Children's Accounts - Deposits and Gift Tax

[Tsumitate Wrestler]

So it’s not clearly laid out by the NTA then? There is nothing on the English language page hinting of these sorts of issues?

https://www.nta.go.jp/english/taxes/others/02/15002.htm

If this is so complicated and nuanced I’d try asking the NTA directly.

https://www.nta.go.jp/english/contact/moreinformation/

Nope, nothing on the English page. As it pretty typical. THe NTA does not comment directly on this sort of issue, contacting them would not be productive.

...............

2-1.贈与であることを子どもに認識させる｜贈与として成立するように
子ども名義の口座に贈与をする場合は、贈与について子どもに認識してもらいましょう。民法上、贈与が成立するためには、贈与を受ける人が贈与について認識し承諾する必要があります。贈与として成立していなければ、子ども名義の口座は親が亡くなった場合に親の遺産となり、相続税の対象になってしまいます。

（贈与）
第五百四十九条　贈与は、当事者の一方がある財産を無償で相手方に与える意思を表示し、相手方が受諾をすることによって、その効力を生ずる。

引用：民法第549条｜e-Gov法令検索
未成年者の場合は親権者の同意のみで問題ありません。ただし子どもが成人している場合は、親子間で贈与契約をしているという共通認識が必要です。親が一方的に子ども名義の口座を作り、子どもに黙ってお金を入金している場合は贈与として成立しません。

子どもが成人するまでは問題ありませんが、成人した子どもにはきちんと贈与の存在を伝えておきましょう。一人暮らしするまでや結婚するまでの間、本人に黙って口座へ入金し続けている場合は要注意です

2-1. make sure the child is aware that the gift is a gift｜Confirm that the gift is established as a gift
When making a gift to an account in the name of a child, make the child aware that it is a gift. Under the Civil Code, in order for a gift to be considered a gift, the recipient must recognize and accept the gift. If the gift is not established as a gift, the account in the child's name becomes the property of the parent upon the death of the parent and is subject to inheritance tax.
Gifts
Article 549 A gift shall become effective when one party indicates an intention to give a certain property to the other party without consideration and the other party accepts the gift.
( Citation: Civil Code Article 549)
In the case of a minor, only the consent of a person with parental authority is required. However, if the child is an adult, there must be a common understanding that a gift agreement has been concluded between the parent and the child. Even if a parent unilaterally creates an account in the child's name and deposits money without the child's knowledge, it is not considered a gift.
This is not a problem until the child becomes an adult, but the adult child must be properly informed of the existence of the gift. Be careful if you continue to deposit money into the account without telling anyone until you live alone or get married!

Again, this is not a theoretical discussion. Here is a good source, as quoted above.

https://chester-tax.com/encyclopedia/16258.html

At the end of the day, the question boils down to... "Are these a bunch of overly paranoid and tax experts who are attempting to justify their high consulting fees, or is this a legitimate issue that those of use with minors need to be concerned about"

[Deep Blue]

Everything I read in both the NTA example and the website you link to very clearly says gifts of less than 1.1 million yen per year are not taxable to minor children.

In one of your previous posts you mentioned a child can not meet the test for receiving a gift… but in that link is says a minor child doesn’t need to acknowledge the gift.

Unless your children are adults already it seems you don’t need to worry at all?

[Tsumitate Wrestler]

Everything I read in both the NTA example and the website you link to very clearly says gifts of less than 1.1 million yen per year are not taxable to minor children.

In one of your previous posts you mentioned a child can not meet the test for receiving a gift… but in that link is says a minor child doesn’t need to acknowledge the gift.

Unless your children are adults already it seems you don’t need to worry at all?

I just want to state that I of course want to be wrong here, and am deliberately taking the opposing position.

But, again the issue comes from the wording of the law.

1. The other party most consent to the gift. 2. Kids cannot really consent. 3. Therefore there is open room for the NTA upon an audit to consider this inheritance tax avoidance/fraud.

引用：民法第549条｜e-Gov法令検索
未成年者の場合は親権者の同意のみで問題ありません。ただし子どもが成人している場合は、親子間で贈与契約をしているという共通認識が必要です。親が一方的に子ども名義の口座を作り、子どもに黙ってお金を入金している場合は贈与として成立しません。

That is the issue in a nut shell. Basically, there appears to be ample room for the NTA to declare a "gift" to a minor actually, not a "gift" and taxable at their own whim. The general advice seems to be the buttress yourself against this with some sort of contract between the gift giver and child. Which, lets be honest is ***** ridiculous.

The responses generally.

A. Yes that is common knowledge in the Japanese tax world, and clearly featured in every tax textbook or guide you can purchased at your local bookstore. Yes, J-Nisa is/was a mess an tax advisors recommended against using it.

B. Complete confusion, and rejection of the issue due to the poor quality of English information on the issue.

....

However, this is definitely a "thing".

[RetireJapan]

The tax experts argue that it is not that simple, and proving if the gift was effective is not straightforward.

The claims are:

A. It is not uncommon for a J-NISA investor to have to pay tax upon maturity after the funds are released to them or after the gifting relative passess away, upon review by the NTA.

B. The NTA views 1 million from Grandma a year in kidos bank account as basically inheritance tax dodging. {Example}

C. The Junior Nisa was always considered to be a liability due to B and C, and THAT is why it was axed.

A. Given how recent J-NISA is this may be an issue in the future, BUT I haven't heard of anyone this has happened to firsthand.
B. grandchildren are outside of the new(ish) inheritance in advance system (may be an issue for parents)
C. my impression is that J-NISA was axed because it was seen as benefiting wealthier families and thus ran counter to Koumeito's public posturing

But I am not a tax expert.

Although I find it difficult to believe that my grandkids will have any issue when getting control of their J-NISA accounts and hopefully put the money straight into adult NISA accounts. Will report back if that happens.

[Deep Blue]

1. The other party most consent to the gift. 2. Kids cannot really consent. 3. Therefore there is open room for the NTA upon an audit to consider this inheritance tax avoidance/fraud.

But doesn’t the translation of the NTA guidance explicitly state

“In the case of a minor, only the consent of a person with parental authority is required“

So all the hand wringing is irrelevant for minor children?

[Tsumitate Wrestler]

1. The other party most consent to the gift. 2. Kids cannot really consent. 3. Therefore there is open room for the NTA upon an audit to consider this inheritance tax avoidance/fraud.

But doesn’t the translation of the NTA guidance explicitly state

“In the case of a minor, only the consent of a person with parental authority is required“

So all the hand wringing is irrelevant for minor children?

The translation is irreverent sadly, it's all about the official Law as written in Japanese.

[RetireJapan]

This Reddit thread has a lot of detail and is very interesting: https://www.reddit.com/r/JapanFinance/c ... e_used_to/

[Tsumitate Wrestler]

This Reddit thread has a lot of detail and is very interesting: https://www.reddit.com/r/JapanFinance/c ... e_used_to/

Starks all over that thread. He is perhaps the reason I made this post. Lol

Can we all put our rings together and summon Captain Tax to break down both sides here and give a ruling?

[RetireJapan]

Can we all put our rings together and summon Captain Tax to break down both sides here and give a ruling?

My impression is there is no ruling because at the end of the day it is going to depend on the NTA doing an inheritance tax audit and ruling against you.

If both of those fail to happen there is no issue. There seem to be steps you can take to reduce the chance of them happening, and you get to sue the NTA if you disagree with their ruling, but it is not a black and white issue.

Personally I am not particularly worried about this. We have put money into our grandkids' J-NISA accounts, but they will get control of them when they are 18 and do whatever they want with the money, hopefully before my wife and I die

After that we are planning to either give money to family (under 1.1m a year) or pay their living expenses for them. We will not have control of bank accounts in their names that we put money into, which seems to be most of the issue discussed on Reddit.

[Deep Blue]

The translation is irreverent sadly, it's all about the official Law as written in Japanese.

I confirmed with my wife the translation is accurate. The official guidance from the NTA on their website states minor children do not need to consent to gifts. I’m not sure what else you are looking for?