JAPAN Law and Practice Contributed by: Atsushi Oishi and Makoto Sakai, Mori Hamada & Matsumoto
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Although both individual fiduciaries and corporate professional fiduciaries bear fiduciary duties to benefi - ciaries, the level of conduct required for professional It is not typical for courts to pierce the veil of a trust or foundation. However, if an individual director of a trus - tee corporation is grossly negligent when conducting their duties, it is possible for a beneficiary of the trust to ask for compensation or damages as a result of the breach of fiduciary duties. fiduciaries is typically higher. 6.2 Fiduciary Liabilities It is possible to provide for a lower level of fiduciary duty in the trust deed, but it is not possible to provide for an exemption from fiduciary duty. 6.3 Fiduciary Regulation In the context of a trust that is privately and specifi - cally set up by wealthy individuals for estate planning purposes, trust assets are not typically and practically actively invested. The trustees are subject to fiduciary duties, as explained in 6.2 Fiduciary Liabilities . 6.4 Fiduciary Investment It is possible for a trust or foundation to have an active business by establishing a subsidiary within the scope of fiduciary duties, unless otherwise provided in the trust deed. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile/Residency Persons having a domicile ( jyusho ) in Japan and per - sons having a residence ( kyosho ) in Japan for one year or more are treated as residents for income tax purposes, and persons having a domicile ( jyusho ) in Japan are treated as residents for inheritance/gift tax purposes. The Income Tax Law and Inheritance Tax Law interpret “domicile” to mean the “principal base and centre of one’s life”, while residence refers to a
ket value, wealthy individuals buy real properties for tax planning purposes. However, the tax authorities sometimes challenge the value of those properties; see 5.1 Trends Driving Disputes . In addition, the Jap - anese government is currently considering amending the tax circulars and notices to change the calculation method for the fair value.
5. Wealth Disputes 5.1 Trends Driving Disputes
Tax authorities have been quite active of late in audit - ing inheritance tax and gift tax on wealthy individu - als, leading to an increasing number of disputes being brought by taxpayers in the National Tax Tribunal or courts to ask for the cancellation of the decisions of tax authorities. For example, many people purchase real estate at market value immediately before their deaths, and the heirs thereof use a fair value for tax purposes, which is less than the market value, when they declare the inheritance tax. Such fair value is sometimes denied by the tax authorities. In this regard, on 19 April 2022 the Supreme Court of Japan supported the tax authorities’ decision not to acknowledge the appraised value of real estate in an inheritance tax case based on roadside land prices set by the authorities, which were significantly lower than market prices. Disputes concerning trusts have also been increas - ing as the use of trusts has become more common among wealthy individuals. In a past court precedent, a trust was deemed to be void as it infringed the statu - tory reserved portion of an heir. 5.2 Mechanism for Compensation An heir may allege that a trust set up by another heir infringes their statutory reserved portion and that an amount equivalent to such reserved portion should be returned to them. For more details about the statutory reserved portion, see 2.3 Forced Heirship Laws .
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