Tax liability of Japan‘s income tax has been based both on a taxpayer‘s residence and on the source of income. A resident in Japan is liable to the tax on his worldwide income. In our local income tax, the tax liability is exclusively based on one‘s residence. However, residence-based taxation has been under attack lately. For one thing, inheritance tax, which is sometimes considered to be supplementary to income tax in Japan, is moving away from being residence-based and adding the element of nationality in deciding the bounds of taxpayers. Even if one has lost his residence in Japan, he might be still liable for inheritance tax as long as he keeps Japanese nationality. Moreover, the local tax act began to admit generous tax credit against local income tax for the donation to the other municipalities than the one in which a taxpayer lives.