Act on Special Measures Concerning Taxation

If the property acquired by an individual through inheritance or bequest includes, out of the residential land, etc. (meaning land or rights existing on land; the same applies in paragraph (3) and paragraph (5) of the following Article) that, immediately before the commencement of the succession, was used for the business (including that specified by Cabinet Order as being equivalent to a business; the same applies in paragraph (3)) of, or as the residence (including, where the land, etc. was not used as the residence of the decedent immediately before the commencement of the succession due to a reason specified by Cabinet Order as a reason that makes it impossible to use it as a residence (excluding where it is used for a purpose specified by Cabinet Order), the use as the residence of the decedent immediately before it ceased to be used as a residence due to that reason; the same applies in paragraph (3), item (ii)) of, the decedent pertaining to that inheritance or bequest or a relative of that decedent who shared the same livelihood with that decedent (referred to as a "decedent, etc." in paragraph (3)), and that is used as the site of a building or structure specified by Order of the Ministry of Finance, residential land, etc. specified by Cabinet Order (limited to residential land, etc. for specified business use, residential land, etc. for specified residential use, residential land, etc. for business use of a specified family company and residential land, etc. used for a leasing business; hereinafter referred to as "special eligible residential land, etc." in this Article), then, with regard to the special eligible residential land, etc. acquired by that individual, or a portion thereof, that has been selected, as provided by Cabinet Order, as land to which the provisions of this paragraph are to be applied, out of all the special eligible residential land, etc. pertaining to the persons who acquired property through that inheritance or bequest (hereinafter referred to as "selected residential land, etc. eligible for the special provisions" in this paragraph and the following paragraph), the value to be included in the taxable value for inheritance tax prescribed in Article 11-2 of the Inheritance Tax Act is, limited to that selected residential land, etc. eligible for the special provisions in the case where the area limit requirement is satisfied (referred to as "small-scale residential land, etc." in this paragraph), the amount calculated by multiplying the value of that small-scale residential land, etc. by the percentage specified in each of the following items according to the category of small-scale residential land, etc. listed in each of those items:

small-scale residential land, etc. that is residential land, etc. for specified business use, small-scale residential land, etc. that is residential land, etc. for specified residential use and small-scale residential land, etc. that is residential land, etc. for business use of a specified family company: 20 percent;

small-scale residential land, etc. that is residential land, etc. used for a leasing business: 50 percent.

The area limit requirement prescribed in the preceding paragraph is the requirement specified in each of the following items according to the category of selected residential land, etc. eligible for the special provisions listed in each of those items pertaining to the persons who acquired special eligible residential land, etc. through that inheritance or bequest:

selected residential land, etc. eligible for the special provisions that is residential land, etc. for specified business use or residential land, etc. for business use of a specified family company (referred to as "residential land, etc. for specified business use or similar use" in item (iii), (a)): the total area of that selected residential land, etc. eligible for the special provisions is 400 square meters or less;

selected residential land, etc. eligible for the special provisions that is residential land, etc. for specified residential use: the total area of that selected residential land, etc. eligible for the special provisions is 330 square meters or less;

selected residential land, etc. eligible for the special provisions that is residential land, etc. used for a leasing business: the total of the areas calculated pursuant to the provisions of (a), (b) and (c) below is 200 square meters or less.

if there is selected residential land, etc. eligible for the special provisions that is residential land, etc. for specified business use or similar use, the area obtained by multiplying the total area of that selected residential land, etc. eligible for the special provisions by 200/400;

if there is selected residential land, etc. eligible for the special provisions that is residential land, etc. for specified residential use, the area obtained by multiplying the total area of that selected residential land, etc. eligible for the special provisions by 200/330;

the total area of selected residential land, etc. eligible for the special provisions that is residential land, etc. used for a leasing business.

In this Article, the meanings of the terms listed in the following items are as prescribed respectively in those items:

residential land, etc. for specified business use: Residential land, etc. that was used for the business of a decedent, etc. (excluding real property leasing business and other businesses specified by Cabinet Order; hereinafter the same applies in this item and item (iii)) and that has been acquired through inheritance or bequest by a relative of that decedent (including an heir of that relative who has acquired that residential land, etc. from that relative through inheritance or bequest; the same applies in (a) and item (iv) (excluding (b))) who satisfies either of the following requirements (excluding residential land, etc. that was newly used for a business within three years before the commencement of the succession (excluding that used for the business of a decedent, etc. who had been conducting a business of a scale specified by Cabinet Order or more), and limited to the portion specified by Cabinet Order);

that relative has taken over the business of the decedent that was conducted on that residential land, etc. during the period from the time of the commencement of the succession until the due date for filing the return under the provisions of Article 27, 29 or 31, paragraph (2) of the Inheritance Tax Act (hereinafter referred to as the "return due date" in this paragraph), has continued to hold that residential land, etc. until the return due date, and is conducting that business;

that relative of the decedent is a person who shared the same livelihood with the decedent, has continued to hold that residential land, etc. from the time of the commencement of the succession until the return due date (or, if that relative dies before the return due date, the date of death; hereinafter the same applies in this paragraph, except in item (iv), (a)), and has continued to use that residential land, etc. for the relative's own business from before the commencement of the succession until the return due date.

residential land, etc. for specified residential use: Residential land, etc. that was used as the residence of a decedent, etc. (or, if there are two or more such pieces of residential land, etc., limited to the residential land, etc. specified by Cabinet Order) and that has been acquired through inheritance or bequest by the spouse of that decedent or by a relative of that decedent (excluding the spouse of that decedent; hereinafter the same applies in this item) who satisfies any of the following requirements (limited to the portion specified by Cabinet Order);

that relative was a person who, immediately before the commencement of the succession, resided in a building that stood on that residential land, etc. and was used as the residence of the decedent (limited to the portion specified by Cabinet Order as the portion used as the residence of the decedent, the spouse of the decedent or that relative), has continued to hold that residential land, etc. from the time of the commencement of the succession until the return due date, and resides in that building;

that relative (limited to a person who has acquired residential land, etc. used as the residence of the decedent and who is specified by Order of the Ministry of Finance) satisfies all of the following requirements (limited to the case where there is no spouse of the decedent and no relative specified by Cabinet Order who resided, immediately before the commencement of the succession, in the house used as the residence of the decedent):

the relative has not resided, within three years before the commencement of the succession, in a house located in the area where the Inheritance Tax Act is in force that is owned by that relative, the spouse of that relative, a relative within the third degree of kinship of that relative, or a corporation specified by Cabinet Order as a corporation having a special relationship with that relative (excluding the house used as the residence of the decedent immediately before the commencement of the succession);

the relative has never owned, at any time before the commencement of the succession, the house in which the relative resides at the time of the commencement of the succession of the decedent;

the relative has continued to hold that residential land, etc. from the time of the commencement of the succession until the return due date.

that relative was a person who shared the same livelihood with the decedent, has continued to hold that residential land, etc. from the time of the commencement of the succession until the return due date, and has continued to use that residential land, etc. as the relative's own residence from before the commencement of the succession until the return due date.

residential land, etc. for business use of a specified family company: residential land, etc. that was, immediately before the commencement of the succession, used for the business of a corporation in which the total number of shares or the total amount of capital contributions held by the decedent, the decedent's relatives and other persons having a special relationship with the decedent as specified by Cabinet Order exceeds five-tenths of the total number of issued shares or the total amount of capital contributions of the corporation pertaining to those shares or capital contributions, which a relative of the decedent (limited to a person specified by Order of the Ministry of Finance) who acquired the residential land, etc. by inheritance or bequest has continued to hold from the time of the commencement of the succession until the return due date, and which has continued to be used for the business of that corporation until the return due date (limited to the portion specified by Cabinet Order);

residential land, etc. used for a leasing business: residential land, etc. that was used for the business of the decedent, etc. (limited to a real property leasing business and other businesses specified by Cabinet Order; referred to as a "leasing business" in this item), which a relative of the decedent who satisfies either of the following requirements has acquired by inheritance or bequest (excluding residential land, etc. for business use of a specified family company and residential land, etc. newly used for a leasing business within three years before the commencement of the succession (excluding residential land, etc. used for the leasing business of a decedent, etc. who had continuously conducted a leasing business specified by Cabinet Order for more than three years until the date of the commencement of the succession), and limited to the portion specified by Cabinet Order).

the relative has taken over the decedent's leasing business relating to the residential land, etc. during the period from the time of the commencement of the succession until the return due date, has continued to hold the residential land, etc. until the return due date, and is using it for that leasing business;

the relative of the decedent is a person who shared living expenses with the decedent, has continued to hold the residential land, etc. from the time of the commencement of the succession until the return due date, and has continued to use the residential land, etc. for the relative's own leasing business from before the commencement of the succession until the return due date.

The provisions of paragraph (1) do not apply to special eligible residential land, etc. that has not been divided by the co-heirs or universal legatees by the due date for filing the return under Article 27 of the Inheritance Tax Act relating to the inheritance or bequest referred to in that paragraph (referred to as the "return due date" in this paragraph); provided, however, that this does not apply to the divided special eligible residential land, etc. in the case where the undivided special eligible residential land, etc. is divided within three years from the return due date (or, in the case where there are unavoidable circumstances specified by Cabinet Order, such as the filing of an action concerning the inheritance or bequest, for the special eligible residential land, etc. not having been divided before the expiration of that period, and the approval of the district director with jurisdiction over the place for tax payment has been obtained pursuant to the provisions of Cabinet Order, within four months from the day following the day specified by Cabinet Order as the day on which the division of the special eligible residential land, etc. became possible) (excluding the case where a person who has acquired property by the inheritance or bequest is subject to the provisions of paragraph (1) of the following Article).

The provisions of Article 32, paragraph (1) of the Inheritance Tax Act apply mutatis mutandis to the case referred to in the proviso to the preceding paragraph and other cases specified by Cabinet Order as cases where the provisions of paragraph (1) have not been applied to the special eligible residential land, etc. that has already been divided. In this case, the necessary technical replacement of terms is specified by Cabinet Order.

The provisions of paragraph (1) do not apply to residential land, etc. for specified business use that has been acquired by inheritance or bequest (including acquisition in the case where it is deemed to have been acquired by inheritance or bequest pursuant to the provisions of Article 70-6-9, paragraph (1) (including as applied by replacing terms pursuant to the provisions of paragraph (2) of that Article)) from the donor prescribed in Article 70-6-8, paragraph (1) relating to a special business donee prescribed in paragraph (2), item (ii) of that Article to whom the provisions of paragraph (1) of that Article have been applied, or to residential land, etc. for specified business use that has been acquired by inheritance or bequest from the decedent prescribed in Article 70-6-10, paragraph (1) relating to a special business heir, etc. prescribed in paragraph (2), item (ii) of that Article to whom the provisions of paragraph (1) of that Article apply.

The provisions of paragraph (1) apply only if a person seeking the application of the provisions of that paragraph states in the return under Article 27 or Article 29 of the Inheritance Tax Act relating to the inheritance or bequest (including a tax return form filed after the due date relating to those returns and an amended return form relating to those returns; referred to as an "inheritance tax return" in the following paragraph) that the person seeks the application of the provisions of paragraph (1), and attaches to it a written statement concerning the calculation under the provisions of that paragraph and other documents specified by Order of the Ministry of Finance.

Even in the case where no inheritance tax return has been filed, or where an inheritance tax return without the statement or attachment referred to in the preceding paragraph has been filed, if the district director finds that there were unavoidable circumstances for the failure to file, or to make the statement or attachment, the district director may apply the provisions of paragraph (1), but only in the case where there has been a submission of a document containing that statement and of the documents specified by Order of the Ministry of Finance referred to in that paragraph.

With regard to the application of the provisions of Article 41, paragraph (2) of the Inheritance Tax Act as applied mutatis mutandis pursuant to Article 48-2, paragraph (6) of that Act in the case where the provisions of paragraph (1) are applied to small-scale residential land, etc. prescribed in that paragraph, the phrase "excluding property" in that paragraph is deemed to be replaced with "excluding property and small-scale residential land, etc. prescribed in Article 69-4, paragraph (1) of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957) (Special Provisions on Calculation of Taxable Value for Inheritance Tax on Small-Scale Residential Land, etc.) to which the provisions of that paragraph have been applied".

Beyond what is provided for in paragraph (4) through the preceding paragraph, necessary matters concerning the application of paragraph (1) are specified by Cabinet Order.