my actual experience with Japanese inheritance tax
Posted: Sun Jul 04, 2021 2:25 am
I recently provided this information when answering a very old question on the forum, so this is kind of a double post, but I personally would have GREATLY benefited from it, so thought it was worthwhile to create a fresh topic.
This is related only to inheritance of overseas assets, and how taxes are calculated by the Japanese tax office for tax residents of Japan.
I discovered that the calculation is different from expected, leading to zero tax for me and being told I did not even need to report the inheritance.
Hopefully the information can save some others from stressing out about and wasting time on appraisals, keeping expense receipts, or even just calculating your tax and filling out a Japanese tax form. (But that will depend on things like number of legal heirs and value of the estate.)
Anyway, this is how the tax is actually calculated for a Japanese tax resident inheriting overseas assets:
The total value of the estate is calculated first, then divided by the number of legal heirs. After that, ONLY the portion going to the Japanese tax resident has the standard deduction subtracted from it (which is 30 million yen + 6 million yen times the number of legal heirs).
That is, the standard deduction is NOT subtracted from the total value of the estate BEFORE distribution. Only from the portion received by a Japan tax resident.
This means you may be able to do a quick calculation and easily see if your tax liability will definitely be zero - in which case you won't have to worry about any details for Japanese tax purposes. I was told I did not even need to file a tax return.
The rationale is that the Japanese tax authorities have nothing to say about any assets with no connection to Japan. Only the part of an estate that actually passes to a Japanese tax resident is relevant to them.
So to them, that portion is considered *the estate* for tax purposes. And the standard deduction is defined by law as 30 million yen + 6 million times the number of heirs, so they are legally obligated to deduct that amount from whatever your portion is.
This is related only to inheritance of overseas assets, and how taxes are calculated by the Japanese tax office for tax residents of Japan.
I discovered that the calculation is different from expected, leading to zero tax for me and being told I did not even need to report the inheritance.
Hopefully the information can save some others from stressing out about and wasting time on appraisals, keeping expense receipts, or even just calculating your tax and filling out a Japanese tax form. (But that will depend on things like number of legal heirs and value of the estate.)
Anyway, this is how the tax is actually calculated for a Japanese tax resident inheriting overseas assets:
The total value of the estate is calculated first, then divided by the number of legal heirs. After that, ONLY the portion going to the Japanese tax resident has the standard deduction subtracted from it (which is 30 million yen + 6 million yen times the number of legal heirs).
That is, the standard deduction is NOT subtracted from the total value of the estate BEFORE distribution. Only from the portion received by a Japan tax resident.
This means you may be able to do a quick calculation and easily see if your tax liability will definitely be zero - in which case you won't have to worry about any details for Japanese tax purposes. I was told I did not even need to file a tax return.
The rationale is that the Japanese tax authorities have nothing to say about any assets with no connection to Japan. Only the part of an estate that actually passes to a Japanese tax resident is relevant to them.
So to them, that portion is considered *the estate* for tax purposes. And the standard deduction is defined by law as 30 million yen + 6 million times the number of heirs, so they are legally obligated to deduct that amount from whatever your portion is.
