Inherited farmland under a tax-deferral grant—what happens if you sell? Cancellation and the property exit

The key point: If you hold inherited farmland under the "inheritance-tax deferral for farmland etc.," then selling it, converting it, leasing it (apart from certain specified leases etc.) or stopping cultivation fixes the deferred inheritance tax. When one of these events occurs, as a rule on the day two months pass after it the deferral is cancelled, and in addition to the deferred principal you pay interest tax for the period from the day after the filing deadline to the fixing date (Act on Special Measures Concerning Taxation art. 70-6). The scope of the fixing is, as a base rule, a partial fixing where you dispose of / convert / lease / abandon cultivation of 20% or less of the deferred area, and a full fixing above 20%. What a real-estate company (we) handle is the sale, lease or conversion as practice—surveying and valuing the property and brokering it—and providing information in the important-matters explanation (Real Estate Brokerage Act art. 35). Calculating and filing the inheritance tax and interest tax on cancellation is for a tax accountant; the Farmland Act permits/notifications for conversion and rights transfer for an administrative scrivener; ownership-transfer registration for a judicial scrivener—each an independent business contracted with separately (no referral fees are exchanged). The final judgment on whether the tax is fixed, and how much you pay, rests with a tax accountant and the tax office.

For heirs who inherited farmland under the inheritance-tax deferral and are weighing a sale, conversion or lease, this article organises which choice leads to cancellation and which lease keeps the deferral alive, in the order of the law and the National Tax Agency's materials. This is general information; the final judgment on whether the deferral is cancelled for a particular plot, and how much tax is due, rests with a tax accountant and the tax office.

Yotsuba Real Estate Co., Ltd. (四葉不動産株式会社), based in Bunkyo, Tokyo, provides surveys and brokerage of inherited real estate. You can consult us from the stage of "what happens to the tax if I sell farmland under a deferral grant"—starting with who to confirm what with.

What is the farmland inheritance-tax deferral, and what is it deferring?

The inheritance-tax deferral for farmland etc. is a system under which a farming heir who inherits farmland etc. from a deceased person who farmed it has part of the inheritance tax deferred, on condition that they keep farming the land (or carry out certain specified leases) (Act on Special Measures Concerning Taxation art. 70-6). What is deferred is the amount over the tax that would arise if the farmland were valued at the "agricultural investment price"—that is, the difference from the inheritance tax computed on the ordinary valuation such as residential-equivalent.

This deferred amount (the farmland deferred tax) is exempted when the special-provision farming heir dies, among other cases (National Tax Agency Tax Answer No. 4147). So as long as you keep farming you need not pay, and in the end it can be exempted. In return, while under the deferral you must file a continuation report every three years from the filing deadline, and letting go of the farmland or stopping farming partway cancels the deferral.

Item	Content
Amount deferred	The difference between the inheritance tax on ordinary valuation and the tax if valued at the agricultural investment price
Condition for deferral	The farming heir keeps farming, or carries out a specified lease etc.
When exempted	On the farming heir's death, among other cases (No. 4147)
To keep it going	File a continuation report every three years from the filing deadline
Basis	Act on Special Measures art. 70-6 (and art. 70-6-2 / art. 70-6-3, Enforcement Order art. 40-7, Enforcement Rules art. 23-8)

The key is that the tax was not "exempted at inheritance" but "deferred." When thinking about the property exit—sale, conversion, lease—you must first grasp how this deferral moves.

Which of sale, conversion or lease is a cancellation trigger?

The main events that cancel the deferral (fix the deferral deadline) are disposing of / converting / leasing (apart from certain specified leases etc.) the deferred farmland, abandoning cultivation, or ceasing the farming business. The scope of the fixing is split by the proportion of farmland area moved.

Act	Effect on the deferral
Dispose of / convert / lease / abandon cultivation of 20% or less of the deferred area	Part of the deferred tax is fixed (the tax for that part)
Over 20% disposed of / converted / leased / cultivation abandoned	The whole deferred tax is fixed
Transfer by expropriation/exchange, request to buy out a productive green space, etc.	Cited as examples amounting to full fixing
Ceasing the farming business	The whole deferred tax is fixed
Certain specified leases etc. (below)	No cancellation; the deferral can continue

Here "sell, convert, lease" are each, as a rule, cancellation triggers. However, as with the specified leases seen below, certain leases set in law can keep the deferral going as an exception. Which act amounts to which scope of fixing, and how the 20% is judged, depends on the individual plot and is judged by a tax accountant and the tax office. We handle the exit practice (survey, valuation, brokerage) of selling, leasing or converting, and do not step into the judgment of whether the tax is fixed.

If cancelled, what do you pay and by when?

When a fixing trigger occurs, as a rule the deferral deadline is fixed on the day two months pass after it. On top of that, besides the deferred inheritance-tax principal, you must pay interest tax for the period from the day after the inheritance-tax filing deadline to the fixing date (Act on Special Measures art. 70-6).

What you pay	Content
Deferred inheritance tax (principal)	The fixed scope (part if partial, all if full)
Interest tax	Calculated for the period from the day after the filing deadline to the fixing date
Start of the payment deadline	The day two months pass after the triggering event

So the longer the deferral has run, the longer the interest-tax period. You may cover the principal from the sale proceeds, but overlooking the interest-tax burden can shrink the net take below expectation. Calculating the specific tax including interest tax, which scope is fixed, and whether any special provision or amended claim applies, are a tax accountant's domain. This article stays with the framework and connects you to a tax accountant for the figures and the filing. When setting the sale schedule, it is safest to confirm with the tax accountant in advance "when the fixing trigger arises (at contract or at delivery, etc.)."

Is there a lease (specified lease etc.) that keeps the deferral alive?

A lease is in principle a cancellation trigger, but certain leases set in law (specified leases etc.) keep the deferral going even if carried out. The National Tax Agency explains specified leases etc. as leases under the Act on Promotion of the Farmland Intermediary Management Business, the Act on Facilitating the Lease of Urban Farmland, and the Act on Special Provisions of the Farmland Act etc. for Specified Farmland Leases, among others (No. 4147, note).

Example of a continuing lease	Cited basis law
A lease under the farmland intermediary management business	Act on Promotion of the Farmland Intermediary Management Business
A lease of urban farmland	Act on Facilitating the Lease of Urban Farmland
A specified farmland lease (community gardens etc.)	Act on Special Provisions of the Farmland Act etc. for Specified Farmland Leases

Separately, there is also a "farming-difficulty lease" mechanism that keeps the deferral alive even when you lease out farmland because disability or illness has made it hard to keep farming yourself. Which lease you can use for your plot, whether you meet the requirements, and what notification is needed vary with the circumstances and the current system. For whether it applies and the procedure, confirm the tax side with a tax accountant and the rights-transfer/lease permit/notification side with an administrative scrivener. As a choice that keeps farmland in use without stopping cultivation, see also our note on farming-type solar power (solar sharing): temporary conversion and property.

Have a question about your situation?

Tell us about your property search or plans to sell.

Chat on LINEContact us

What is the order of procedures once you decide to sell, and who handles what?

Once you decide on a sale, lease or conversion, real estate, tax, Farmland Act and registration run in parallel. These cannot be bundled into one contract; each is an independent business contracted with separately. With the windows separated, we connect them smoothly from one and the same window (no referral fees are exchanged).

Stage	Who	Content
Confirm the effect on the deferral / estimate the tax	Tax accountant / tax office	Whether it is cancelled, part or all, principal and interest tax, filing
Farmland Act permit / notification	Administrative scrivener / agricultural committee / prefectural governor etc.	Farmland Act art. 3 (rights transfer), art. 4 (conversion), art. 5 (conversion rights transfer) permits; a notification inside an urbanization-promotion area
Property survey, valuation, brokerage	Real estate (we)	Survey of condition, boundary, access; valuation; brokerage incl. important-matters explanation
Ownership-transfer registration	Judicial scrivener	Registration on sale, gift, etc.
Disputes among heirs	Lawyer	Where there is a dispute over estate division or co-ownership

Selling or leasing farmland as farmland needs the agricultural committee's permit (Farmland Act art. 3); converting and selling needs the prefectural governor's etc. permit (art. 4, art. 5); inside an urbanization-promotion area a notification suffices. First confirm with a tax accountant "what happens to the deferral if I sell," while we progress the property survey and valuation in parallel, and the Farmland Act procedure goes to an administrative scrivener—that order is safest. For the flow of selling/leasing ordinary inherited farmland not under a deferral, see also what to confirm first when selling or leasing inherited farmland.

For selling or using inherited farmland, consult Yotsuba Real Estate (consultation free)

In your message, write the farmland's location (ideally the lot number), that it is under a deferral grant, the exit you are considering (sale / conversion / lease), and the rough area. We talk through how it might sell as property and where to refer each procedure. The judgment of whether the tax is fixed we connect to a tax accountant.

Frequently asked questions

Q. If I sell farmland under a deferral grant, will I always have to pay tax?
A. Disposing of the deferred farmland etc. as a rule fixes the deferral deadline, and you pay the inheritance tax (principal) and interest tax for that part (Act on Special Measures art. 70-6). A disposal of 20% or less of the area is a partial fixing, over 20% a full fixing, as a base rule. The day two months pass after the triggering event is the start of the payment deadline. Whether it is actually fixed and how much you pay vary with the circumstances, so calculating the figure and filing are a tax accountant's domain. This article only shows the framework.

Q. If cancelled, how much interest tax is charged?
A. On cancellation (fixing), besides the principal you are charged interest tax for the period from the day after the inheritance-tax filing deadline to the fixing date (Act on Special Measures art. 70-6). The longer you were under the deferral, the longer the interest-tax period. The specific interest-tax rate, the calculation and any special provision need confirming with a tax accountant and the tax office. We do not step into the tax calculation; we connect you to a tax accountant.

Q. Does leasing always cause cancellation? Can a specified lease keep it going?
A. A lease is in principle a cancellation trigger, but where you carry out certain specified leases etc. under the Act on Promotion of the Farmland Intermediary Management Business, the Act on Facilitating the Lease of Urban Farmland, or the Act on Special Provisions of the Farmland Act etc. for Specified Farmland Leases, the deferral can continue (National Tax Agency Tax Answer No. 4147). There is also a farming-difficulty lease mechanism for when disability or illness makes farming hard. Whether you can use it for your plot, and the requirements and notifications, should be confirmed with a tax accountant for the tax side and an administrative scrivener for the rights-transfer/lease permit/notification side.

Q. Which comes first, the sale or the Farmland Act permit?
A. Selling farmland as farmland needs the agricultural committee's permit (Farmland Act art. 3); converting and selling needs the prefectural governor's etc. permit (art. 4, art. 5); inside an urbanization-promotion area a notification suffices. In a sale conditioned on a permit, it is common to contract with the permit as a condition precedent. The permit/notification procedure is the domain of an administrative scrivener and the agricultural committee / governor etc.; we handle the property survey, valuation and brokerage. It also helps to confirm with a tax accountant in advance whether the sale amounts to a deferral cancellation, to set the schedule.

Sources

The following public materials are starting points. Laws are amended, so check the current article, paragraph, item, enforcement date and latest amendment on e-Gov Law Search. The application, cancellation and tax judgment of the deferral are made, on the individual circumstances, by a tax accountant and the tax office. Public materials were all consulted on 9 November 2026. The sources below are in Japanese.

• e-Gov Law Search: Act on Special Measures Concerning Taxation art. 70-6 (deferral and exemption of inheritance tax on farmland etc.: the deferred amount, the fixing triggers (disposal / conversion / lease / abandoning cultivation / ceasing the farming business, etc.), fixing on the day two months pass after the triggering event, payment of interest tax; and art. 70-6-2 / art. 70-6-3; confirm the paragraphs and items in the text)
• National Tax Agency Tax Answer "No. 4147: Special provision for deferral when inheriting farmland etc." (the outline; the condition of continuing farming or a specified lease etc.; exemption on the farming heir's death etc.; the definition of specified leases etc. (leases under the Act on Promotion of the Farmland Intermediary Management Business, the Act on Facilitating the Lease of Urban Farmland, the Act on Special Provisions of the Farmland Act etc. for Specified Farmland Leases, etc.); basis laws: Act on Special Measures art. 70-6, 70-6-2, 70-6-3, Enforcement Order art. 40-7, Enforcement Rules art. 23-8; consulted 9 November 2026)
• e-Gov Law Search: Farmland Act art. 3 (permit for rights transfer), art. 4 (permit for conversion), art. 5 (permit for conversion rights transfer); notification as the special provision inside an urbanization-promotion area; the specific need for a permit/notification is judged by the agricultural committee and the prefectural governor etc.; consulted 9 November 2026

This article provides general information and does not guarantee whether the deferral is cancelled for a particular plot or how much tax is due. The property survey, valuation and brokerage are real estate's (ours); calculating and filing the cancellation tax and interest tax a tax accountant's; the Farmland Act permit/notification for conversion and rights transfer an administrative scrivener's; ownership-transfer registration a judicial scrivener's; disputes among heirs a lawyer's—each judged and handled by them.

Joji Uramatsu (浦松 丈二), Representative Director and licensed real estate transaction specialist, Yotsuba Real Estate Co., Ltd. (四葉不動産株式会社). As a licensed real estate transaction specialist in Bunkyo, Tokyo, we provide surveys and brokerage of inherited real estate. Author profile

Updated: 9 November 2026