Inheritance by Foreigners
The number of foreigners staying in Japan has been increasing for a long time. It is expected that as the foreign residents increase more as more inheritances those inheritees are foreigners increase in the future.
The inheritance when a foreigner passes in Japan, there are cases to conduct based on the Japanese law or the law in one’s home country (the country in which the inheritee was born). We have to be careful about the point that even if the one passes in Japan, the inheritance is not necessarily conducted by the Japanese law.
Which country’s law would be applied when the inheritee is a foreigner
When a foreign nationality inheritee passes in Japan, first, we conduct the inheritance based on which country’s law would be a problem.
1-1．The law of the country with the inheritee’s legal domicile will be applied in principle
In Article 36 of the Act on General Rules regarding the application of the law (written as “the Act on General Rules” in the following), it is provided that “the inheritance is conducted by the inheritee’s national law” and if the inheritee is a foreign nationality, the inheritance will be conducted based on the law of the country with the inheritee’s legal domicile.
1-2．When the laws differ depending on the places
The laws are different depending on the states in America. About the countries that the laws differs depending on the places like this, it is provided that “the law designated by that country’s regulation (snip) will be the party’s national law” in Clause 2, Article 38 of the Act on General Rules. Additionally, it is provided that “when there are no such regulations, the law of the place which is the most closely related to the party will be the party’s national law”.
When the inheritee’s nationality is America, the common view is that there is no “law designated by that country’s regulation” that is provided in the text so “the place which is the most closely related to the party” (closely related place) has to be decided. That is to say, the law of the state which is the closely related place will be the national law.
The closely related place is decided by referring the place of birth, address and others, but it could be difficult in the business practice. In this kind of case, we recommend confirming with the lawyer who has a detailed knowledge of the international inheritance.
1-3．When the party has multiple nationalities
When the inheritee is a foreigner, it is conceivable that the party has more than 2 nationalities. Some countries allow or conditionally accept multiple citizenships in Europe.
In Clause 1, Article 38 of the Act on General Rules, when the party has more than 2 nationalities, it is provided that “if either of those nationalities is Japanese nationality, the Japanese law will be the national law of the party”.
When the party does not have the Japanese nationality, it is provided that “when the party has a habitual residence in the countries with the nationalities, that country’s law will be and when the party does not have a habitual residence in any of those countries with the nationalities, the law of the place which is the most closely related to the party will be the party’s national law”.
Inheritance Procedure when the inheritee is a foreigner
It is conceivable that the national law will be the Japanese law when the inheritee has the nationalities of America and England and had a habitual residence in Japan or Japan was the most closely related place.
The same as the closely related place, the habitual residence is decided based on the place where that person resided for a long time, but we recommend confirming with the professional when it is difficult to judge.
1-4．Could follow by Japanese law by the regulation of the national law
In Article 41 of the Act on General Rules, it is provided that “when it is by the party’s national law, when it should be by the Japanese law following that country’s law, it will be by Japanese law”. This is called “Renvoi” in the legal term.
When the inheritance of the movable property such as the cash equivalents and securities has to follow the law of the inheritee’s native country, on the other hand, the inheritance of the immovable property has to follow the law of the country where it is located.
For example, when the inheritee’s nationality is Chinese, the inheritance of the immovable property in Japan will be based on the Japanese law.
Registration of inheritance when the inheritee is a foreigner
The registration of inheritance is necessary when you inherit the immovable property. In the inheritance of the immovable property located in Japan, even if the inheritee is a foreigner, the registration of the inheritance will be followed by the Immovable Property Registration Law in Japan.
In the registration of inheritance, the family registers of the inheritee and the inheritor are necessary in order to determine the inheritor, but most of the countries don’t have the family register system. Because of that, when the inheritee is a foreigner, it is necessary to obtain a certificate that is an alternative to the family register.
The followings are alternatives to the family register.
Birth Certificate
Marriage Certificate
Death Certificate
Affidavit etc
An Affidavit is all the inheritors swear that “we are the inheritors of the inheritee and there are no inheritors except for us” and obtain a certification by a consulate in Japan or a notary public.
These documents naturally created in foreign languages. In order to use them for the registration of the inheritance, it is necessary to attach translations.
Inheritance tax when the inheritee is a foreigner
Regarding a taxation of the inheritance tax, the nationality of the inheritee is unrelated. The inheritance tax in Japan decides the scope of assessment depending on the locations of the inheritee and inheritor’s addresses and property.
3-1．The inheritance tax will be decided by the address of the inheritee
Even if the inheritee is a foreigner, as long as the address is in Japan, the inheritance tax in Japan will be taxed. Both of the property in Japan and the property outside of Japan will be the taxable objects.
However, for the inheritance after April 1, 2017, when both of the inheritee and inheritor are short term stay foreigners, the taxation has been eased only to the property within Japan. For other scopes of assessment according to the address of the inheritee and inheritor, please refer the below chart.
Also, when it applies to the certain cases, the transitional measures are provided.
The inheritance procedure when the inheritee is a foreigner
3-2．Statutory Share in Inheritance when calculating the inheritance tax
When calculating the inheritance tax, first, assume that the heir-at-law inherits the property for the statutory share in inheritance, calculate the tax amount of each inheritor and determine the total amounts. And then, proportionately divide the total amounts of the inheritance tax based on the actual proportions each inheritor inherited.
When calculating the total amount of the inheritance tax, even if the inheritee has a foreign nationality, it is provided to be calculated based on the inheritor and share in inheritance regulated by Japanese civil law.
3-3．Inheritance proportion when declaring the undivided bequest
The due date of declaring the inheritance tax is decided as within 10 months after the death of the inheritee. However, when the inheritee is a foreigner, the declaring sometimes cannot meet the due date because of taking time to obtain necessary documents and others.
Since the postponement of declaring the inheritance tax is not allowed, when it cannot meet the due date, we declare the undivided bequest. Declaring the undivided bequest is the way to calculate and pay the inheritance tax by assuming the inheritance has divided as the statutory share in inheritance and submit the revised tax returns after the division of inherited property has been done.
In declaration of the undivided bequest when the inheritee is a foreigner, you need to be careful since the ways of thinking for the inheritance division rates will be as below when calculating the total amount of the inheritance tax and proportionately dividing that total amount by each inheritor.
Calculation for the total amount of the inheritance tax: to be calculated based on the inheritor and share in inheritance regulated by Japanese civil law.
Calculation for the tax amount of each inheritor: to be calculated based on the inheritor and share in inheritance regulated by the inheritee’s national law
SUMMARY
When the inheritee with the foreign nationality passed in Japan, the inheritance will be conducted by the national law in principle. However, when the national laws are different depending on the place or has the multiple nationalities, the advanced decision might be needed on which law to apply.
For the inheritance registration of the immovable property in Japan, it will be conducted based on the Japanese law, but since there are no family register systems in most of the foreign countries, it takes time to obtain documents for the procedures. Regarding the inheritance tax, the taxable objects will be decided by the place of residence not by the nationality of the inheritee. If the inheritee resided in Japan, the Japanese inheritance tax will be taxed regardless of the location of the property.
As stated, when the inheritee is a foreigner, the way of thinking is different from the cases of Japanese people. We recommend consulting with a professional with a detailed knowledge of the international inheritance in both legal affairs and tax practice aspects.
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We provide legal services regarding inheritance for foreigners in Japan.
If you have any queries for inheritance,please don’t hesitate to contact us.
