What You Be Careful About Tax Before Living in Japan

Hello, my name is Taisei Koshida, a Certified Public Accountant and Tax Accountant in Japan.

My office assists foreign business owners, investors, and individuals who need support with Japanese tax matters in English. Many of my clients are planning to move to Japan or have already relocated and are surprised by how different the Japanese tax system can be.

If you are considering moving to Japan, it is often worth reviewing your assets and tax situation before the move. A little planning in advance may help you avoid unexpected tax issues later.

1. Japanese Inheritance and Gift Tax

Japanese inheritance and gift tax rules are stricter than those of many other countries.

For inheritance tax purposes, the basic deduction is generally:

30 million yen + 6 million yen × the number of statutory heirs

The tax rate ranges from 10% to 55%, depending on the taxable amount.

For gift tax purposes, the annual exclusion is generally 1.1 million yen per recipient, with tax rates ranging from 10% to 55%.

There are also special tax benefits available for spouses. For example, under certain conditions, a surviving spouse may receive up to 160 million yen of assets without inheritance tax.

One important point for foreigners is that Japanese inheritance and gift tax may apply to overseas assets after moving to Japan, particularly when living in Japan under a spouse visa or as a Japanese national.

Because of this, some families review their asset ownership and gifting plans before relocating to Japan. Depending on your circumstances, making gifts before becoming subject to Japanese inheritance and gift tax rules may be worth considering.

Every case is different, so professional advice is recommended before making transfers of significant assets.

For more information, please see:

Taxes in Japan for Receiving Inheritance or Gifts Across Countries

2. Tax Treatment of Roth IRA and Other Retirement Accounts

Another area that often surprises people is the Japanese tax treatment of foreign retirement accounts.

For example, distributions from a U.S. Roth IRA, which are generally tax-free in the United States when certain requirements are met, may not receive the same treatment in Japan.

As a result, some individuals consider taking distributions before becoming a Japanese tax resident. However, early withdrawals may trigger penalties or other tax consequences in the United States.

The best approach depends on your age, account balance, expected retirement plans, and overall tax situation. Therefore, both Japanese and U.S. tax consequences should be reviewed before making a decision.

Need Help With Japanese Tax Matters?

Our office regularly assists foreign business owners, investors, and individuals with Japanese tax filings and cross-border tax issues.

In addition to tax and accounting services, we can introduce trusted specialists in immigration, company registration, social insurance, legal matters, and business consulting through our professional network.

All services are provided in English.

If you are planning to move to Japan or would like assistance with Japanese tax compliance, please feel free to contact us through our inquiry form.