Dear fellow redditors,
I've been scouring through previous posts on the topic of inheritance taxes and the calculations behind them but has anyone actually gone through the process or spoken to a tax advisor or the NTA and received advise on what is the correct way to calculate your tax liability?
For someone who is the only member of the family (all non-Japanese + no inheritance taxes in home country) who is an unlimited taxpayer in Japan (i.e PR/Spouse visa) while the rest of the family members are "restricted" tax payers (no tax residency in Japan, have lived overseas all their lives), my initial understanding was that the only assets visible to Japan for inheritance tax purposes would be the assets solely to be inherited by the unlimited tax payer (with the assumption that all assets in the estate of the deceased are "foreign" and does not include any Japanese stock, properties, etc).
I saw a link shared previously by @kristhuy here. Using the same logic as that link and assuming an estate of say, USD 4M (no Japanese assets) and an allocation of 50% each for 2 children (1 restricted taxpayer/non-Japanese tax resident "A", and 1 is an unlimited taxpayer in Japan "B") - the tax for "B" should be calculated as:
(assuming 1 USD = JPY 100 for simplicity although I know USD/JPY is crazy now)
I consulted with a tax advisor but was told that the above calculation was wrong and that the Japanese tax authorities looked at the whole estate on a worldwide basis (that is, the USD 4M in my example above) and amount of tax payable by "B" would be calculated by USD 4M (or JPY 400M- JPY42M deduction) / 2 = which gives a hefty tax base of JPY 179M or about JPY 54.6M in taxes owed!
I'm not sure if he's correct so I wonder if any of you had a different result after consulting with your advisors.
(Links I referred to as below)
I've been scouring through previous posts on the topic of inheritance taxes and the calculations behind them but has anyone actually gone through the process or spoken to a tax advisor or the NTA and received advise on what is the correct way to calculate your tax liability?
For someone who is the only member of the family (all non-Japanese + no inheritance taxes in home country) who is an unlimited taxpayer in Japan (i.e PR/Spouse visa) while the rest of the family members are "restricted" tax payers (no tax residency in Japan, have lived overseas all their lives), my initial understanding was that the only assets visible to Japan for inheritance tax purposes would be the assets solely to be inherited by the unlimited tax payer (with the assumption that all assets in the estate of the deceased are "foreign" and does not include any Japanese stock, properties, etc).
I saw a link shared previously by @kristhuy here. Using the same logic as that link and assuming an estate of say, USD 4M (no Japanese assets) and an allocation of 50% each for 2 children (1 restricted taxpayer/non-Japanese tax resident "A", and 1 is an unlimited taxpayer in Japan "B") - the tax for "B" should be calculated as:
(assuming 1 USD = JPY 100 for simplicity although I know USD/JPY is crazy now)
50% of USD 4M = USD 2M (assets visible to Japan / only the inheritance to be received by "B" as all assets are based overseas and should not include "A"s portion) or JPY 200MLess deduction of JPY 30M + 6M + 6M (basic deduction + JPY 6M deduction per heir) = JPY 42MTax base for "B": (JPY 200M - JPY 42M) / 2 = JPY 79M = JPY 158MGoing by the progressive tax rate table:JPY 46.2M inheritance tax owed(1st 10M at 10%, next 20M at 15%, next 20M at 20%, next 50M at 30% and remaining 58M at 40%)
Note: Not sure if step #3 is correct but that is what was donehere(in the given example the amount post-deduction was divided by # of heirs)Edit: Removed step 3, as that seemed incorrect based on the comments received.
- A) Assets visible to Japan (i.e only the portion to be inherited by "B" based on assumptions set out above: JPY 400M x 50% = JPY 200M
- B) Less deductions of JPY 42M (30M basic + 6M per statutory heir): JPY 200M - JPY 42M = JPY 158M
- C) Taxable base for each statutory heirs: JPY 158M / 2 heirs = JPY 79M
- D) Japanese tax liability for each statutory heir: JPY 16.7M
- E) Amount in D) x number of statutory heirs: JPY 16.7M x 2 = JPY 33.4M (to be borne by "B" as he is the sole unlimited taxpayer and will bear 100% of JP tax liability)
(Links I referred to as below)