This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
The most common misunderstanding about inheritance tax in Japan is that you apply the rate table directly to the property you personally received. The National Tax Agency (NTA) warns against exactly this: "the rates are not applied directly to the property each person actually acquired." The correct method has three steps: (1) subtract the basic exclusion from the estate, (2) split the remainder by the statutory shares of inheritance as a hypothesis, apply the rates and add the results up, (3) redivide that total by the proportion each person actually received. This article works through a household with an estate of 80 million yen, a surviving spouse and two children, using the rate table (10% to 55%) and the fixed deductions to arrive at the amount payable, then sorts out the spousal tax credit, the 20% surcharge and the minors' credit from NTA materials.
The short answer: an 80 million yen estate with a spouse and two children means 1.75 million yen in total
| Step | Calculation | Amount |
|---|---|---|
| (1) Subtract the basic exclusion | 80 million yen minus (30 million yen + 6 million yen x 3 heirs) | Taxable estate 32 million yen |
| (2) Split by statutory shares as a hypothesis and apply the rates | Spouse 1/2 = 16 million yen, 15% minus 500,000 yen | 1.9 million yen |
| Child 1/4 = 8 million yen, 10% | 800,000 yen | |
| Child 1/4 = 8 million yen, 10% | 800,000 yen | |
| Sum = the total inheritance tax | 3.5 million yen | |
| (3) Divide by what each person actually received (here, exactly the statutory shares) | Spouse 3.5 million yen x 1/2 = 1.75 million yen, then the spousal tax credit | 0 yen |
| Children 3.5 million yen x 1/4 = 875,000 yen each, for two | 1.75 million yen |
Our own calculation. The procedure follows NTA No.4152 "Calculating inheritance tax", the rates follow No.4155 "Inheritance tax rates", and the spousal credit follows No.4158.
On an estate of 80 million yen, the tax paid comes to 1.75 million yen in total, or about 2.2%. Contrary to the impression that inheritance tax is heavy, the first inheritance is light while a spouse is alive. The heavy one is the second inheritance, when there is no spouse.
The inheritance tax rate table
The rates apply to "the amount acquired in proportion to the statutory share of inheritance". They do not apply to the amount of property you received[NTA No.4155].
| Amount acquired per the statutory share | Rate | Fixed deduction |
|---|---|---|
| 10 million yen or less | 10% | — |
| Over 10 million to 30 million yen | 15% | 500,000 yen |
| Over 30 million to 50 million yen | 20% | 2 million yen |
| Over 50 million to 100 million yen | 30% | 7 million yen |
| Over 100 million to 200 million yen | 40% | 17 million yen |
| Over 200 million to 300 million yen | 45% | 27 million yen |
| Over 300 million to 600 million yen | 50% | 42 million yen |
| Over 600 million yen | 55% | 72 million yen |
In the NTA's own example, a taxable estate of 152 million yen shared by a wife and two children gives the wife 76 million yen at 30% minus 7 million yen, or 15.8 million yen, and each child 38 million yen at 20% minus 2 million yen, or 5.6 million yen. The total inheritance tax is 27 million yen[NTA No.4155].
Step 1: subtract the basic exclusion from the net estate
First, work out the taxable value for each heir and add them up. To land, buildings, deposits and shares you add life insurance proceeds and death retirement benefits above their exempt allowance, then subtract debts and funeral expenses. From that figure you subtract the basic exclusion of 30 million yen plus 6 million yen per statutory heir, and what remains is the taxable estate[NTA No.4152].
| Number of statutory heirs | Basic exclusion |
|---|---|
| 1 | 36 million yen |
| 2 | 42 million yen |
| 3 | 48 million yen |
| 4 | 54 million yen |
- An heir who has disclaimed the inheritance is still counted, as if the disclaimer had not happened.
- Adopted children count up to one if there is a natural child, and up to two if there is none.
- If the land under the family home uses the special exception for small residential land, the taxable value uses the figure after the 80% reduction.
- Gifts made before the death are added back too: annual gifts within the add-back period and gifts under the settlement taxation system (after deducting the 1.1 million yen a year).
If the taxable estate is zero or less, no inheritance tax is due. How the basic exclusion works is set out in the basic exclusion for inheritance tax and how to reduce the bill.
Step 2: split by the statutory shares as a hypothesis, apply the rates, add them up
The taxable estate is split as if it followed the statutory shares under the Civil Code, regardless of how it is actually divided. With a spouse and children the spouse takes 1/2 and the children share the rest equally; with a spouse and parents the spouse takes 2/3; with a spouse and siblings the spouse takes 3/4. Apply the rate table to each split amount (rounded down to the nearest 1,000 yen) and add everyone's figures together: that sum is "the total inheritance tax"[NTA No.4152].
Because of this mechanism, the same estate produces a smaller total when there are more heirs. Even if one person takes everything, the total is fixed by the progression that applies after the hypothetical split.
Step 3: redivide by what each person actually received, then apply credits and surcharges
The total inheritance tax is apportioned by the share of the taxable value each person actually acquired. Only here does the content of the division of the estate matter. Then the per-person credits and surcharges apply.
| Credit or surcharge | What it does | Source |
|---|---|---|
| Spousal tax credit | No tax for the spouse up to the greater of 160 million yen or the amount of the statutory share of the net estate actually acquired. The estate must be divided and the return filed by the deadline | No.4158 |
| 20% surcharge | Anyone other than the spouse, parents or children (including a grandchild inheriting by substitution) pays 1.2 times the tax. It hits siblings, nieces and nephews, and adopted grandchildren who are not substitutes | No.4157 |
| Minors' credit | 100,000 yen for each year until age 18 (part years rounded up). Anything left over comes off the tax of the person with the duty of support | No.4164 |
| Credit for persons with disabilities | 100,000 yen for each year until age 85 (200,000 yen for a person with a severe disability) | No.4167 |
| Credit for gift tax paid | Gift tax already paid on the gifts added back is deducted | No.4161 |
The 20% surcharge is 0.2 times the amount before the tax credits, added on. Leaving property to a grandchild by will brings the surcharge into play unless that grandchild is an adopted child or an heir by substitution.
Use the spousal credit with the second inheritance in mind
If the spouse takes everything in the first inheritance, up to 160 million yen can be brought to zero tax. But in the second inheritance, when that spouse dies, there is no spousal credit and there is one statutory heir fewer, so the basic exclusion is 6 million yen smaller.
- The spouse takes everything: first inheritance 0 yen. In the second inheritance the two children inherit 80 million yen, the basic exclusion is 42 million yen and the taxable estate 38 million yen, so 19 million yen each at 15% minus 500,000 yen is 2.35 million yen each, or 4.7 million yen. Total 4.7 million yen
- Exactly the statutory shares: first inheritance 1.75 million yen. In the second inheritance the two children inherit 40 million yen, so the taxable estate is negative (40 million yen is under 42 million yen) and the tax is 0 yen. Total 1.75 million yen
In this example, giving the children a share in the first inheritance leaves the family about 3 million yen better off overall. The basic approach is to secure the spouse's living costs first, then pass to the children an amount that fits inside the basic exclusion of the second inheritance.
Frequently asked questions
If I receive 100 million yen, does the 30% in the rate table apply?
No. The rates apply to the remainder after the basic exclusion, split by the statutory shares. With a spouse and two children and an estate of 100 million yen, the taxable estate is 52 million yen, so the spouse's 26 million yen and each child's 13 million yen both fall in the 15% band. The effective burden is much lower.
Is the tax zero if the spouse inherits everything?
It is zero up to 160 million yen or the amount of the statutory share. The estate must be divided and the return filed by the deadline, and a return is required even when the tax is zero. Watch out as well for the children's tax rising in the second inheritance.
When are the return and the payment due?
Within 10 months of the day after you learn of the death. Payment is due by the same deadline. If you cannot pay in cash, there are systems for paying in instalments or in kind.
Do I still have to file if no inheritance tax is due?
If you are inside the basic exclusion and the tax is zero without using any special measure, no return is needed. If the tax becomes zero only because of the spousal credit or the exception for small residential land, a return is required, because filing is a condition of those measures.
Reference links (sources)
- NTA No.4152 Calculating inheritance tax (the four-stage procedure, how to count statutory heirs)
- NTA No.4155 Inheritance tax rates (the rate table and a worked example)
- NTA No.4158 Spousal tax credit
- NTA No.4157 The 20% surcharge on inheritance tax
- NTA No.4164 Tax credit for minors / No.4167 Tax credit for persons with disabilities
Note: the 80 million yen example is our own calculation, applying the NTA's rate table and procedure. Land valuations and special measures change the result. Please check with a tax accountant or the tax office before you file.
