Assets in UK and Japan writing a will

[northSaver]

Wait - so the situation is that you inherit a house, pay IHT on it to the Japan tax office. Then, if you sell it, you are liable for CGT on the entire increase in value from the time your parents bought it? How is that not double taxation? How on earth would they ever figure out the gain? If that is the case then I perhaps you could have the estate liquidate the property and inherit the proceeds of the sale in cash. Would that avoid the CGT or does Japan not acknowledge probate for tax purposes?

Yeah, as I mentioned on page 1:

Someone here suggested that CGT wouldn't be payable if the property were sold during probate and the inheritors received cash instead of the property. I don't know if he/she knows that for a fact or it's just wishful thinking. My view is that UK CGT would still be paid in that situation, so why not Japan CGT?

I don't know enough about the Japanese system to confirm this. Logically... you inherited the house at time of death so it doesn't matter when it was sold (during or after probate). You still benefit from the gains it has made and still have to pay the CGT. In the UK you only pay tax on the gains it made, if any, since the time of death.

[RetireJapan]

Wait - so the situation is that you inherit a house, pay IHT on it to the Japan tax office. Then, if you sell it, you are liable for CGT on the entire increase in value from the time your parents bought it? How is that not double taxation? How on earth would they ever figure out the gain? If that is the case then I perhaps you could have the estate liquidate the property and inherit the proceeds of the sale in cash. Would that avoid the CGT or does Japan not acknowledge probate for tax purposes?

That blew my mind too when I first found out about it (on r/JapanFinance).

I guess the tax office logic is that the capital gains tax and inheritance tax are different issues. When you inherit the property it comes with the capital gains tax bill attached to it, as it were. Tax the person who left it to you did not pay.

Separately from that, you owe inheritance tax on the value of the asset you inherited, without taking the capital gains tax liability into account.

This might make more sense if it were an asset in Japan, formerly owned by a Japanese taxpayer.

Also sucks because you are probably not going to be able to use the CGT break for your own home (30m yen I believe?).

But the tax office is not going to create some little loophole that says you can get out of tax by buying assets overseas, and the vast majority of people are not going to ever be affected by this issue.

Depending on the value of the property and the amount of CGT owed, it certainly might be worth investigating whether leaving Japan temporarily would allow you to sell the property then just bring the money to Japan later without worrying about Japanese tax liabilities. It would definitely be a good idea to get proper advice from a professional before considering that kind of thing though.

[Deep Blue]

Depending on the value of the property and the amount of CGT owed, it certainly might be worth investigating whether leaving Japan temporarily would allow you to sell the property then just bring the money to Japan later without worrying about Japanese tax liabilities. It would definitely be a good idea to get proper advice from a professional before considering that kind of thing though.

If you have been here for ten of the last fifteen years, you need to leave Japan for five full years to release yourself from this tax liabiliity.

[captainspoke]

As for leaving in order to sidestep inheritance/gains taxes, should I bring up the exit tax?

[RetireJapan]

As for leaving in order to sidestep inheritance/gains taxes, should I bring up the exit tax?

Real estate doesn't count towards the exit tax.

[Deep Blue]

As for leaving in order to sidestep inheritance/gains taxes, should I bring up the exit tax?

Not everyone is subject to that, fortunately.

[northSaver]

Wait - so the situation is that you inherit a house, pay IHT on it to the Japan tax office. Then, if you sell it, you are liable for CGT on the entire increase in value from the time your parents bought it? How is that not double taxation?

On the subject of "double taxation", I forgot to mention that in Japan you can deduct some of the IHT tax you paid from the property gains in order to pay less CGT. This is only if you sell it within three years of the inheritance. The amount you can deduct is based on the proportion of the property value to the total inheritance value. I've just found a thread on reddit that explains a real-life example of this:

https://www.reddit.com/r/JapanFinance/c ... ?rdt=36330

[TokyoSurvivor]

As for leaving in order to sidestep inheritance/gains taxes, should I bring up the exit tax?

Real estate doesn't count towards the exit tax.

Surely another reason not to sell real estate until you're back in the UK.
Also making sure it's sold after the required period of time etc that meets the criteria acceptable by the Japanese tax authorities so they don't claim CGT.

[eyeswideshut]

If you have been here for ten of the last fifteen years, you need to leave Japan for five full years to release yourself from this tax liabiliity.

Sorry for the dumb question but which tax liability are you referring to? IHT or CGT or both?

[TokyoSurvivor]

If you have been here for ten of the last fifteen years, you need to leave Japan for five full years to release yourself from this tax liabiliity.

Sorry for the dumb question but which tax liability are you referring to? IHT or CGT or both?

I would also like to clarify this.
Basically, exactly what do we need to do that would put us in a position where CGT is no longer applicable for property we sell outside Japan?
Is it just time duration, or are there other key steps that need to be taken?