Japan's inheritance tax

[thomas]

JT had an interesting piece on Japan's punishing inheritance tax, among the highest and most complicated in the world. For non-Japanese individuals, the situation is especially complex. I had to read it twice to understand half of it:


Japan is said to have one of the highest inheritance tax rates in the world, with rules so complex and strict that what initially seems like a smart move to the country can later become a costly mistake. Some residents reportedly even choose to leave Japan because of this tax burden. Adrian Castelino-Prabhu, a specialist in international inheritance tax, explained that it is easy to fall into the higher tax brackets in Japan compared to other countries.

In recent years, Japan has been popular for its low living costs, safety, good infrastructure, educational opportunities, and reasonable income tax rates—except for the highest earners. The threat of a large inheritance tax, particularly for those with significant family wealth or global assets, can reduce the country's appeal. There have been many reports of foreigners facing unexpected tax bills after a spouse's death or having to borrow money to pay inheritance taxes on overseas assets. Even carefully planned estates can be disrupted by Japan's complicated rules. The complexity of the paperwork is often cited as a deterrent. In 2020, a senior Japanese politician reportedly described the country's taxation of foreign inheritance as "terrifying."

Japan's top inheritance tax rate is 55%, arguably the highest in the world (in France, Belgium and Korea it can be higher depending on the asset and the heir). In passing to beneficiaries in Japan, nearly half of a sizable estate can be eaten up by this tax. A 2019 study of 28 large economies by UHY International, a tax advisory, found that Japan charged the most tax on a $3 million inheritance to a single heir — 38.5%. France was No. 2, at 34.3%. For the United States, the federal estate tax was 0%. Exemptions in Japan are few and low, most loopholes have been closed, and the inheritance tax is determined using set ratios based on an order of precedence among heirs — spouse alone, 100%; spouse ½ and children ½; spouse ⅔ and parents ⅓; and so on. While the actual payout doesn't necessarily have to follow these fractions, the tax is calculated as if the statutory divisions were followed. "The rates are quite high and, compared to other countries, the basic exemptions are quite low," said Castelino-Prabhu. For non-Japanese individuals, the situation is especially complicated. Small differences in documentation and timing can mean paying a bundle rather than almost nothing at all.

Japan's inheritance tax is high, unforgiving and sometimes avoidable

Under certain circumstances, overseas inheritance can pass tax-free to foreigners who are residents in the country.

www.japantimes.co.jp

 

[Mikawa Ossan]

The article is really interesting. It does sound quite complicated for foreigners living in Japan.

I found this from the National Tax Agency.

財産を相続したとき｜国税庁

Here are some strategies to reduce the tax owed.

相続税対策9つの方法を厳選　節税のために準備しておくこと　注意点も解説 | 相続会議

相続税は生前からの準備次第で税額が大きく変わります。最低限知っておきたい相続税対策や注意点を、税理士が解説します。

souzoku.asahi.com

相続税対策23選｜節税のためにできることを税理士が解説

「相続税対策にはどのようなものがあるのだろうか…？」と疑問をお持ちの方を対象に、相続税を適切に節税できる23の方法を、解説しています。また、23の節税方法を「節税効果は高いか」「手続きの容易さ」「誰でも実現可能か」の３つの軸で評価しました。

www.ht-tax.or.jp

This looks like it could be an interesting book, although I've never read it.

https://item.rakuten.co.jp/books-sanseido/ebm-9784909484659/?scid=s_kwo_pla_unpaid&yclid=YSCPA.e4949821-5803-40a2-bd69-0ac09e528c83

The above are really for Japanese citizens. The following is worth a read, as it's more pertinent to non-Japanese residents.

外国籍の相続人がいる時の手続き・相続税・注意点について解説｜相続大辞典｜【相続税】専門の税理士60名以上｜税理士法人チェスター

配偶者など相続人の中に外国籍の方がいる場合、相続権はどのようになるのか、遺産を相続できるのか気になるところです。このケースのように外国と何らかの関わりを持つ相続のことを渉外相続といいます。

chester-tax.com

 

[Ukigumo]

I'm a great believer in that we need to pay taxes in order to 'keep the lights on', but inheritance tax seems to be especially punitive; taxing assets that have been taxed a few times already. In the UK one needs to place everything into a trust fund and, progressively, after seven years they become tax exempt. But doing that requires explicit trust of the beneficiaries and their intent and that they won't throw you out of your property before your demise.

 

[Ukigumo]

There's a change coming in British inheritance tax laws! Currently the threshold for inheritance tax is about £500k (£340 and an additional £160k if passing on one's estate to one's spouse). That's cash, investments and property. About 5% of the British population are liable to inheritance tax. The new twist is that private pension pots are going to be included in this list, pushing those who'll have to pay it up to 10%!

Our government promised not to increase income tax (and a few others) when trying to be elected. This severely hobbled their ability to raise funds to fill the huge debt they inherited from the previous government's mismanagement of our economy. Hence they're using these more stealthy taxes to collect money.

What are they doing in Japan?