Private client law in Japan: overview
A Q&A guide to private client law in Japan.
The Q&A gives a high level overview of tax; tax residence; inheritance tax; buying property; wills and estate management; succession regimes; intestacy; trusts; co-ownership; familial relationships; minority and capacity, and proposals for reform.
To compare answers across multiple jurisdictions, visit the Private Client Country Q&A tool.
The Q&A is part of the global guide to private client law. For a full list of jurisdictional Q&As visit www.practicallaw.com/privateclient-mjg.
Tax year and payment dates
For individuals, the tax year runs from 1 January through to 31 December. Individual income tax returns and gift tax returns must generally be filed no later than 15 March of the following year. Individual consumption tax returns must generally be filed no later than 31 March of the following year, while inheritance tax returns must be filed within ten months after the death of the deceased.
Domicile and residence
There is no legal concept of "domicile" in Japan. For income tax purposes, however, taxes are imposed based on a taxpayer's residence status (see Residence below).
Individuals are classified into resident taxpayers and non-resident taxpayers based on their residency:
Resident. An individual whose address is in Japan is considered a resident. An individual whose residence is in Japan is also defined as a resident. "Address" (jyūsho) means a person's centre of living and "residence" means the place where an individual lives continuously for a certain period of time but cannot be deemed the centre of living. A resident is subject to income tax on his/her worldwide income. A resident without Japanese nationality who has lived in Japan for less than five years of the last ten years is a non-permanent resident. A non-permanent resident belongs to the same taxpayer category as a resident. However, a non-permanent resident's tax liability on income from foreign sources is limited. This means that income derived from foreign sources is not subject to Japanese tax unless it is paid in Japan or it is remitted into Japan.
Non-resident. All individuals other than residents are considered non-residents. Non-resident taxpayers are subject to Japanese income tax only on income derived from sources in Japan.
Taxation on exit
As of April 2015, there is no exit tax payable when an individual leaves Japan, nor is any tax imposed on the termination of Japanese residency. For any year in which an individual terminates Japanese residency, he/she is subject to Japanese income tax as a resident until the termination of the residency, and is thereafter taxed as a non-resident.
However, from 1 July 2015, individuals that have been residents of Japan for more than five years out of the past ten years immediately prior to the date of departure can be subject to exit taxes. These taxes are imposed on unrealised capital gains from financial assets (such as shares) calculated at the time of departure. The target of these exit taxes are individuals with financial assets exceeding JPY100 million. These financial assets can include:
Equity in anonymous partnerships (tokumei kumiai).
An individual subject to the exit tax will be allowed to enjoy a tax-payment grace period for five years from the date of departure (a maximum of ten years is possible by submitting the appropriate application) by appointing a tax agent and paying a deposit at the time of departure. If an individual who has already paid the exit tax returns to Japan within five years of the date of departure without actually having sold the assets that were taxed, the exit tax can be refunded.
A resident is subject to local inhabitant's income tax on taxable income for the previous year. An individual who is a resident of Japan on 1 January of a given tax year must pay the local inhabitant's income tax on income from the prior year. Therefore, an individual with residency on 1 January 2015 who is no longer resident at some point in 2015 must pay the inhabitants tax on the taxable income for 2014.
There is no statutory definition of a "temporary resident" under Japanese law. However, non-permanent residents (see Question 2) are subject to income tax only on their Japan-sourced income as well as any foreign income that is paid in Japan or remitted into Japan.
Taxes on the gains and income of foreign nationals
Individuals are classified as either residents (including non-permanent residents) and non-residents. The rates described below apply to a foreign national living outside of Japan (a non-resident) from a country with no applicable tax treaty with Japan or with no permanent establishment in Japan.
Capital gains derived from the transfer of real property
In the case of capital gains derived from the transfer of real property the following rates apply:
Long-term (held for more than five years): 15% of the taxable amount of capital gains plus a 2.1% earthquake reconstruction surtax.
Short-term (held for fewer than five years): 30% of the taxable amount of capital gains plus a 2.1% earthquake reconstruction surtax.
A resident (including a resident foreign national) is subject to a 5% local tax for any long-term capital gains and a 9% local tax for short-term capital gains.
When a non-resident sells real property, the purchaser must withhold 10.21% of the sale price (10% for income tax and 0.21% for the earthquake reconstruction surtax).
Capital gains from the sales of stocks, shares or convertible bonds
Generally, a non-resident is not subject to Japanese income tax on capital gains from the sale of stock, shares or convertible bonds. However, a non-resident's capital gains are taxed at 15.315% (15% for income tax and 0.315% for the earthquake reconstruction surtax) if that individual:
Enters into an agreement during his/her stay in Japan for the sale of such holdings as shares.
Disposes of at least 2% of the shares of an unlisted company, or at least 5% of the shares of a listed company with at least 50% of its holdings consisting of Japanese real property and the like.
Exit taxes will be imposed on unrealised capital gains of financial assets on certain types of residents leaving Japan (see Question 3).
In addition to capital gains discussed in Question 5, the following are also generally treated as Japan-sourced income that non-residents are taxed on:
Interest income on loans to a person or entity in Japan.
Income from sales of property in Japan.
Dividends from a Japanese company.
Real estate income from real property located in Japan.
Income received for services performed in Japan.
Royalties for the use of intellectual property in Japan.
Unless the applicable tax treaty states otherwise or the non-resident has permanent establishment in Japan, any Japan-sourced interest income is subject to a 15.315% withholding tax (15% for income tax and 0.315% for the earthquake reconstruction surtax). Any other Japan-sourced income listed above is subject to a 20.42% tax (20% for income tax and 0.42% for the earthquake reconstruction surtax).
Inheritance tax and lifetime gifts
Unlike in the US, Japanese inheritance taxes and gift taxes are levied on the beneficiary rather than the deceased's estate. The tax is imposed on a worldwide basis, but foreign assets can be excluded depending on where the deceased and the beneficiaries reside.
Tax is imposed only on Japanese assets if:
The deceased did not reside in Japan at death but resided in Japan five years prior to death and the beneficiary is a non-Japanese who does not reside in Japan at the deceased's death.
The deceased did not reside in Japan and did not reside in Japan five years prior to death, and the beneficiary does not reside in Japan at the deceased's death and during the five years prior to the deceased's death.
From 2015, inheritance tax is levied at the following rates depending on net taxable assets:
Up to JPY10 million: 10%.
Over JPY10 million up to JPY30 million: 15%.
Over JPY30 million up to JPY50 million: 20%.
Over JPY50 million up to JPY100 million: 30%.
Over JPY100 million up to JPY200 million: 40%.
Over JPY200 million up to JPY300 million: 45%.
Over JPY300 million up to JPY600 million: 50%.
Over JPY600 million: 55%.
The gift tax is levied on assets that a beneficiary receives from an individual (not a corporation or other entity). A beneficiary who is at least 20 years old and receives a gift from a lineal ancestor can in some cases receive a special favourable tax rate as follows:
Up to JPY2 million: 10% (general) or 10% (special).
Over JPY2 million up to JPY3 million: 15% (general) or 15% (special).
Over JPY3 million up to JPY4 million: 20% (general) or 15% (special).
Over JPY4 million up to JPY6 million: 30% (general) or 20% (special).
Over JPY6 million up to JPY10 million: 40% (general) or 30% (special).
Over JPY10 million up to JPY15 million: 45% (general) or 40% (special).
Over JPY15 million up to JPY30 million: 50% (general) or 45% special).
Over JPY30 million up to JPY45 million: 55% (general) or 50% (special).
Over JPY45 million: 55% (general) or 55% (special).
Tax free allowance
From 1 January 2015, the basic estate allowance for inheritance tax was lowered. The basic estate allowance is calculated as follows, JPY30 million plus JPY6 million x number of statutory heirs.
If the taxable amount is less than the basic estate allowance, the beneficiary does not need to pay any inheritance tax and file an inheritance tax return.
Although gift tax was increased up to a maximum rate of 55%, the gift tax burden will in some cases be lower due to the establishment of special tax rates for gifts from lineal ancestors. The annual basic allowance is JPY1.1 million per beneficiary.
Generally, the following amounts can be deducted from the total inherited amount that is subject to taxation:
Debts and funeral expenses.
Life insurance proceeds (JPY5 million x number of statutory heirs).
Retirement allowance (JPY5 million x number of statutory heirs).
The following tax credits can be credited against the inheritance tax in the order below:
Gift tax credit. Any gift tax paid within three years prior to the deceased's death or, gift tax paid under the unified system can be deducted.
Spousal credit. A deceased's spouse is entitled to a credit equal to the statutory share of the taxable assets for the spouse (half under Japanese law) or JPY160 million whichever is greater.
Minor child credit. If a statutory heir is younger than 20 years old at the time of the deceased's death, he/she is entitled to a credit equal to JPY60,000 x number of years until he/she reaches the age of 20 years.
Disabled person credit. A disabled person is entitled to a credit equal to JPY60,000 (JPY120,000 for a severely handicapped person) x number of years until he/she reaches the age of 70 years.
Inheritance credit. This credit is allowed in the event that the deceased paid inheritance tax within the ten years preceding his/her death.
Foreign tax credit. Foreign taxes or estate taxes paid before the filing of an inheritance tax return in Japan can be credited against Japanese inheritance tax up to certain limits.
Techniques to reduce liability
Life insurance is commonly used as an estate planning device since the proceeds received by the statutory heirs can be deducted from the inheritance tax. The amount to be deducted is JPY5 million x number of statutory heirs.
In contrast to the US, inter vivos gifting in Japan is not an efficient way to reduce taxes since the tax rate is as high as the inheritance tax rate, and the rate bracket less favourable compared to that for inheritance taxes. However, annually gifting less than JPY1.1 million per beneficiary over the course of many years is frequently used as a long-term technique to reduce inheritance taxes.
Since April 2013, the transferor's worldwide assets are subject to Japanese inheritance tax or gift tax if the transferor resides in Japan at the time of death or at the time the gift is made. This change has had a significant impact on the scope of Japanese inheritance and gift tax.
Both Japanese inheritance and gift tax apply to assets located in Japan that are transferred (see Question 7). Even if no Japanese assets are transferred, Japanese inheritance tax and gift tax would still apply to transferred foreign assets if:
The transferor or the beneficiary resides in Japan.
A non-resident transferor resided in Japan five years prior to death and the beneficiary is a Japanese national.
The transferor did not reside in Japan five years prior to death and the beneficiary resided in Japan five years prior to the death.
Taxes on buying real estate and other assets
Purchase and gift taxes
An acquisition tax is a local tax imposed on the purchaser of real property. The standard rate is 4% on the official appraised value. In addition, the registration tax (see Question 10) is levied when real property is purchased. In Japan a stamp tax also applies to the execution of certain types of documents such as promissory notes, real property sales agreements and merger agreements.
There is no concept of wealth tax in Japan. However, real property owners are subject to fixed assets tax annually.
Taxes on overseas real estate and other assets
International tax treaties
Japan has concluded income tax treaties with more than 50 countries, including the US, Sweden, Pakistan, Norway, Denmark, India, Singapore, Australia, the UK, New Zealand, Thailand, Malaysia, Canada, France, Germany, Belgium, Italy, Australia, the Netherlands, Korea, Spain, the Philippines, Hungary, Indonesia, China, Vietnam, Mexico, South Africa, Kuwait, Saudi Arabia, the UAE, and Russia.
Japan has a gift, inheritance and estate tax treaty with the US.
Wills and estate administration
Governing law and formalities
It is recommended that foreigners who own assets in Japan, whether they are Japanese resident or not, make a Japanese notarial will to transfer their Japanese assets to a beneficiary smoothly and without going through probate procedures in Japan. Under Japanese conflict of law, the deceased's inheritance matters are governed by the law of the deceased's nationality. Testators cannot designate the governing law at their discretion.
With regard to the effectiveness of the form of will prepared and executed under foreign law, such will is valid if it is made in compliance with the law of a country that has ratified the Convention of Conflict of Laws Relating to the Form of Testamentary Dispositions under the Act Concerning Laws Governing Forms of Will. The form of testamentary dispositions is valid under:
The law of the place where the will was made.
The law of the country where the testator had nationality, either at the time he/she made the will or at the time of his/her death.
The law of the place where the testator has address (jyūsho), either at the time he/she made the will or at the time of his/her death;
The law of the place where the testator had habitual residence, either at the time he/she made the will or at the time of his/her death.
The law of the place where the real property is located.
There are three ordinary types of will under Japanese law, which may be used by foreign nationals as well as Japanese nationals:
Notarial will. This is a will made using a notary to whom the testator recited the contents in the presence of two witnesses. The testator and two witnesses sign the will in the presence of the notary and the notary attests. The notary public office retains the original will. The will can be executed immediately after the testator's death without probate at the Family Court. A notarial will must be written in Japanese, however, a testator who cannot speak and read Japanese can make a notarial will with the assistance of an interpreter.
Holographic will. This is a will drafted in the testator's own handwriting with his/her seal, signed and dated. A holographic will does not need to be written in Japanese and does not require any witnesses. However, Japanese law does not allow a typed holographic will, it must be handwritten. To execute the will, it must be filed for the probate at the Family Court. This type of will frequently results in conflicts among heirs for example disputing whether the will was drafted in the testator's handwriting or not, or disputing the testator's capacity.
Secret certificate will. This is a will drafted by the testator (either handwritten or typed) with his/her seal, signed and affixed. He/she seals the envelope with the same seal affixed on the will. He/she must present the envelope to a notary before two witnesses, declaring that the document in the envelope is his/her will, and provide his/her name and address, then the notary notes the date that the will is presented and the statement of the testator on the envelope, and the testator and the two witnesses sign on the envelope.
Generally foreign nationals who have assets in Japan are advised to make a notarial will in order to transfer their Japanese assets to beneficiaries smoothly.
A statutory heir can renounce his/her rights to all of the deceased's property which he/she inherited by filing a declaration with the Family Court within three months from the acknowledgment of the inheritance. The statutory heirs inherit not only positive property but also negative property such as debts. If the deceased's negative property exceeds his/her positive property, the statutory heir can inherit the deceased's property as long as the positive portions cover the negative portions and can also renounce a negative portion of the deceased's property.
Validity of foreign wills and foreign grants of probate
Validity of foreign wills
Since Japan ratified the Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions, a will made in a jurisdiction other than Japan is also a valid will as long as it conforms to the applicable laws stated in the Act Concerning Laws Governing Forms of Will, (see Question 15).
Validity of foreign grants of probate
Theoretically, a grant of probate by the foreign court having jurisdiction is recognised provided that it meets conditions stated in the Japanese Code of Civil Procedure. However, practically, it takes some time and money to execute a grant of probate by a foreign court on the deceased's property in Japan.
Death of foreign nationals
Transferring the title of the deceased's property from the deceased to the heirs is generally conducted by the deceased's heirs without involving the Japanese courts. Estate administration supervised by the court is not common in Japan, especially in cases where the distribution can be conducted amicably.
Transferring title from a foreign deceased to the heirs requires more time and money in comparison with the case where all interested parties are Japanese. Necessary documents vary depending on the kinds of assets and administrative authority or company managing the deceased's assets. Generally, the following documents are necessary to transfer title to the beneficiaries:
Certificate of death of the deceased.
Probate documents issued by the foreign court.
Certificate showing the relationship between the heirs and beneficiary and listing all statutory heirs of the deceased.
The probated will if any.
Certificate of signature, address and nationality of the heirs who inherit the deceased's property.
These documents must generally be translated into Japanese. In addition, some institutions (for example banks) can request an explanation of the legal regime on inheritance matters under the law of the deceased's nationality since the inheritance matter should be governed by the law of the deceased's nationality. Considering the efficiency and costs, it is more advantageous for foreign nationals to make a Japanese notarial will rather than making a foreign will to be probated outside Japan.
Administering the estate
Responsibility for administering
If a testator appoints an executor in the will and the person appointed as the executor assumes such position, the executor is responsible for executing the will and administering the deceased's assets. However, the heirs are generally responsible for administering the assets of the deceased, such as gathering asset information, paying debts or unpaid taxes of the deceased and filing an income tax return and inheritance tax return. If a deceased has no statutory heirs, the Family Court appoints an assets administrator who administers the deceased's property.
Under Japanese law, the heirs inherit the deceased's property (both positive and negative (for example debts and unpaid taxes) immediately upon the deceased's death without probate proceeding as there is no estate administration system similar to the US in Japan. However, whether Japanese law applies to the inheritance depends on whether the deceased was a Japanese national, as the inheritance matter should be governed by the law of the deceased's nationality under the Japanese Conflict of Law.
Establishing title and gathering in assets (including any particular considerations for non-resident executors)?
Establishing title and gathering in assets
The heirs are generally responsible for administrating the deceased's property (see Question 20), including establishing title and gathering assets. With regard to an inheritance involving foreign nationals (either as deceased or as an heir), any necessary documents that are not in Japanese and that will be submitted to certain institutions (such as banks, securities companies, post offices, the legal affairs bureau, the tax agency and so on) are generally required to be translated into Japanese. If the deceased is non-Japanese, the law of the deceased's nationality, not Japanese law, will govern this matter. It is recommended that heirs involving foreign nationals retain professionals (lawyers or a tax accountant) to administer the deceased's assets.
Procedure for paying taxes
Japanese inheritance tax is levied on beneficiaries (heirs and legatees), not on the deceased's estate itself. Beneficiaries who receive assets exceeding the basic tax allowance must file an inheritance tax return within ten months after the deceased's death.
Distributing the estate
Under Japanese law, theoretically the heirs inherit their respective share in each asset of the deceased immediately upon the deceased's death unless the will specifically designates how to distribute the testator's assets. In intestacy, heirs generally distribute the assets by entering into a distribution agreement. However, if the heirs cannot reach agreement, the case generally goes to mediation procedures in Japan and if mediation fails, it will go to litigation.
The deadline for the inheritance tax return is ten months after the deceased's death and no extension is allowed. Beneficiaries who inherit assets exceeding the basic estate allowance must establish title, gather the assets, specify the statutory heirs, and file the inheritance tax return within the restricted period. The valuation for the inheritance or estate tax filing used in the local jurisdiction, or valuation by a certified appraiser are practically accepted for Japanese inheritance tax purposes.
A beneficiary may challenge the validity of the will by filing a claim with the Family Court for lack of capacity, a forged will (in the case of a holographic will, (see Question 16)) as well as other grounds. A beneficiary may file a petition to dismiss the executor appointed by the will if the executor breaches their fiduciary duty or if there is any other justifiable reason for dismissal.
A deceased may dispose of his/her assets under the will at his/her discretion unless the distribution by the will infringes forced heirship rights, known as "legally secured portion" (see Question 25).
Forced heirship regimes
Certain eligible heirs (spouses, children and parents, but not siblings) are reserved one-third to one-half of the deceased's assets. In the event that a deceased had a spouse and one child, the legally secured portion for each is one-quarter (one-half in total). If a deceased had a spouse and two children, the legally secured portion for the spouse is one-quarter and for each child is one-eighth (one-half in total). If a deceased had ancestors only, their legally secured portion is one-third in total. The eligible heirs must assert their legally secured portion rights if a will infringes their rights within one year after he/she is aware of the deceased's death and the infringement.
Avoiding the regime
If the deceased had Japanese citizenship and his/her inheritance is governed by Japanese law, according to Japanese Conflict of Law the above regime applies even to the heirs living outside Japan, at least in theory. To avoid the forced heirship regime a deceased could renounce their Japanese citizenship during their lifetime, however, this is not a practical option.
Assets received by beneficiaries in other jurisdictions
If the deceased had Japanese citizenship, the regime applies to the assets received by heirs living outside Japan.
Mandatory or variable
Eligible heirs must claim their forced heirship rights within one year after he/she acknowledges the death of the deceased. Eligible heirs can renounce their right by failing to execute it within the prescribed period of time.
Real estate or other assets owned by foreign nationals
Inheritance is governed by the law of the deceased's nationality under the relevant Japanese conflict of law rules. Real property or other assets owned by a foreign national are subject to the law of deceased's nationality, not Japanese law. However, Japanese law may apply to the deceased's real property located in Japan since the Japanese conflict of law rules adopt the doctrine of renvoi (see Question 27).
Japanese courts do apply the doctrine of renvoi. Since Japanese Conflict of Law provides for the doctrine of renvoi, Japanese law applies to the deceased's real property even if the deceased was a foreign national. If the conflict of law of the deceased's nationality provides that succession of real property is generally governed by the law of the situs, Japanese law applies to the inheritance of the deceased's real property located in Japan.
Under Japanese Law, if a deceased did not have a will, the assets are distributed under intestacy distribution rules. The spouse of the deceased is always a statutory heir. Additionally, certain relatives are statutory heirs in following order:
First rank relatives. Direct descendants (children and his/her lineal descendants including stripes).
Second rank relatives. Direct ancestors.
Third rank relatives. Siblings (or their children, if deceased).
The spouse receives at least one-half of the deceased's assets. If there are statutory heirs in addition to the spouse, the deceased's assets will be distributed as follows:
First rank relatives. Spouse (one-half) and direct descendants (one-half).
Second rank relatives. Spouse (two-thirds) and direct ancestors (one-third).
Third rank relatives. Spouse (three-quarters) and siblings (one-quarter).
Japanese law allows statutory heirs to change and adjust each statutory share under the intestacy rules considering each statutory heirs' contribution to increase and maintain the deceased's assets, and gifts or benefits provided to certain statutory heirs from/by the deceased during his/her lifetime. The statutory heirs can challenge the adequacy of the statutory share under the intestacy rules by agreement with all of the heirs or through court proceedings.
Despite its civil law regime, trusts are generally allowed in Japan. However, trusts are not widely used in Japan for estate planning purposes. One reason is that, unlike the system in the US, inheritance under Japanese law does not require probate, which can take a considerable amount of time to complete (strictly speaking, holographic wills and secret certificates (see Question 16) will need to be probated, however Japanese probate is merely a procedure to acknowledge the existence of the will and its terms). Therefore, there is no need to rely on trusts to avoid probate. Furthermore, a trustee must be licensed by the government and there are only a small number of such licensed trustees. However, the key reason that trusts are not widely used in Japan as an estate planning device is that they cannot be used in Japan as a tax-reduction strategy.
Type of trust and taxation
Although trusts are not frequently used as an estate planning device, there are many types of trusts under Japanese law. The types relatively used for the estate planning purposes are as follows:
Will trust. A testator can create a trust by appointing a trustee and beneficiaries in the will. A trustee appointed by the will can refuse to assume the role of trustee at his/her discretion. If the person appointed as a trustee by the will refuses to act as trustee when the testator passes away, the beneficiary can file a petition to the court requesting the appointment of another trustee. For Japan tax purposes, the beneficiary who receives the benefits from the trust on the testator's death is subject to inheritance tax.
General trust. This is a trust whereby the settlor appoints himself as a beneficiary during his lifetime with the consent of the trustee. The settlor can appoint secondary beneficiaries to address the possibility of the settlor passing away. In either case, a beneficiary who receives the beneficial rights is subject to Japanese inheritance tax at the settlor's death.
No beneficiary trust. This is a trust in which the beneficiary is not specified. In order to prevent avoidance of tax, gift tax is imposed on the transfer of the assets into the trust. The trustee is deemed the owner of the trust assets during the trust period. Even if the trustee is an individual, the trustee for a no beneficiary trust is deemed a corporation. The trustee is subject to corporate tax for the income from the trust assets.
Residence of trusts
The tax residency of the trust is determined based on the residency of the owner of the trust assets, such as settlor, beneficiary, or trustee depending on each trust arrangement.
Whether trusts created in foreign countries or governed by foreign laws have effect in Japan is unclear. Japanese statutes do not address this issue even in Conflict of Law. As a practical matter, for cases including Japanese assets, it is advisable to create a Japanese trust since governmental officials handling real property title registration are less likely to view Japanese trusts with suspicion.
Does the law provide specifically for the creation of non-charitable purpose trusts?
Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?
Can the trust document restrict the beneficiaries' rights to information about the trust?
Although there is no specific statutory non-charitable purpose trust, a trust can generally be created for any purpose.
Perpetuities and accumulations
With the exception of the no beneficiary trust which has an effective period of 20 years, there is no statutory limit on the trust effective period.
Beneficiaries' rights to information
A beneficiary can request a trustee to report on the status of the trust administration and inspect or copy the documents of a trustee.
Japanese law does not recognise claims against trust assets by the spouse of a settlor or beneficiary on the dissolution of the marriage. Since the trust assets are deemed separate from those of the settlor or beneficiary, the spouse cannot claim against trust assets themselves on the dissolution of the marriage. However, the spouse can claim against the interest that the settlor or beneficiary has in the trust assets.
Charities are legally recognised in Japan as Public Interest Incorporated Associations. Charities in Japan are entities mainly aimed at public interest initiatives such as academic, artistic, charitable or other public activities and improvement of general public interest. Charities in Japan are incorporated under the Act on Authorisation of Public Interest Incorporated Associations and Public Interest Incorporated Foundations.
A charity can be set up under strict conditions in Japan such as that more than 50% of its expenses must be related to public interest activities and certification from the prefectural governor or the prime minister depending on the type of public interest matter. A charity is registered at the legal affairs bureau and is regulated by its supervisory authority (the prefectural governor or the prime minister).
Ownership and familial relationships
A spouse receives at least one-half of the deceased's assets under the intestacy rules. Even if all of the deceased's assets are bequeathed to other statutory heirs or third parties, the spouse can claim his/her legally secured portion. Cohabitees or civil partners are not protected by Japanese law.
To effect a marriage in Japan, a couple (a man and a woman) must agree to get married and register the marriage at the ward office.
A married couple may divorce by filing an agreed divorce with the ward office without a court proceeding.
An individual who has obtained the age of majority (20 years in Japan) can adopt another person as his/her child. If an adopted person is a minor, Family Court permission is required. When a married person adopts a minor child, such adoption must be made jointly with the spouse except in the event where the adopted child is the legitimate child of the spouse.
A child conceived during marriage is presumed to be the legitimate child of the married couple. A husband can challenge paternity by filing a claim in court.
There is no legally recognised concept of civil partnership in Japan. Therefore, civil partners are treated as non-family members.
A minor heir or beneficiary is treated the same way as someone who has reached majority (20 years old in Japan). Even a pre-born child is deemed entitled to inheritance. A minor can own assets, but his/her property is subject to control by his/her guardian (generally, his/her parents). If the minor has no parents or his/her parents lack the capacity to serve as guardian (for example in the case of conflict of interest), another guardian acting for the minor is appointed by the Family Court.
Capacity and power of attorney
A voluntary guardianship agreement is frequently used in cases where a property owner becomes mentally incompetent. The agreement must be notarised upon execution. When a property owner becomes mentally incompetent, a petition to appoint a guardian according to the agreement is filed with the Family Court and then the guardian is formally appointed and acts for the property owner under the regulator appointed by the court. If there is no voluntary guardianship agreement, a petition to appoint an appropriate guardian is filed with the Family Court by an interested party such as a family member.
Proposals for reform
The reforms that may have a substantial impact on private client law in Japan are the exit taxes on unrealised capital gains that will be imposed from 1 July 2015 on certain types of Japanese residents at the time they leave Japan (see Question 3).
Japanese Law Translations
Description. This Japanese Law Translation Database is provided by the Ministry of Justice. It contains relevant laws and rules on the private client law such as the Civil Code, Income Tax Act, Corporate Tax Act, Inheritance Tax Act, Charities Act, and so on, available in English.
Hiromasa Ogawa, Partner
Kojima Law Offices
Professional qualifications. Attorney, Japan
Areas of practice. International commercial transactions, mergers and acquisitions, outbound direct investment (especially into India); international and domestic taxation; labour laws.
Languages. Japanese and English
Member, Inter-Pacific Bar Association.
Member, The American Chamber of Commerce in Japan (ACCJ).
Company Formation-A Practical Guide, Third Edition, co-author, Globe Business Publishing Ltd. 2015.
Labour Law: A Practical Global Guide, Japan Chapter, co-author, Globe Business Publishing Ltd. 2011.
Cash Management Under Japanese Law, co-author, Euro-Association of Corporate Treasurers (EACT), 2004.
Hitomi Sakai, Counsel
Kojima Law Offices
Professional qualifications. Attorney, Japan
Areas of practice. Labour; employment; international inheritance; estate planning.
Languages. Japanese and English
Deputy Secretary General, Japan Association of Arbitrators.
Society of Trust and Estate Practitioners (STEP, Hong Kong branch).
Member, Japan Association of Trust Law.
Special Commissioner, Central Committee for Adjustment of Construction Work Disputes, the Ministry of Land, Infrastructure, Transport and Tourism.
Member, Manual Preparation Committee, The Association for Promotion of Digital Broadcasting (2009-2010).
International Inheritance Legal and Tax Practice, co-author, Zeimu Kenkyukai, 2014.
Labour Law: A Practical Global Guide, Japan Chapter, co-author, Globe Business Publishing Ltd. 2011.
Utilisation of Professionals (Independent Experts and Expert Witnesses) in the Process of Arbitration, co-author, Arbitration-ADR Forum Vol. 1, 2007.