RetireJapan wrote: ↑Sat Oct 13, 2018 12:07 pm
Okay that makes it an easy calculation. I believe it will be something like this:
1m USD = 112m yen
standard deduction for one heir 36m
taxable amount: 76m
taxes on 76m = 30% with a 7m deduction
Taxes due = 20.7m yen (30% of 69m)
Hi Ben. Isn't the the 7m deduction is taken from the tax payable, not the taxable amount? Otherwise there'd be a huge jump in tax payable for people just over the threshold between bands.
So the taxable amount would be 76m, with taxes due of 22.8m (30% of the taxable amount) - 7m = 15.8m.
The op mentioned a mortgage. If that's on the inherited property then it can be deducted from the taxable amount along with funeral expenses.
fools_gold wrote: ↑Mon Oct 15, 2018 1:19 am
Hi Ben. Isn't the the 7m deduction is taken from the tax payable, not the taxable amount? Otherwise there'd be a huge jump in tax payable for people just over the threshold between bands.
So the taxable amount would be 76m, with taxes due of 22.8m (30% of the taxable amount) - 7m = 15.8m.
The op mentioned a mortgage. If that's on the inherited property then it can be deducted from the taxable amount along with funeral expenses.
You're right! Huge error on my part
Good point about the mortgage too.
English teacher and writer. RetireJapan founder. Avid reader.
When an inheritance has any foreign element in either decedent, successor or asset, the related party needs to see which country of law governs the inheritance. Act on General Rules for Application of Laws provides that inheritance shall be governed by the national law of the decedent. Japan charges inheritance tax based on Japan tax law, but distribution of estate and substance of inheritance, on which Japan charges inheritance tax, is governed primarily by law of the country of decedent’s nationality at the time of the death.
I spoke with a Japanese CPA and it seems the basic deduction under Japanese tax law is higher than the assessed value of my property, so there is no tax to pay and, according to the CPA, no obligation to file an inheritance tax return.
What I learned is that while Japan charges inheritance tax, if the decedent is a foreign national, the foreign law primarily applies to the inheritance. Also that is for inherited property, which is treated differently than cash assets. Of course if I sell the property, that's another story.
In the US, inheritance tax depends on the state, but only a few states have it. In my case, there is no inheritance tax levied by the state, and also a special exclusion on the transfer of property such that the assessed value doesn't change if the property is inherited. The assessed value is not the same as the current appraised market value, and Japan follows the foreign law. In other words, the number that gets evaluated is the (older) value assessed by the local county, which was the appraisal at the time the decedent bought the property.
There is also a Federal estate tax, but it has only applied to estates greater than $5.4 M, and it seems that under Trump this is being raised to $11.18 M.
Needless to say, this is all pretty complicated and YMMV, so it's best to discuss with a CPA.
In my case, a lot of initial apprehension was quickly sorted by the CPA, and I gleaned one of the crucial points from the discussion on this site.
The CPA I consulted has contacted me to reverse his initial statement.
He now claims that the Japanese tax authority will use the "fair market value" of the property for the inheritance tax — not its taxable value under US law —, and that I should consider retaining him to calculate the amount owed in Japan.
In other words, the house will likely have to be sold and my retirement plan is up in smoke, again.
The part I don't get is that if I am compelled to sell a rental property to pay an exorbitant tax, the rental revenue from the property is lost, seemingly without any compensation.
A friend, who also has property abroad (though not via inheritance), tells me that after consulting with lawyers and a tax accountant, he has decided to cancel his future plans in Japan and is leaving the country.
I would like to just get a straight answer on this, and now I'm wondering if I need to go look for another CPA.
Can't hurt to get a second opinion, but I would recommend talking to the tax office directly. They have no conflict of interest and will usually give you a straight answer.
English teacher and writer. RetireJapan founder. Avid reader.
mango wrote: ↑Mon Oct 22, 2018 7:25 pm...
A friend, who also has property abroad (though not via inheritance), tells me that after consulting with lawyers and a tax accountant, he has decided to cancel his future plans in Japan and is leaving the country.
...
A local person I know left about a year and a half ago, with a probable large inheritance in mind. The idea was to stay out of japan so that the inherited property would not have to be sold to pay the inheritance tax on it.
It seemed that they'd made a smooth, well-planned transition to small town US life. But it didn't work out, work-wise, and they're now back in town, living here.
**
Japan has given me a wonderful life and family, education for our kids, and many other things. They can have their share of what's left, and I only hope my survivors feel the same way.
