Tax laws usually vary considerably from country to country.
In particular, gift and inheritance taxes vary greatly from country to country.
Here, we will explain a little about the Japanese gift taxation of gifts received by foreigners residing in Japan.

In general, if you receive a gift from someone in excess of a total of ¥1,100,000 per year, in principle the gift is subject to gift tax.
You, the recipient of the gift, are responsible for paying the gift tax.

Exceptional property that is not subject to gift tax is,
the property acquired from a husband and wife, parent and child, siblings, or other persons obligated to support them to meet living expenses and educational expenses, which are deemed to be ordinarily necessary.

Living expenses here refer to expenses necessary for a person’s normal daily life, and include medical treatment, childcare expenses, and other expenses related to child rearing.
Educational expenses include school fees, educational materials, stationery, etc.

Property that is not subject to gift tax is limited to property that is used directly for living and educational expenses each time they are needed.
Therefore, even if you receive a gift in the name of living or educational expenses, if you use the gift to deposit money or to purchase stocks or real estate, you will be subject to gift tax.

If you, the recipient, are a resident of Japan, the gift is, in principle, subject to taxation even if the giver is a foreign national living abroad.
In addition, the gift is subject to taxation whether the donated property is located in Japan or abroad.

You may think that the Japanese tax authorities will not be able to capture your foreign assets.
But you never know.
Currently, Japan has information exchange treaties with about 80 countries regarding the financial assets of foreigners living in Japan.
It is said that countries are becoming more sensitive to taxes that escape across borders and are exchanging information with considerably more enthusiasm than in the past.

There are exceptions to the above gift tax rules.
If you are a foreigner with resident status and have been domiciled in Japan for less than 10 years within the past 15 years, then foreign property received from a person of the following types is not subject to taxation.

1: Foreign property donated by a person (regardless of nationality) who has not had a domicile in Japan for a period exceeding 10 years.

2: Foreign property donated by a foreigner outside Japan who has had an address in Japan within the past 10 years.

3: Foreign property donated by a foreigner with a status of residence in Japan who has had a domicile in Japan for less than 10 years within the past 15 years.

However, even in that case, all domestic property is subject to the gift tax, if it exceeds 1.1 million yen, regardless of the nationality or residence status of the giver or recipient.

If you are a foreigner who has resided in Japan for less than 10 years within the past 15 years and you plan to receive a gift of assets located overseas from an person overseas, please be aware of what the above mentioned points.
It means,
If you plan to receive a gift in the future from someone who qualifies for the above special provisions, you must be sure to receive the gift of the foreign property before your period of domestic residence within the past 15 years does not exceed 10 years.
In that case, the foreign property will not be subject to taxation.

Still, there is one point of Controversy when money is transferred to your bank account as a gift by person overseas.
If the money transferred from the donor to your domestic account is considered “domestic property,” then it is subject to taxation.

What about this?

Many experts on this point say that the deposit is “foreign property”.
Because there is a court case that says that a gift is established when the donor completes the transfer (the money has not yet been transferred to Japan).
Yet, the decision of the national tax authorities has not been clarified.

If you want to play it safer, you should do one of the following procedures.
(1) If the donor transfers money to your bank account as a gift, it is better to transfer the money to your offshore account.
You must save the documents of that transfer.
(2) Before the money is transferred, a gift agreement should be drawn up between you and the donor.
This way, the donor will have gifted the deposit to you as “foreign property” and subsequently transferred the money to your domestic account.
You must, of course, preserve that agreement and any remittance documents that follow.

The gift tax rate is not low, ranging from 10% to 55%, depending on the value of the gifted property.

Make sure you know the tax laws and save tax wisely.

I am a tax accountant in Nagoya.
If you need help with accounting or taxation issues, please contact me.

Certified Tax accountant　 Motohiko Aoyama
e₋mail: bemyself8314@gmail.com