We are Murata Sogo Tax & Accounting Office, located in Miyakojima-ku, Osaka, specializing in inheritance and international taxation.
This time, we would like to explain the concept of inheritance tax for foreign nationals (those living in Japan on a spouse visa or those with permanent resident status).The following are some examples.

(1) In the case of inheritance of property in the U.S. of a foreign decedent (who resides in Japan with permanent resident status) by an heir who resides in the U.S. and is a U.S. citizen.

As long as the decedent resides in Japan, both the property in Japan and the property in the U.S. are subject to Japanese inheritance tax, even if the decedent is a foreign national. However, if the decedent falls under the category of "foreign decedent (Article 1-3(iii)-2 of the Phase I Law)," only property located in Japan is subject to tax.

a. What is a foreign decedent (Article 1-3-3-2 of the Phase Law)?

A "foreign decedent" is a person who has a certain status of residence at the time of inheritance. The status of residence referred to here is "the status of residence in the upper column of appended table 1 of the Immigration Control and Refugee Recognition Act (Article 1-3-3-1 of the Ministerial Ordinance).

b. What is the status of residence in the upper column of appended table 1 of the Immigration Control and Refugee Recognition Act?

This page (https://www.moj.go.jp/isa/applications/status/qaq5.html) of the Immigration Control and Refugee Recognition Act is easy to understand.

The status of residence is defined, and the status of residence of diplomat, official, professor, art, etc. are listed. Those who stay in Japan with the status of residence in the upper column of Appended Table 1 are considered "foreign decedents" and only their property located in Japan is subject to inheritance taxation.

c. What happens if the decedent is staying in Japan with permanent resident status?

Permanent residence is defined as "status of residence in the upper column of Appended Table 2 of the Immigration Law" as "Permanent Resident". In other words, since the status of residence does not fall under the status of residence in the upper column of Annexed Table 1, it does not fall under the category of "foreign decedent.

In other words, in this case, the U.S. property inherited by the heir who resides in the U.S. and is a U.S. citizen will also be subject to Japanese inheritance tax.

(2) Inheritance of U.S. property from a U.S. decedent by an heir who is a foreign national (living in Japan on a spouse visa)

This case is the opposite of (1).

As long as the heir lives in Japan, both property in Japan and property in the U.S. are basically subject to Japanese inheritance tax, even if the heir is a foreign national.
However, if the decedent falls under the category of "Temporary Resident (Article 1-3(iii)(i) of the Phase I Law)," only property located in Japan is subject to taxation.

a. What is a temporary resident (Article 1-3-3-1 of the Phase Law)?

A "temporary resident" is a person who has a certain status of residence at the time of inheritance and whose total period of residence in Japan within 15 years prior to the commencement of inheritance is 10 years or less. Here, too, "certain status of residence" is "status of residence in the upper column of appended table 1 of the Immigration Control and Refugee Recognition Act (Article 1-3 (iii) (i) of the Ministerial Ordinance).

b. What happens if the heir is staying in Japan on a spouse visa?

Spouse visa is defined as "Status of Residence in the upper column of Annexed Table 2 of the Immigration Control Act" as "Spouse or Child of Japanese National". In other words, it does not fall under the status of residence in the upper column of Appended Table 1, so it does not fall under the category of "temporary resident.

In other words, in this case, U.S. property inherited from a U.S. decedent would also be subject to Japanese inheritance tax.

In this article, we have introduced some examples of inheritance tax cases that cross international borders.

International inheritance is often complicated due to the determination of the taxpayer, and errors are very common. If you have any inquiry regarding these cases, please get in touch with me via contact form.