Japan Gift Tax Explained: The 2024 Reform (7-Year Add-Back and the New ¥1.1M Deduction)

If you make gifts to family in Japan — or expect to receive them — one date matters more than it used to: January 1, 2024. That’s when Japan’s National Tax Agency (NTA) reshaped the two tracks for lifetime giving, and the changes are easy to miss because neither track’s headline numbers moved much. What changed is timing and structure, and both cut in opposite directions.

This is general information, not advice. Tax rules change and your situation is unique. The figures here are current as of 2026 and cited to Japan’s National Tax Agency (NTA). Always confirm with a licensed zeirishi (tax accountant) before acting.

Two tracks, one choice

Japan’s gift tax runs on two mutually exclusive systems. You elect one; you cannot mix them for the same donor-recipient pair in the same year.

Both tracks still exist after 2024 — the reform didn’t merge or eliminate either one. It made Track 1 slightly less generous for gifts close to death, and made Track 2 meaningfully more attractive for steady annual transfers.

Track 1 — Annual taxation and the 7-year add-back

Under annual taxation, a recipient can receive up to ¥1,100,000 per calendar year, tax-free, from any number of donors combined. Amounts above that are taxed on a progressive 10%–55% scale (NTA No.4408).

That annual exclusion did not change in 2024. What changed is the estate add-back rule — the mechanism that pulls lifetime gifts back into a deceased person’s taxable estate if the gift happened too close to death.

• Before the reform: gifts made within 3 years before death were added back to the taxable estate.
• After the reform: gifts made within 7 years before death are added back — more than double the look-back window.
• Transition relief: for the extra years (years 4 through 7 before death), a combined ¥1,000,000 deduction applies to the amount added back, softening the impact of the longer window.
• Phase-in: the extended reach applies to gifts made on or after January 1, 2024, and the full 7-year effect only matters for deaths from 2031 onward. Deaths in the years between now and then use a shorter effective look-back, since gifts before 2024 aren’t retroactively pulled in under the new 7-year rule.

Source: NTA’s 2024 reform overview (PDF).

Why this matters for planning

The practical effect: gifting early and often now matters more than it did. A gift made 8 years before death permanently escapes the estate under the new rule, just as a gift made 4 years before death did under the old 3-year rule. But a gift made in year 5, 6, or 7 before death — which used to be completely safe — is now pulled back (with the transition deduction only partially offsetting it). Families relying on late-life gifting as a last-minute estate-tax reduction tool lost some of that flexibility.

Track 2 — Early-inheritance settlement gets a new annual deduction

The early-inheritance settlement system (相続時精算課税, sōzoku-ji seisan kazei) lets a donor aged 60 or older give to a descendant aged 18 or older under an elective regime: a ¥25,000,000 lifetime special deduction, with a flat 20% rate applying above it. Anything given under this system — special deduction included — is normally added back to the donor’s estate at death, at its original gifted value (NTA No.4103).

The 2024 reform added something new: a separate ¥1,100,000 annual deduction, layered on top of the ¥25,000,000 lifetime amount. The critical detail — and the reason this reform is a big deal for Track 2 users — is what happens to that annual deduction at death:

Gifts within the new ¥1,100,000 annual deduction are not added back to the taxable estate, unlike the ¥25,000,000 lifetime special deduction and unlike ordinary Track 1 gifts.

That is a structural change, not a cosmetic one. It means a donor can move up to ¥1,100,000 per year to a descendant, indefinitely, with that amount permanently outside both gift tax and future estate tax — no 7-year look-back, no add-back at all.

Why the reform tilts toward Track 2

Before 2024, Track 2 was mostly useful for a single large lifetime transfer (e.g., gifting real estate or a lump sum using the ¥25M deduction), because every yen given under the system eventually came back into the taxable estate. That made Track 1’s annual exclusion look more permanent by comparison — until the 7-year add-back stretched Track 1’s exposure window too.

Now the calculus flips for donors planning steady, annual transfers: Track 2’s new ¥1,100,000 deduction is permanently outside the estate from day one, while Track 1’s ¥1,100,000 exclusion is only permanently outside the estate once you clear the 7-year mark. For a donor in reasonably good health with a multi-year time horizon, Track 2 now offers a cleaner annual transfer with no mortality-timing risk.

Choosing between the two tracks

One more structural point: once you elect Track 2 for a given donor-recipient pair, you cannot switch back to Track 1 for that pair. The election is irrevocable (NTA No.4103). This makes the choice worth running past a tax professional before the first gift under either system.

Cross-border and non-resident considerations

Gift tax scope rules mirror the inheritance tax rules covered in our pillar guide: whether worldwide gifts or only Japan-situated gifts are taxed depends on the residency and nationality of both donor and recipient. The NTA’s consumer summary for gift tax and residence is at No.4432. Non-resident donors and recipients should also review the 10-year lookback rule and the temporary-foreigner relief, both of which apply in parallel to gift tax and inheritance tax — see our detailed breakdown in Japan Inheritance Tax for Non-Residents.

Filing and deadlines

Gift tax returns are filed by the recipient (not the donor), covering gifts received in the prior calendar year, generally due February 1 to March 15 of the following year. Track 2 elections require a specific application filed with the first return under the system — missing that filing window forfeits the election for that year.

Where to go next

• Start with the Financial Planning blog index for the full inheritance and gift tax series.
• New here? Read the pillar guide to Japan inheritance tax first — gift tax and inheritance tax interact directly through the add-back rules above.
• Living abroad? See Japan Inheritance Tax for Non-Residents for how residency and nationality affect both taxes.

Sources

• National Tax Agency — Gift tax, annual taxation (No.4408): https://www.nta.go.jp/taxes/shiraberu/taxanswer/zoyo/4408.htm
• National Tax Agency — Early-inheritance settlement system (No.4103): https://www.nta.go.jp/taxes/shiraberu/taxanswer/sozoku/4103.htm
• National Tax Agency — Gift tax and residence status (No.4432): https://www.nta.go.jp/taxes/shiraberu/taxanswer/zoyo/4432.htm
• National Tax Agency — 2024 reform overview (PDF): https://www.nta.go.jp/publication/pamph/pdf/0023006-004.pdf

Confirmed against NTA sources on 2026-07-06.