Japan's Temporary Foreigner Inheritance Reform (2021): What HR Teams and Foreign Employees Need to Know

Every year, thousands of foreign employees are posted to Japan on multi-year secondments — engineers, executives, researchers, consultants. Their compensation packages are negotiated in HQ, their benefits are structured around home-country norms, and almost nobody in that process asks: what happens to this person’s overseas estate if they die while stationed in Japan?

Before 2021, the honest answer was uncomfortable: it depended on a set of interacting residency rules that could, in some configurations, pull a foreign employee’s home-country assets into Japan’s inheritance tax net — even though those assets had nothing to do with Japan.

The 2021 reform fixed the most consequential gap in that framework. This article explains what changed, who it protects, and why corporate HR and global mobility teams should understand it before drafting the next secondment package.

This is general information, not advice. Tax rules change and every secondment structure is different. All figures and rules are current as of 2026 and cited to Japan’s National Tax Agency (NTA). Confirm any individual case with a licensed zeirishi (tax accountant qualified in Japan) and, where relevant, a cross-border mobility specialist.

The “temporary resident foreigner” category, defined

Japan’s inheritance tax law splits every heir into an unlimited taxpayer (taxed on worldwide assets) or a limited taxpayer (taxed on Japan-situated assets only), based primarily on domicile and nationality. Full detail on that framework is in our companion article on non-resident inheritance tax rules.

Within that framework sits a specific carve-out for foreign nationals living in Japan: the temporary resident foreigner (一時居住外国人).

A person qualifies as a temporary resident foreigner if they meet both conditions:

1. They hold a Table-1 immigration status — a status listed in Appended Table 1 of the Immigration Control and Refugee Recognition Act. This covers most work visas, study visas, and the spouse-or-child-of-Japanese-national visa. It does not cover Table-2 statuses such as Permanent Resident or Long-Term Resident.
2. Within the 15 years immediately preceding the inheritance, they have had a Japan domicile for 10 years or less.

If both conditions hold, the person is classified as a limited taxpayer — taxed only on Japan-situated assets — even though they currently live in Japan and would otherwise look like a straightforward Japan-domicile case.

NTA reference: No. 4138 — 相続税の納税義務者について

This category exists precisely because Japan wants to remain attractive to foreign talent on fixed-term assignments. Without it, any foreign employee living in Japan long enough to establish domicile would become an unlimited taxpayer on their worldwide assets — a result nobody accepting a 3-to-5-year secondment would expect or want.

What the 2021 reform actually changed

The temporary resident foreigner category itself predates 2021. What the 2021 reform addressed was a gap on the decedent’s side of the equation, not just the heir’s.

Before the reform, the rules focused heavily on the heir’s classification. But a related question mattered just as much in secondment scenarios: if the decedent (the person who died) was also a temporary resident foreigner, what happens to their overseas assets?

In earlier iterations of the framework, there were configurations where a decedent’s overseas assets — a home-country retirement account, foreign real estate, foreign life insurance proceeds — could still be pulled into the Japanese taxable estate if the heir did not clearly qualify for protection, or if the interaction between the decedent’s and heir’s residency histories fell into an ambiguous zone.

The 2021 reform clarified and strengthened the exclusion:

When both the decedent and the heir are temporary resident foreigners, the decedent’s assets located outside Japan are excluded from the Japanese taxable estate entirely.

This is a meaningful expansion. It means a foreign family — both spouses on Table-1 visas, both within the 10-years-in-15 threshold — living together in Japan on secondment can pass overseas assets to each other (or to children) without those overseas assets ever entering the Japanese inheritance tax calculation, regardless of the decedent’s own residency nuances.

Why this reform happened

The policy driver was straightforward: Japan competes globally for skilled foreign workers, and ambiguity about inheritance tax exposure on home-country assets was a real friction point for multinational employers structuring secondments. A foreign executive relocating to Tokyo for four years does not expect their US 401(k) or UK pension to become subject to Japanese estate tax rules because their spouse happened to also be resident in Japan when they died. The reform removes that friction by making the exclusion explicit and symmetric — covering both the heir’s and the decedent’s residency status.

Before vs. after: a comparison

The key structural point: the 2021 reform did not change who qualifies as a temporary resident foreigner. It changed what happens to the decedent’s overseas estate once both parties in the transfer clearly qualify.

What this means for corporate HR and mobility teams

For companies posting foreign employees to Japan, this reform is directly relevant to three recurring conversations:

1. Secondment risk disclosure. Global mobility teams briefing employees before a Japan posting can now state with more confidence that typical secondment structures — foreign employee and foreign spouse, both on Table-1 visas, both within the 10-year threshold — do not expose home-country assets (property, retirement accounts, life insurance) to Japanese inheritance tax merely because of Japan residency.

2. Compensation and benefits framing. Some companies previously built inheritance-tax risk premiums or supplemental life insurance into expat packages specifically to offset perceived Japanese estate tax exposure. Where that exposure has been narrowed by the 2021 reform, HR teams may want to revisit whether those provisions still reflect current law — a decision to make with tax counsel, not unilaterally.

3. The 10-year threshold as a planning boundary. The protection is not indefinite. An employee approaching or exceeding 10 years of cumulative Japan domicile within a 15-year window loses temporary resident foreigner status and falls into the ordinary framework, where Japan domicile can trigger unlimited taxpayer status. Long-tenure expatriates and repeat-assignment employees (someone posted to Japan for 6 years, reassigned home for 3, then posted back for another 5) are the population HR should flag for individual review, since the 15-year lookback window can produce non-obvious results.

A worked example

A US technology company posts a director and their spouse to its Tokyo subsidiary on Table-1 work and dependent visas. Three years into the assignment, the director passes away. The spouse — also on a Table-1 visa, also with only three years of Japan domicile — inherits.

Both the decedent (director) and the heir (spouse) qualify as temporary resident foreigners: Table-1 status, well under the 10-years-in-15 threshold.

Under the post-2021 rule, the director’s US-based assets — a 401(k), a house in California, US brokerage accounts — are excluded from the Japanese taxable estate. Only assets the director held in Japan (a Japan bank account used for local salary, for instance) would be assessed against the Japanese taxable estate. The bulk of the family’s wealth, held in the US, is unaffected by Japanese inheritance tax.

Contrast this with a case where the same director has been in Japan for 11 cumulative years across two assignments within the past 15 years. That crosses the domicile threshold, the temporary resident foreigner carve-out no longer applies, and the ordinary residency-based rules take over — a materially different — and more exposed — tax position.

Where to go next

• For the full framework on how unlimited vs. limited taxpayer status is determined, see Japan Inheritance Tax for Non-Residents: Unlimited vs Limited Taxpayer and the 10-Year Rule.
• For the complete calculation framework, rates, and spouse credit, see Japan Inheritance Tax: The Complete Guide for Foreigners and Overseas Heirs.

Sources

• NTA No. 4138 — 相続税の納税義務者について (Inheritance Tax Taxpayer Categories) — primary reference for temporary resident foreigner classification and the overseas-asset exclusion
• NTA No. 4105 — 相続財産の範囲 (Assets Subject to Inheritance Tax) — definition of taxable assets
• Japan Inheritance Tax Act (相続税法), Article 1-3 and related provisions on taxpayer classification, as amended by the 2021 tax reform
• Immigration Control and Refugee Recognition Act, Appended Table 1 (出入国管理及び難民認定法 別表第一) — definition of Table-1 immigration statuses