My Inheritance experience UK version

[dgbg]

My mum passed 18 months ago and I can finally share my experience since it has finally concluded.

I'm UK born, permanent resident of Japan since 1991. I've saved money and invested overseas for 20+ years but I'll leave that for another post.

I received 70% of my mother 's estate - a telephone number amount of cash (almost 7 figures in pounds sterling - a fortune before Truss became PM.
I was truly worried about how much extra tax I would have to pay in Japan. I'm a very law abiding individual.
After going to the local (rural) tax office I worked out the 36,000,000 exemption and tried to figure out any extra exemptions.
I also knew that I could deduct any tax I'd paid HMRC UK but all my sums showed me paying anything between 6M - 12M yen.

I looked for an English speaking accountant but the fees were close to 1M yen and became disheartened.
Then I found 「税理士法人西東京会計」https://www.tkcnf.com/ntk
Not English speakers but can understand and, more importantly, work through those murky waters of inheritance tax with documents written in English.
I sent them the death certificate, the will, the inheritance document sent to HMRC (all in English) and that was it.
They worked through it all, even with the sale of the house but didn't need those documents since it all went through 'the estate' and ...........

I ended up paying ZERO inheritance tax to Japan.gov and only 500,000 yen to the company for the company hanko and 10-page tax document that they sent to my tax office. And that's the point - The hanko and the legit paperwork.

I have since invested most of the monies in an offshore fund but sent 100K to my bank through TorFX which caused some raised eyebrows but sorted that out within a week (local banks acting like the police/immigration) and now sitting pretty. But it did take a long time and I had to request a extension on the 10-month period to report findings etc. to the tax office.

[Beaglehound]

Interesting. Perhaps you weren’t too concerned with knowing the details but do you know why the Japan inheritance tax ended up at zero?

[dgbg]

Thx for the reply. Looking through the 7 pages of tax forms it appears the calculation went as follows:

70% of the total value of the estate
Minus funeral costs and other 'care' costs
Minus 36,000,000 yen (personal deduction)

This figure was the one that I thought then would be subject to 40% tax and then I could deduct the tax I'd already paid in the UK
BUT I'd misunderstood the tax bracket and since this figure was under 100,000,000 I got another 2,000,000 yen discount and 20% of this final figure was the amount of tax I should pay. Thankfully this final figure was slightly less than the IHT paid in the UK so a huge sigh of relief all round!!

What the accounts did (well, the tax computer programme they put my figures in) was worked out more deductions that I thought and worked with the correct tax bracket. So, I have no regrets paying the 500,000 yen fee because it was all worked out correctly AND there was an official seal from a accounting firm which I can now flash at banks and other financial institutions when I'm sending money over to Japan.

[imaginatorium]

Interesting. Perhaps you weren’t too concerned with knowing the details but do you know why the Japan inheritance tax ended up at zero?

Hmm, yes. If I remember correctly, Jimmy Carr had a rather similar story. I wonder how that worked out...

[sutebayashi]

So, I have no regrets paying the 500,000 yen fee because it was all worked out correctly AND there was an official seal from a accounting firm which I can now flash at banks and other financial institutions when I'm sending money over to Japan.

Yeah, for 500,000 that seems worth it. Well done.

I will be looking at paying all inheritance tax to the Japanese authority (no home inheritance tax in my case), and not really being in need of the cash either, am considering other possibilities, such as “passing” on my share beyond what there would be tax due on. Siblings and my kids cousins might then be able to gift monies annually to my kids thereafter. And get the annual gifts flowing to my kids now before the time comes.

I should probably at least spend some money on advice. Although 500,000 yen seems like a worthy investment, at the same time I find it perverse that tax payers need to stump up such amount to tax experts in order to be sure they are legally within the bounds of the rules. But, it is what it is.

[Deathstar_ITHelpdesk]

I inherited some money from my godfather in the UK (7 years ago, while I was living in Japan) - about 85k, which is now 150k due to investments I have made over the years with it.

But I now want to bring it all to Japan in cash.

Its under the 35M threshold. If I go to the tax office and say "I inherited 150k and now I want to transfer it over" - are they going to request proof of anything?

All I have is an email from my godfathers solicitor asking for my bank details so they could pay it in..

[Beaglehound]

I inherited some money from my godfather in the UK (7 years ago, while I was living in Japan) - about 85k, which is now 150k due to investments I have made over the years with it.

But I now want to bring it all to Japan in cash.

Its under the 35M threshold. If I go to the tax office and say "I inherited 150k and now I want to transfer it over" - are they going to request proof of anything?

All I have is an email from my godfathers solicitor asking for my bank details so they could pay it in..

The actual inheritance amount should be no problem at all, under the threshold as you say. If you have been living in Japan continuously since that time, you will have been liable for taxes on any gains made through your investments in the years which they occurred, even if they were accrued outside Japan. If that’s the case, and you haven’t paid any taxes on gains, that would be the potential issue, should the tax office enquire.

[Tkydon]

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[Deathstar_ITHelpdesk]

I inherited some money from my godfather in the UK (7 years ago, while I was living in Japan) - about 85k, which is now 150k due to investments I have made over the years with it.

But I now want to bring it all to Japan in cash.

Its under the 35M threshold. If I go to the tax office and say "I inherited 150k and now I want to transfer it over" - are they going to request proof of anything?

All I have is an email from my godfathers solicitor asking for my bank details so they could pay it in..

The actual inheritance amount should be no problem at all, under the threshold as you say. If you have been living in Japan continuously since that time, you will have been liable for taxes on any gains made through your investments in the years which they occurred, even if they were accrued outside Japan. If that’s the case, and you haven’t paid any taxes on gains, that would be the potential issue, should the tax office enquire.

How long had you been in Japan when you received the inheritance?
If less than 5 years in the preceding 10 years, and you (obviously) did not remit the money to Japan at the time, then there was no Inheritance Tax due, but that value at that time would be the Tax Basis for future Capital Gains calculations.

If you had already been here of more than 5 years in the preceding 10 years, the inheritance was subject to calculation for Inheritance Tax at that time, even if you did not remit the funds to Japan at the time...

As the inheritence was not inherited from a direct relation; parent, child, sibling, any inheritance tax would have been subject to the 20% Non-Direct Heir Surcharge...

GBP 85k @ the 2016 Exchange Rate of say Y150 = Y12,750,000
You would have to check the Exchange Rate at the time, here:
http://www.murc-kawasesouba.jp/fx/past_3month.php
See the bottom drop-down and select the year (2016)...

If you were the only heir in Japan, then you could claim the Basic Deduction of Y30,000,000 + Y6,000,000 per heir = Y36,000,000...

Therefore, Y12,750,000 < Y36,000,000, so NO Inheritance Tax due.

Therefore, Y12,750,000 is the Tax Basis for future Capital Gains Calculations.

GBP 150k @ the current exchange rate of Y161.17 = Y24,175,500

Capital Gain is Y24,175,500 - Y12,750,000 = Y11,425,500
Minus Capital Gains Basic Deduction Y500,000 plus transaction costs...

Y11,425,500 - Y500,000 = Y10,925,500
Taxable at 20.315% (15% National, 0.315% Reconstruction/Self Defence, and 5% Residents' Taxes) when you liquidate the investments (subject to actual gain and exchange rates)

Y10,925,500 x 20.315% = Y2,219,515 Capital Gains Taxes due.

You can remit the funds to Japan and pay the Capital Gains Taxes at the next Kakutei Shinkoku (15 Mar 2024... or later) and subsequent Residents' Tax deductions from payroll July 2024 to June 2025... or later).

Thank you that is very helpful - I was not in Japan for 5 years when I received this, and fairly certain I was the only beneficiary in Japan.

Will the tax office request for proof of anything or is this a kind of honesty system?

[Tkydon]

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