By Dako
Nearly every account we own is American. Two 401(k)s, a brokerage account, the IRAs, the HSA, the kids’ 529. All of it sits in US institutions, in dollars, under US law. When I first read about Japan’s inheritance tax, I filed it as a problem for people with Japanese property. Japanese tax, Japanese assets. Ours are here.
That is not how the law works. Japan’s inheritance tax doesn’t start by asking where the money is. It starts by asking where the people are, and where they’ve been for the past ten years. Get the wrong answer on either the person who dies or the person who inherits, and a 401(k) that has never left a US custodian is taxable in Japan, at rates that climb to 55%. This post is about how that question is asked, why it treats the two of us differently, and what it does to a maybe-move.
The surprise: the tax follows people, not property
Japan’s system taxes heirs, not estates, which I wrote about in the inheritance law post. Each person who receives property has their own tax bill. The first thing the law decides about each of them is scope: are you taxed on everything you inherited, worldwide, or only on the part located in Japan?
The statute sorts every heir into one of four boxes. Two are “unlimited,” meaning worldwide. Two are “limited,” meaning Japan-located property only. Which box you land in depends on three variables. Whether you have a domicile in Japan. Whether you hold Japanese nationality. And whether you or the person who died had a Japanese domicile at any point in the ten years before the death.
Domicile here means your real center of life, judged on facts, not on what visa you hold or what a form says. If you’ve moved to Japan, you have one. Visa category enters the picture only through a narrow exception I’ll get to.
The short version is blunt. If either the deceased or the heir is a Japan resident, worldwide taxation applies. A deceased with a Japanese domicile means every heir is taxed on everything, wherever they live and whatever passport they carry. An heir living in Japan is taxed on everything they receive, wherever the deceased lived. Two exceptions exist, and both are built for foreigners who are only passing through.
Unlimited versus limited, in plain English
The exceptions are where the visa matters. Japanese immigration law has two lists of statuses. Table 1 holds the ones tied to an activity: work visas, student visas, the “designated activities” catch-all. Table 2 holds the ones tied to a person or a place: permanent resident, spouse of a Japanese national, long-term resident.
If you live in Japan on a Table 1 status and your total time domiciled in Japan over the past fifteen years is ten years or less, you’re a “temporary resident” in the tax law’s eyes. As an heir, you’re taxed only on Japan-located property, provided the person you’re inheriting from was also a foreigner living in Japan on a Table 1 status. Or was living outside Japan, and if Japanese, had been out for more than ten years. That’s the carve-out that lets an expat engineer in Tokyo inherit a parent’s house back in the States without Japan taking a share.
Table 2 gets none of that. A permanent resident, or a spouse of a Japanese national, is treated exactly like a Japanese citizen for scope purposes the day they establish a domicile. That’s Jay. He’d arrive on a spouse visa, which is Table 2, and from that day forward anything he inherited from anyone, anywhere, would be inside Japan’s net. Same for me, as a citizen coming home.
Then there’s the ten-year rule, which is the reason this post exists.
The 10-year rule: why leaving Japan doesn’t end it
Suppose you lived in Japan and then left. For a foreign national, the tax scope closes behind you. Once Jay had no Japanese domicile, and had never held Japanese nationality, he would count as a “non-resident deceased” the moment he left. His US estate would be outside Japan’s scope as far as his status goes.
For a Japanese national, it doesn’t close. If I lived in Japan and then left, I’d stay inside the worldwide scope, as an heir and as a deceased, for ten years after leaving. The rule used to be five years. It became ten for deaths and gifts on or after April 1, 2017, and the way the law is written, it’s the Japanese passport that carries the tail.
So imagine the full move, and then imagine it not working out. We live in Japan for three years and come back to the US. For the next decade, if I died, every heir of mine would be taxed by Japan on everything. My share of the brokerage account. My 401(k). All of it, because I had a Japanese domicile within ten years of death. Jay wouldn’t be a temporary resident in that scenario. He’d be the heir of someone who was, in Japan’s eyes, still recently Japanese-resident. Worldwide scope. From a US suburb, on US accounts, years after we left.
The mirror case runs the other way. If Jay died in that same decade, his own status would be clear, but scope is decided per heir, and I’d be a Japanese national with a Japanese domicile within the past ten years. Taxed on everything I inherited from him. Where our kids land would depend on whether they hold Japanese nationality, which is a separate question I’m not going to settle here, and Japan treats dual nationals as Japanese for this purpose.
One more layer, because it’s the one I didn’t expect. The rule also looks at the person who dies. I’ve lived in the US for more than ten years and have no Japanese domicile. But my parents live in Japan. If I inherited from them, the fact that the deceased was a Japanese resident would put me in the worldwide box. Heir living abroad, gone longer than the ten years, doesn’t matter. The scope question was never closed for me. It only looked closed from the outside.
Same house, two different tax shadows
Today, before any move, our position is asymmetric in the direction that helps. If I died tomorrow in the US, Jay would be a foreign national with no Japanese domicile inheriting from someone with no Japanese domicile in the past ten years. Limited box. Whatever my nationality means for the legal side, the Japanese tax side would not touch our US accounts.
The day we establish a domicile in Japan, that flips for the whole household. Both of us are unlimited, on everything, for each other and for anyone else. And when we leave, it flips back only for Jay’s own estate. I carry it for ten more years. The person in the marriage with the Japanese passport is the one whose death, or whose inheritance, keeps Japan’s tax in play long after the move has been undone.
None of this means the tax would be large. Japan gives a basic exclusion of ¥30 million plus ¥6 million per statutory heir. A surviving spouse pays nothing on the greater of ¥160 million or their statutory share, and the relief doesn’t ask about the spouse’s nationality. There’s a credit for foreign inheritance taxes paid on the same property, and a US-Japan estate tax treaty from the 1950s that sorts out which country taxes which kind of asset. With the US federal exemption at $15 million in 2026, though, most households like ours would have no US tax to credit. What it would actually cost, in a model case with none of our numbers, is a separate post I’m building carefully. What I want to plant here is narrower: the scope question, unlimited or limited, is decided by residence history, and it doesn’t reset when you leave if you’re the Japanese one.
A full move versus a dual-base life
I’d assumed a two-base life would be the gentler version of this. Keep a foot in each country, stay partly outside each system. It doesn’t work that way, because domicile is singular. Japan’s tax authorities decide where your center of life is on the facts, and there’s no box for “half.” Either you have a Japanese domicile or you don’t. If the facts say Japan, the whole worldwide scope applies exactly as it would for a full move. The tail starts for me the day we stop.
That interacts badly with which country counts you as a resident for income tax. As far as I can tell, the tests aren’t identical, but they look at the same facts. Tip into one and you’ve almost certainly tipped into the other. We haven’t set a months-per-year model for the two-base option, and this is one of the reasons it’s still undecided. The ten years don’t accrue while we deliberate. They start the moment the facts change.
For a full move, the picture is at least honest. Everything is in scope, for both of us, from day one. Retirement accounts included: tax advisors in Japan broadly agree that a 401(k) or IRA balance counts as inherited property for someone in the unlimited box. There’s no official ruling on how it’s classified, though, and some read it as excluded from the exemption Japanese death benefits get. The same accounts are taxed as income when withdrawn by a Japan-resident heir. Two Japanese taxes on one American account isn’t a fear. It’s the mainstream reading.
What to do before you become a resident
I don’t have a plan. I have a list of things that would have to happen before we’d cross into Japanese domicile, if we do.
First, know whose name is on what. Nearly all our accounts are joint, and as I covered in the joint-finances post, Japan doesn’t see a joint title the way the US does. It looks at who contributed. Sorting that out on paper, before a death forces someone else to do it, is the cheapest piece of this.
Second, get each account classified. Not “is it taxable,” which it is, but what kind of property Japan thinks each one is, because that changes the exemptions. That’s a Japanese tax professional’s job, and it needs someone who’s seen American retirement accounts before.
Third, put the ten years on the decision calendar. Not as a reason to stay, but as a cost of going. A move that lasts three years is a thirteen-year commitment for the Japanese spouse’s estate.
Fourth, deal with the Japan-side family question separately. Inheriting from a parent in Japan while living in the US triggers its own set of US reporting forms, which is a post of its own on our calendar.
And fifth, talk to someone in each country, and make them talk to each other. Our US trust and wills were written for one legal universe. The tax side turns out to have the same problem.
FAQ
We’re both US citizens and we’d move to Japan on work visas. Does this apply to us?
Less. Two foreign nationals on Table 1 statuses, with ten years or less in Japan, are temporary residents, and inheritances between you would be limited to Japan-located property. Cross ten years, or switch to permanent residence, and you’re in the same box as everyone else.
My Japanese spouse has been in the US for twenty years. Are we safe?
On your spouse’s own status, yes: no domicile in the past ten years puts them outside the tail. But inheriting from a parent who still lives in Japan makes them a worldwide-scope heir for that inheritance, and any future period of Japanese domicile restarts the ten years.
Does the same logic apply to gifts?
Yes. Japan’s gift tax uses the same four boxes, the same ten-year lookback, and the same visa-based exceptions. A gift to a Japan-resident spouse from a US account is inside the scope on the day the domicile exists.
This article is general information about Japanese inheritance and gift tax scope rules and related US rules, not legal or tax advice. Figures reflect law in force as of 2026 and change. Domicile and nationality questions are fact-specific, and cross-border ones doubly so. Please work with qualified professionals in both countries before acting, and see our Disclaimer for details.