Inherited property - tax implications.. :-/

[Deathstar_ITHelpdesk]

I will at some point inherit a dual commercial/residential property in the UK.

It is likely worth GBP 700k now (115M JPY at todays rates) - but was bought with a peanut in the 1970's.

About me - I have Japan PR and own a home with a mortgage in Japan.

I am reading some scary things about capital gains tax if I sell the place...would it be better to rent it out and pay Japan tax on the income?

Any other bright ideas?

Thousand thanks!

[Tkydon]

You will be liable for Japanese Inheritance Tax on the the value of the Estate including the property when you inherit it, whether you sell it or not.

Japanese Inheritance Tax calculations depend on the total value of the portion of the total Estate inherited by Heirs in Japan, the number of Heirs in Japan, and the relationship of the Heirs in Japan to the Deceased.

The calculations for Valuation of the property and distribution of the Japanese Inheritance Tax across the Heirs in Japan are a little complicated.

If the property is sold and you inherit the Cash, you will be liable for Japanese Inheritance Tax on the cash when you inherit it, whether you remit the cash to Japan or not.

The Tax Basis of the property going forward will then be the Value assessed for Inheritance Tax. If you sell the property at a later date, you will be liable for Short-Term Capital Gains Taxes (less than 5 years) or Capital Gains Taxes (more than 5 years) on any gain over the Tax Basis.

If you rent out the property, you will be liable for Income Taxes on the rental income in both UK and Japan, with a Foreign Tax Credit for Taxes paid in the UK when filing your Japanese Taxes.

You will then be liable for Short-Term Capital Gains Taxes (less than 5 years) or Capital Gains Taxes (more than 5 years) on any gain over the Tax Basis when you decide to sell it.