Real estate and inheritance tax

[RolandB1]

This is my first post so apologies if it has been covered before. My (Japanese) wife is set to inherit quite a large piece of land from her parents. I’ve estimated it to be worth around 70,000,000 yen based on a smaller piece of land they sold previously that was attached to the larger piece.
So let’s say that she inherits the land - will she have to pay inheritance tax when she inherits the land or only when we decide to sell it? I’m guessing that it will be when she inherits the land so we will looking at around 20,000,000 yen of inheritance tax.She is an only child so it will all go to her. Her parents are in their late 60s/early 70s so we still have time to plan on what to do.
Thanks in advance.

[RetireJapan]

Welcome to the forum!

700m yen is around 7m USD. All other factors notwithstanding, inheritance tax on an estate of that value is likely to be much much more than 2m yen.

My non-tax professional, top of my head calculation would put it around 250m yen.

Are you sure the numbers are correct? If so, I recommend talking to a tax accountant who should be able to help you navigate this important event.

[RolandB1]

Sorry, it looks like I messed up the numbers. It should be 70,000,000 yen and 20,000,000 tax.

[RetireJapan]

Sorry, it looks like I messed up the numbers. It should be 70,000,000 yen and 20,000,000 tax.

Ah, that makes more sense.

Again, I am not a tax professional, but I think it is something like this (assuming no other allowances, etc.):

70m inheritance (if the land is the only thing inherited)
36m tax-free allowance (30m + 6m per heir)
34m taxable @ 30% with 7m deduction

So about 9m in tax.

I would definitely talk to a professional though.

[RolandB1]

Many thanks for your reply and sorry for the initial confusion.
Am I correct in thinking that inheritance tax must be paid immediately when the inherit land rather than when you come to sell it?

[RetireJapan]

Yes, inheritances must be declared within 10 months (? -not entirely sure) and any tax due paid shortly after that.

[RetireJapan]

Also tax will be levied on the assessed value (which may be different from the resale value).

[Tokyo]

Yes, as Ben notes the resale value of the land is apparently irrelevant as far as inheritance tax goes. The much lower assessed value is used for calculating tax which is why financial advisors here highly recommend passing on property rather than cash or shares.

I am about to post a long piece on the subject in the very near future.

[RolandB1]

Thanks for the reply. I’m just wondering if there are any people in a similar position and what, if anything, can be done to reduce the amount of tax paid.

[RolandB1]

Yes, as Ben notes the resale value of the land is apparently irrelevant as far as inheritance tax goes. The much lower assessed value is used for calculating tax which is why financial advisors here highly recommend passing on property rather than cash or shares.

I am about to post a long piece on the subject in the very near future.

Looking forward to this.