eyeswideshut wrote: ↑Thu Aug 29, 2024 5:03 am
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.