Also, from Mr. Tax himself u/starkimpossibility. This diatribe. I swear this is not a fever dream I am having...
https://old.reddit.com/r/JapanFinance/c ... context=3
We know that gift tax and inheritance tax are separate.
There is no "Gift Tax Law". Gift tax is a creation of the Inheritance Tax Law, and it only exists to inhibit inheritance tax evasion. Also, gift tax enforcement is almost non-existent outside the scope of inheritance tax enforcement. The two taxes are intertwined and can't be considered separately. The reason we know that a child's lack of awareness of funds (or lack of access to funds) renders a gift ineffective is that the NTA has consistently ruled that such funds are subject to inheritance tax. In practice, the only way to understand what constitutes a gift (and what doesn't) is to look at how inheritance tax works.
Respecting the retroactive rules that look back over X years after inheritance
Those rules are not relevant to this issue. They are just used to determine which gifts are subject to inheritance tax. They are not used to determine whether an asset in the name of someone else constitutes part of the deceased's estate.
Money gifted to a child before said period, is that child money.
Only if the gift was effective. The Civil Code (Article 549 et al) and Inheritance Tax Law determine whether a gift is effective for inheritance/gift tax purposes, and according to that law (as explained on the many pages I linked above) transfers to accounts in children's names are not always effective as gifts. Certain conditions must be met. (Again, refer to the articles for the details of those conditions. But needless to say awareness of the account and ability to access it are the most fundamental.)
The length of time that has passed between depositing the funds into the child's account and the date of death is not especially relevant. If anything, more time having passed without the child accessing/using the funds is evidence towards the conclusion that no gift occurred. Again, see the NTA's materials about how common it is for people to "forget" to include very old accounts in children's names as part of the deceased's estate. It is a widespread form of inheritance tax evasion and something that the NTA is working hard to minimize.
The NTA is not going to create a "legal test" of a child's knowledge of said funds.
When engaged in an audit, the NTA must reach a conclusion as to whether a gift occurred in the past. To do so, they must apply the relevant provisions of the Civil Code and the Inheritance Tax Law. Those provisions require knowledge on the part of the gift recipient (among other things), and the NTA has a long history of holding that deposits made into children's accounts did not constitute a gift when there was insufficient knowledge on the part of the recipient (or for other reasons). Again, see the NTA document linked in my previous comment, as well as the detailed explanations provided by tax accountants.
The current practices are pretty firmly culturally entrenched
If you mean that inheritance tax evasion via transfers to children's accounts (where the child doesn't know about or have full access to the funds) is common, then I agree. It seems to be one of the most common types of tax evasion discovered by inheritance tax audits (second, perhaps, to the old fashioned cash-in-the-wardrobe strategy). It has also been identified by the NTA as a priority in terms of taxpayer education, and if you pick up any textbook about inheritance/gift tax you will undoubtedly find a lengthy discussion of the topic. (Just as you will find plenty of detailed explanations online.) The fact that it is common doesn't make it legal, though.
systems like the form J-Nisa formalized them
Unfortunately, Junior NISA was not accompanied by any changes to the Inheritance Tax Law. As a result, it gave rise to a wide variety of complex inheritance/gift tax scenarios, and many tax accountants ended up advising their clients to avoid Junior NISA. There were also people who were shocked to be told by the NTA that their child would have a gift tax liability when control over the account passed to them (assuming the value of the account exceeded 1.1 million yen). One of the reasons Junior NISA no longer exists is that it never sat comfortably with existing inheritance/gift tax law, and it certainly didn't "formalize" any exceptions, as much as some might wish it did.
