the number of heirs.
Life insurance exemption
Life insurance proceeds paid to statutory heirs are exempt up to ¥5 million per statutory heir. A family with three statutory heirs can receive ¥15 million in life insurance proceeds tax-free. This exemption applies only to policies where the decedent was the insured.
Minor child deduction
A minor heir receives a deduction of ¥100,000 for each year remaining until age 18. A 10-year-old heir would receive a ¥800,000 deduction. The threshold was lowered from age 20 to 18 in the 2022 reform.
Disabled person deduction
A disabled heir receives a deduction of ¥100,000 for each year remaining until age 85. For severely disabled heirs, the deduction increases to ¥200,000 per year.
Other deductions
Funeral expenses and outstanding debts of the decedent are deductible from the gross estate before the tax calculation begins.
Japan inheritance tax on property: how real estate is valued
Japanese real estate is not assessed at full market value for inheritance tax purposes. The valuation method typically results in a built-in discount compared to what the property would sell for on the open market.
Land is valued using the rosenka – the roadside land price published annually by the National Tax Agency. The rosenka is typically set at roughly 80% of the Official Land Price, which itself approximates fair market value. This means land is effectively assessed at about 80% of its market price.
Buildings are valued using the fixed asset tax assessed value, which is based on the building’s reconstruction cost reduced for age and wear – not the price it would fetch on the open market. The exact ratio to rebuild cost varies by structure type and age, but it is consistently lower than market value.
The combined effect means Japanese real estate often enters the inheritance tax calculation at a meaningful discount to what it would fetch in a sale.
Small-scale residential land reduction
Qualifying residential land receives an additional reduction of up to 80% on the first 330 square meters. Eligibility depends on who inherits the home. A surviving spouse qualifies automatically, even if they don’t live there.
A child or other relative generally must live in the home from the decedent’s death through the tax filing deadline and continue to hold the land. An heir who owns no home of their own can also qualify under a separate rule, even without ever having lived with the decedent, as long as no other heir was already living in the home and a few other conditions are met.
A surviving spouse qualifies automatically; other heirs generally need to live in the home, or qualify under the separate rule for heirs who don’t own a home of their own.
See our TFX guide to Japan property tax for the ongoing property tax obligations that come with owning real estate in Japan.
Why is Japan’s inheritance tax so high?
Japan’s 55% top inheritance tax rate reflects a deliberate post-war policy of wealth redistribution that has remained largely intact for decades.
After World War II, the Allied Occupation’s Shoup Mission restructured Japan’s entire tax system as part of broader efforts to redistribute wealth and prevent its reconcentration.
These reforms took place alongside the dissolution of the zaibatsu industrial conglomerates through separate deconcentration measures. Together, the reforms reshaped how wealth is transferred between generations in Japan.
Japan’s aging population and high asset concentration in older generations continue to put pressure on maintaining high rates.
The government views the inheritance tax as a tool for intergenerational equity – preventing large fortunes from compounding across generations.
The rate has remained high even as other countries have reduced or eliminated their inheritance taxes.
Japan’s 55% top rate compares to 40% in the US and 40% in the UK. Germany’s rates are progressive by relationship to the decedent: 7% to 30% for close family such as spouses and children, 15% to 43% for more distant relatives, and 30% to 50% for unrelated heirs.
How to avoid inheritance tax in Japan
There is no way to completely eliminate Japanese inheritance tax on a large estate, but several legal strategies can significantly reduce the burden.
- Maximize the basic exemption by structuring statutory heirs. Each additional statutory heir adds ¥6 million to the exemption. Adoption, which is common and legally routine in Japan, can increase the number of statutory heirs – though the tax code limits the benefit to one adopted child if there are biological children, or two if there are none.
- Use lifetime gifting within the annual exclusion. Japan’s gift tax annual exclusion allows ¥1.1 million per recipient per year tax-free. Consistent annual gifts over 10 or 20 years can transfer significant wealth outside the taxable estate. Be aware that the lookback window for gifts is being extended from three years to seven years. For a death occurring before January 1, 2027, the lookback is still three years. It widens gradually for deaths through 2030, and only reaches the full seven years for deaths on or after January 1, 2031.
- Hold qualifying real estate for the small-scale residential land reduction. The 80% reduction on the first 330 square meters of residential land can shelter a substantial amount of property value. This requires the heir to continue living in the property.
- Use life insurance strategically. Each statutory heir provides ¥5 million in tax-free insurance proceeds. A family with three statutory heirs can shelter ¥15 million through life insurance – one of the simplest tools available.
- Consider the timing of domicile changes carefully. Under the 10-year lookback rule, moving abroad does not immediately reduce Japanese inheritance tax exposure. Planning a domicile change requires at least a decade of foresight.
US estate tax obligations for Americans in Japan
US citizens are subject to federal estate tax on their worldwide assets regardless of where they live.
A US expat in Japan is subject to both Japanese inheritance tax and US estate tax on the same worldwide estate.
The federal estate tax exemption for tax year 2025 is $13.99 million per individual. Estates below this threshold owe no federal estate tax. The One Big Beautiful Bill Act permanently raised the exemption, and under Revenue Procedure 2025-32 it is $15 million per individual for tax year 2026, so the reduction once scheduled for 2026 will not happen.
A US citizen living in Japan who dies with a worldwide estate above $13.99 million (2025) faces both a Japanese inheritance tax return and a US estate tax return on Form 706. Cross-border estate planning is essential to coordinate the two obligations.
See our TFX guide to nonresident alien estate tax and US situs assets for how situs rules work when a non-citizen spouse is involved.
Claiming the foreign tax credit for Japanese inheritance tax paid
US taxpayers who pay Japanese inheritance tax may claim a foreign tax credit on their US estate tax return to offset double taxation. The credit is calculated separately from the income tax foreign tax credit and is claimed on Form 706.
The US-Japan Estate Tax Treaty governs how the credit works. The credit is limited to the lesser of the Japanese tax on the relevant assets or the US tax on those same assets. You cannot credit more than the US tax actually owed.
See our TFX guide to double taxation for how credit mechanisms work across different countries.
Reporting a Japan inheritance to the IRS: Form 3520 and FBAR
Reporting a Japan inheritance to the IRS requires attention to several separate filing obligations, each with its own threshold and penalty structure.
Form 3520
A US person who receives a bequest from a foreign individual or foreign estate must report it on Form 3520 once the total gifts and bequests from that person for the tax year exceed $100,000. A lower, inflation-adjusted threshold of $20,116 for tax year 2025 applies only to gifts from foreign corporations or partnerships, not to a personal inheritance.
Failure to file triggers a penalty of 5% of the unreported amount per month, capped at 25%. Form 3520 is an information return – it does not create a tax liability on its own. But the penalties for non-filing are severe.
FBAR – FinCEN Form 114
If you inherit foreign financial accounts and the aggregate value of all your foreign accounts exceeds $10,000 (2025) at any point during the year, you must file an FBAR.
This includes bank accounts, securities accounts, and certain insurance policies held in Japan.
FBAR penalties for tax year 2025 are capped at $16,536 per year for non-willful violations – not per account. The Supreme Court settled this in 2023 in Bittner v. United States: The non-willful penalty applies once per unfiled report, no matter how many foreign accounts you had. Willful violations are still assessed per account, up to the greater of $165,353 or 50% of the account balance.
Form 8938 – FATCA
US expats living abroad must also file Form 8938 if their specified foreign financial assets exceed certain thresholds.
For single filers living abroad, the thresholds are $200,000 (2025) at year-end or $300,000 (2025) at any time during the year. For married filing jointly, the thresholds are $400,000 (2025) at year-end or $600,000 (2025) at any time.
Japan inheritance tax filing deadlines and payment rules
The Japanese inheritance tax return must be filed and the tax paid within 10 months of the date of death. The return is filed with the tax office that has jurisdiction over the decedent’s last domicile.
Both residents and non-residents with Japan-situs assets must meet this deadline.
Extensions are available in limited circumstances, but they are not automatic.
Installment payment – enno
When the tax exceeds ¥100,000, and the taxpayer cannot pay in full, installment payment may be available for up to 20 years, depending on the composition of the inherited assets. The taxpayer must apply by the 10-month filing deadline and provide collateral.
Payment in kind – butsuno
When even installment payment is insufficient, the taxpayer may apply to surrender assets – typically real estate or securities – directly to the government in lieu of cash. This option is subject to NTA approval and is available only after installment payment has been considered.
Inherited retirement accounts and trusts in Japan
Japan treats US retirement accounts and trust structures differently than the US does – and the differences create planning traps.
Retirement accounts
Because Japan taxes the worldwide assets of a Japan-domiciled decedent, US retirement accounts – 401(k)s and IRAs – held by that decedent are likely included in the Japanese taxable estate at their fair market value.
Japan has no mechanism that mirrors the US tax-deferred treatment of these accounts, so the balance would typically be exposed to inheritance tax regardless of whether distributions have been taken. Since no single NTA ruling addresses this, confirm the specific valuation and reporting mechanics with a cross-border estate planning specialist before relying on it.
Japan generally does not recognize the tax-deferred status of these accounts, so the full balance is typically subject to inheritance tax regardless of whether distributions have been taken.
Trusts
Japan generally recognizes the legal validity of US trusts. Per the NTA’s interpretive circular on Article 9-2 of the Inheritance Tax Act, a person who becomes entitled to trust property is treated as receiving it by gift or bequest, so the trust structure itself provides no separate tax benefit.
This principle likely extends to US revocable living trusts, but the rule was not written with US trusts in mind, so practical application can vary.
This means a revocable living trust does not avoid or reduce Japanese inheritance tax. Practical complications also arise with property registration offices, banks, and courts in Japan, which may have difficulty processing foreign trust structures.
See our TFX guide to the 2026 retirement plan limits for how the updated 401(k) and IRA limits affect expat retirement planning.
Step-up in basis: does Japan offer a cost basis reset on inherited assets?
Unlike the US, Japan does not provide a step-up in basis for inherited assets.
Heirs carry over the decedent’s original acquisition cost for income tax purposes. If the decedent bought property for ¥20 million and the heir later sells it for ¥50 million, the heir owes capital gains tax on the full ¥30 million gain.
This is the opposite of the US rule under IRC §1014, which resets the cost basis to fair market value at the date of death. Under the US rule, unrealized gains accumulated during the decedent’s lifetime are effectively erased.
The absence of a step-up is a significant planning trap for US expats. Heirs who later sell inherited Japanese property may owe significant capital gains tax in Japan on top of the inheritance tax already paid.
See our TFX guide to avoiding capital gains tax on inherited property for the US-side rules on inherited property and how to coordinate them with Japan’s system.
Japan gift tax: the connection to inheritance tax planning
Japan’s gift tax – zoyo-zei – is closely linked to the inheritance tax but uses its own separate progressive rate schedule. The gift tax schedule is not the same as the inheritance tax schedule. Gift tax rates range from 10% to 55% across a different set of brackets with different thresholds.
Annual exclusion
Each recipient can receive up to ¥1.1 million per year from any donor without triggering gift tax. Gifts above this amount are taxed at the applicable gift tax rate.
Clawback rule
Under Japan’s 2023 tax reform, effective for gifts received on or after January 1, 2024, the period for adding lifetime gifts back into the taxable estate is being extended from three years to seven years. For a death occurring before January 1, 2027, the lookback is still three years.
The window widens gradually for deaths through 2030 and reaches the full seven years for deaths on or after January 1, 2031. A separate ¥1 million deduction applies to the combined total of gifts made in years four through seven of the lookback window, not ¥1 million for each of those years.
Relative gift tax system – sozoku-ji seisan kazei
Japan also offers an alternative system that allows gifts to be aggregated with the estate at death and taxed under the inheritance tax schedule instead. This can be advantageous for large single transfers, but it requires consistent annual action – not a last-minute decision.
Lifetime gifting within Japan’s annual exclusion is one of the most accessible strategies for reducing a taxable estate over time.
Cross-border estate planning for US expats in Japan
Coordinating US and Japanese estate obligations requires attention to six key areas.
- Establish domicile status clearly. Determine which country’s worldwide tax applies and plan accordingly. The 10-year lookback rule makes future domicile changes something to plan years in advance.
- Review beneficiary designations on US accounts annually. Japan may treat these differently than the US, particularly for retirement accounts and life insurance.
- Coordinate wills under both US and Japanese law. A Japanese will may be required for Japanese real estate. A US will should cover US-situs assets. The two documents must not contradict each other.
- Consider the impact of the 10-year lookback rule before changing domicile. Moving out of Japan does not immediately end inheritance tax exposure.
- Establish life insurance as a source of tax-free liquidity for heirs. The ¥5 million per statutory heir exemption provides immediate cash to cover the tax bill.
- Work with advisors licensed in both jurisdictions. A coordinated US-Japan estate plan requires two separate legal documents – a US will and a Japanese will – to ensure assets in both countries pass efficiently.
FAQ
Yes. Japan levies an acquisition-based inheritance tax on each heir’s share of the estate. Rates range from 10% to 55% across eight progressive brackets. Whether the tax reaches worldwide assets depends on the residence, citizenship, and visa status of both the decedent and the heir.
The amount depends on each heir’s taxable share after deducting the basic exemption. The basic exemption is ¥30 million plus ¥6 million per statutory heir. Any amount above the exemption is taxed at rates from 10% to 55%.
The formula is ¥30 million + ¥6 million × number of statutory heirs. A surviving spouse and two children produce a basic exemption of ¥48 million.
Yes, if the decedent was domiciled in Japan or if the inherited assets are located in Japan. A foreign heir receiving assets from a decedent who was domiciled in Japan long-term is generally subject to Japanese inheritance tax on worldwide inherited assets regardless of the heir’s own residence. If the decedent was a foreign national with temporary status in Japan, that heir is generally taxed only on assets located in Japan.
Yes. The treaty has been in force since 1955 and provides a credit mechanism to prevent double taxation. The Japan estate tax credit must be actively claimed within four years of filing the US estate tax return.
The return must be filed and the tax paid within 10 months of the date of death. Installment payment is available for qualifying taxpayers who cannot pay in full, and payment in kind is a last resort.
Form 3520 must be filed if a US person receives a bequest exceeding $100,000 in the tax year from a foreign individual or foreign estate. An FBAR is required if the aggregate value of inherited foreign accounts exceeds $10,000 (2025) at any point during the year.
Yes. Under the US-Japan Estate Tax Treaty, Japanese inheritance tax paid may be credited against US estate tax liability. The credit is claimed on Form 706 and is limited to the US tax attributable to the same assets.
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