Death & Taxes

[IparryU]

because they do not report it externally... but someone else does on their behalf.

That's basically what I wrote.

:wall::wall::wall::wall:

Still having trouble reading between the lines?

mobile copy&paste/typing/reading not so good.

[Samurai_Jerk]

because they do not report it externally... but someone else does on their behalf.

That's basically what I wrote.

:wall::wall::wall::wall:

Still having trouble reading between the lines?

mobile copy&paste/typing/reading not so good.

Yeah, I generally just use it for reading not posting.

[IparryU]

because they do not report it externally... but someone else does on their behalf.

That's basically what I wrote.

:wall::wall::wall::wall:

Still having trouble reading between the lines?

mobile copy&paste/typing/reading not so good.

Yeah, I generally just use it for reading not posting.

gots me a long ride... listening to some Hard Core History too.

[matsuki]

The inheritance tax thing definitely sucks if you're American since there's no federal inheritance tax (some states have inheritance taxes) and the estate tax exclusion is over five million dollars. I've always though that was kind of strange because one guy can inherit five million bucks tax free but if 20 people inherited a ten million dollar estate it would be taxed before being divided among them. Anyway, it sucks but that's life. Should the government not require you to pay a tax that all other residence have to pay just because you're a US citizen?

If you're inheriting that much $$$, couldn't you cancel your visa (and tax obligations) here, "move back" to the US to get the inheritance....and then reapply for a new visa if you still want to live here?

[IparryU]

The inheritance tax thing definitely sucks if you're American since there's no federal inheritance tax (some states have inheritance taxes) and the estate tax exclusion is over five million dollars. I've always though that was kind of strange because one guy can inherit five million bucks tax free but if 20 people inherited a ten million dollar estate it would be taxed before being divided among them. Anyway, it sucks but that's life. Should the government not require you to pay a tax that all other residence have to pay just because you're a US citizen?

If you're inheriting that much $$$, couldn't you cancel your visa (and tax obligations) here, "move back" to the US to get the inheritance....and then reapply for a new visa if you still want to live here?

10 year revolving window for "permanent tax resident". So you would have to live back in the states and not have any income coming from Japan until you are outside that time frame.

What could they really do though if you go back to the states... Uncle Sam would want that money to stay onshore and what not.

[wagyl]

Yes, from of the cuff memory I think they would require that you be outside Japan for five of the previous ten years, so you either have to plan ahead for when Aunt Mabel is going to kick the bucket or it is a long, forward-facing break from Japan. If the amount was worth investigating or you seemed suspicious to the authorities, I could see them making inquiries into the bona fides of your actions: keeping some possessions in Japan during your absence would look like you were doing this for tax purposes. And even though you've got yourself hitched to a visa sponsor, most other visa types are not so easy: getting an employer to sponsor a work visa might be hard if you have a record of resigning the minute Uncle Jehosephat dies. I can't see it being easy applying for your second permanent residence visa.

IPU, I can't see why the US Government cares what happens to the assets, once they have got their taxes from it.

[matsuki]

10 years?! Is that just Japan or some kind of international standard? Doesn't seem realistic...how does that work if you permanently move back to the US an inherit a large sum...say a year later? Even if Japan still considers you a "permanent tax resident," can they legally pursue you in the US, to try and enforce their tax laws? Assuming extradition agreements don't change, would seem to be a big jurisdiction issue. I guess this would prevent you from coming back to Japan but if that's the price you're willing to pay I don't see what can be done??

[IparryU]

IPU, I can't see why the US Government cares what happens to the assets, once they have got their taxes from it.

exactly, hence why they would want it to stay onshore (meaning in the US) and they may be reluctant to give Japan their share of it. not much Japan can do but complain and go after what you have left in Japan (including family/previous family).

10 years?! Is that just Japan or some kind of international standard? Doesn't seem realistic...how does that work if you permanently move back to the US an inherit a large sum...say a year later? Even if Japan still considers you a "permanent tax resident," can they legally pursue you in the US, to try and enforce their tax laws? Assuming extradition agreements don't change, would seem to be a big jurisdiction issue. I guess this would prevent you from coming back to Japan but if that's the price you're willing to pay I don't see what can be done??

That is Japan tax law. You have to hand in your gaijin/zairyu card when you leave the country to break your residency, but if you come back to Japan and reclaim your residency before the window is over, then you might get hit up for it (assuming that they know about it). If you own property in Japan, you are still pinned down on the tax and you cannot really break your tax residency.

So what can they do if you run to the US? Not much but go after your wife/ex-wife/guarantor/children and/or their guardian(s)

Presentation (this does not cover probate, but it does go over what residency is and how to determine what type your are):
https://app.box.com/s/ryzsr5hntumtq7pnb69i5bqy11xjs3t6

Have fun reading:
http://www.pwc.com/jp/en/taxnews-estate ... tion-e.pdf

[Samurai_Jerk]

The inheritance tax thing definitely sucks if you're American since there's no federal inheritance tax (some states have inheritance taxes) and the estate tax exclusion is over five million dollars. I've always though that was kind of strange because one guy can inherit five million bucks tax free but if 20 people inherited a ten million dollar estate it would be taxed before being divided among them. Anyway, it sucks but that's life. Should the government not require you to pay a tax that all other residence have to pay just because you're a US citizen?

If you're inheriting that much $$$, couldn't you cancel your visa (and tax obligations) here, "move back" to the US to get the inheritance....and then reapply for a new visa if you still want to live here?

If I were inheriting millions tax free, it would be a very easy choice to move back to the States to avoid inheritance taxes in Japan. But I'm single and don't own anything here besides some furniture, a couple of bicycles, and electrical appliances. It might not be so easy for someone with a wife and kids who's been here for decades, runs a business, and owns a home. Also, what if you're inheriting a few hundred thousands dollars? Certainly a nice chunk of change but probably not enough to walk away from your life.

[Coligny]

if you are recipient of a life insurance... how is it taxed when you get it ? inheritance or regular income ?

[Wage Slave]

if you are recipient of a life insurance... how is it taxed when you get it ? inheritance or regular income ?

Don't know and would like to. In the UK insurance payments are nor taxed at all, so life policies can be handy for a few purposes. I need to check cos there is one coming up. I'm busy at present but when I get a bit of time I'll have a look. I do skim/scan read the ever popular "Tax Guide for Foreigners" every year since they send it to me. It's that time, but I haven't got round to it yet. Perhaps at the weekend.

[Samurai_Jerk]

if you are recipient of a life insurance... how is it taxed when you get it ? inheritance or regular income ?

In general or in Japan? My guess is it varies by country.

[IparryU]

if you are recipient of a life insurance... how is it taxed when you get it ? inheritance or regular income ?

depends on how the person received it... if the insurance was paid on death, they (IRS) would consider it part of the deceased's estate.

now if it was transferred into a living trust prior to death, then the tax laws on that trust would apply (if there was no taxable event, then they cant tax it.) Then there would be capital gains tax, which is hairy enough to determine over the years and even more so if the value jumped up due to the life insurance policy. but if someone were to do this, there would be a lawyer attached to it to determine what is possible (and to tag along as long as possible for some extra pay).

[wagyl]

if you are recipient of a life insurance... how is it taxed when you get it ? inheritance or regular income ?

Just to add another "it probably depends" factor, some insurance policies pay out to a named beneficiary, some to the estate of the deceased, and the latter would probably be subject to any inheritance tax. Probably. Maybe. Obviously if this is an important issue for you you should seek professional advice.

[matsuki]

If I were inheriting millions tax free, it would be a very easy choice to move back to the States to avoid inheritance taxes in Japan. But I'm single and don't own anything here besides some furniture, a couple of bicycles, and electrical appliances.

Word

It might not be so easy for someone with a wife and kids who's been here for decades, runs a business, and owns a home. Also, what if you're inheriting a few hundred thousands dollars? Certainly a nice chunk of change but probably not enough to walk away from your life.

Of course...but if you're already contemplating it, probably worth the move.

go after your wife/ex-wife/guarantor/children and/or their guardian(s)

I've never got the fuzzy grey line with that shit...you file taxes independently so if she's not your guarantor, why would she or your children be liable? Then again, as you know all to well....no joint bank accounts....but then when your soon to be ex wife goes to your bank, they will let her clean your account out.... "because wife."

[wagyl]

Linked from IPU's link, is this http://www.pwc.com/jp/en/taxnews-estate ... ue12-e.pdf about the reporting of foreign assets.

Answering some of the questions raised here:

Domestically, the National Tax Agency issued the Revised Basic Circular for National Tax Collection Act in June
2013. One of the changes in the revised Circular is that for delinquent taxpayers whose assets are located outside of Japan, the Japanese government can now ask the other country’s government to help collect the unpaid tax.

[Samurai_Jerk]

Linked from IPU's link, is this http://www.pwc.com/jp/en/taxnews-estate ... ue12-e.pdf about the reporting of foreign assets.

Answering some of the questions raised here:

Domestically, the National Tax Agency issued the Revised Basic Circular for National Tax Collection Act in June
2013. One of the changes in the revised Circular is that for delinquent taxpayers whose assets are located outside of Japan, the Japanese government can now ask the other country’s government to help collect the unpaid tax.

And for people wonder why that other government would bother the answer is reciprocity.

[wagyl]

Hmm, now that permanent resident tax payers are excluded from receiving welfare if the shit hits their fan, there is kind of less incentive to pay inheritance tax in Japan, especially if there is no tax treaty preventing double taxation, isn't it?

I was just thinking: if you are a candidate to be required to pay inheritance tax in Japan, I don't think you will ever by a recipient of benefits anyway. Your fan will be so powerful the shit will levitate above it, if indeed the shit is traditionally regarded as dropping on to the fan .... I never did understand that metaphor, it strikes me as just another excuse to say shit.

[matsuki]

Linked from IPU's link, is this http://www.pwc.com/jp/en/taxnews-estate ... ue12-e.pdf about the reporting of foreign assets.

Answering some of the questions raised here:

Domestically, the National Tax Agency issued the Revised Basic Circular for National Tax Collection Act in June
2013. One of the changes in the revised Circular is that for delinquent taxpayers whose assets are located outside of Japan, the Japanese government can now ask the other country’s government to help collect the unpaid tax.

They can ask...but what actually happens if they do? Reciprocity is nice but without laws on taxation being standardized (fat chance that's gonna happen) I think the main tool in cracking down on people abroad will be basically letting them know if they come to Japan again, they're going to be arrested for tax evasion. (but considering you can literally buy citizenship in some other country, new name and all....and enter on that passport, even that isn't going to be effective on the locals...who aren't currently being fingerprinted when they enter the country)

This help SJ?

[wagyl]

There are so many questions with this: a purely hypothetical example.

A long term FG is one of a large family, the only one of them in Japan.

That FG's parent dies leaving a tidy sum in the estate. Potentially reaching the top marginal rate of 55%.

As SJ raised above, is the whole estate taxed, or just the share going to the FG?
I can see the situation where the remaining siblings buy the FG back to the home country, to avoid losing half of their shares to Japanese tax, if indeed the whole estate is taxed in this scheme.

I suppose the risk of that situation arising are slim, and Japan really doesn't see any loss of value to it if the FG makes the decision to leave Japan to avoid paying more in tax to the Japanese government than they are themselves receiving as a share of the estate.

That FG would have a few things to think about their future.
Thank you SJ for the thought provoking thread.

[Wage Slave]

I've been mulling over the same question. There is also the "number of heirs" allowance to consider. They can't be able to tax the entire estate - surely that's impossible. So they go for your share. I suppose then the allowances would also be reduced in proportion to a quarter/third or whatever. But I need to see that in writing and can't find guidance at present.

Also, How can the proceeds of a life insurance policy form part of an estate? The whole point is that the deceased in not the beneficiary. As Wagyl said - out with the common sense and in with Catch 22 rules.

[Salty]

... Also, How can the proceeds of a life insurance policy form part of an estate? The whole point is that the deceased in not the beneficiary. As Wagyl said - out with the common sense and in with Catch 22 rules.

I think it depends upon who owns the policy... if the deceased owns it, then part of the estate but proceeds directed to the beneficiary. To solve this, just have the beneficiary open/own the policy.

[wagyl]

I've been mulling over the same question. There is also the "number of heirs" allowance to consider. They can't be able to tax the entire estate - surely that's impossible. So they go for your share. I suppose then the allowances would also be reduced in proportion to a quarter/third or whatever. But I need to see that in writing and can't find guidance at present.

Also, How can the proceeds of a life insurance policy form part of an estate? The whole point is that the deceased in not the beneficiary. As Wagyl said - out with the common sense and in with Catch 22 rules.

One answer:

Japanese inheritance tax is levied on person who inherits assets from the deceased.

So the remainder of the estate going to the other beneficiaries seems to not be subject to the tax. That pdf also has a series of case studies but

To simplify the case, we assume the heir of the decedent is one child only and the child inherits all of decedent’s assets.

the bastards, so that does not answer that other question.

I have seen life insurance policies expressly payable to the estate in the event of death. It is the estate which gets the payout, not the deceased, and it is then divided up as set out in the will or testamentary document. The other choice, is to name a particular person, be it your wife, your favourite maiden aunt, or your mistress (there may be overlap in the last two. Well, no longer maiden, I suppose).

[Wage Slave]

Yep, I saw that earlier and it would seem to support a view that Japanese tax is payable only on the portion inherited by a Japanese taxpayer. The question of allowances - I presume that the 30 million applies to the whole estate and not one share. If so, then presumably they would also apply the other allowance and then come up with a total but notional figure liable for Japanese tax. They would then divide that by the number of heirs and I would pay tax on that number.

I have seen life insurance policies expressly payable to the estate in the event of death. It is the estate which gets the payout, not the deceased, and it is then divided up as set out in the will or testamentary document. The other choice, is to name a particular person, be it your wife, your favourite maiden aunt, or your mistress (there may be overlap in the last two. Well, no longer maiden, I suppose).

I have never heard of the estate being the beneficiary of a life policy though I suppose it could be done. Many people in the UK use a life policy to hedge against inheritance tax by specifying the children as the beneficiaries. They get the money tax free and it offsets the inheritance tax. No idea what status insurance payouts have for tax here - I really must find out.

[wangta]

A foreign resident gets taxed by Japan on their worldwide income if they have been living in Japan for five out of the previous ten years. It used to be if you had been living in Japan for five years in a row but of course the change meant that more gaijin could be classified as 'permanent residents' even though it is a faux permanent resident classification by the standards of our home countries.

In Australia a permanent resident has significant rights and PR status is relatively easy to obtain. In Japan it is only easy to obtain in the defacto way of living in Japan for five year out of the last ten years and that is only to make your worldwide income subject to Japanese taxation laws. Re some of the pickles that both the faux Permanent Residents and long term gaijin that have PR and not just because of the five year rule can get themselves into, go to www.forum.gaijinpot.com and look under Banking and Finances.

The forums closed some time ago but the posts are there and in the category I mentioned, the last post was on the Be Careful With Your Investments thread. It was started by a Canadian whose handle is Super Grover and he is a university prof somewhere in Japan judging by the info he gives. Other gaijin caught in the Japanese taxation dragnet tell their stories. It makes for interesting and cautionary reading.

I still don't understand how Super Grover who is married to a J citizen and has real PR could think all the dosh he was sending back to Canada wouldn't be noticed, and how he thought his Canadian investments in tandem with his Japanese wife were somehow none of the Japanese Tax Office's business.

[wagyl]

No idea what status insurance payouts have for tax here - I really must find out.

There was this throw away line here

In this case, the taxpayer challenged that the annuity payments as a result from the life insurance policy inherited (which is subject to inheritance tax) shall be treated as tax exempted income from Japanese income tax point.

The Japan Institute of Life Insurance gives an example where the payout from a life insurance policy is subject to inheritance tax. http://www.jili.or.jp/lifeplan/houseeco ... on/11.html

[inflames]

According to this site, under some types of life insurance, 5 million yen worth of life insurance per legal heir is excluded from inheritance taxes (the remaining amount is considered fair game).

http://www.jili.or.jp/lifeplan/houseeco ... on/11.html

Having life insurance and leaving it without a designated beneficiary is really fucking dumb - the estate is the beneficiary and the money must be used to satisfy any debts before going to heirs (so if you die an incredibly expensive death, you paid all those life insurance premiums so your creditors could get paid). Even if there are no debts to be satisfied, it generally takes a lot longer for the estate to be settled (IME more than a year is not unusual) than life insurance to be paid (less than a month, two weeks or so seems to be standard provided you fill out everything properly the first time around).

The stuff about people getting busted is interesting. If they got strict with it, I guess it'll lead to people at the airport with 900,000 yen in cash (or worse, family members with 900,000 yen each traveling separately).

[wagyl]

Source material has now disappeared, but post 14 here seems to have been based on something put out by Fukui Prefecture. It covers the situation of multiple heirs, only one of which is in Japan. The figures are pre-revision, but I would suppose the calculation method is the same.

A summary of the inheritance tax calculation method with a truly fucked family, some FG, some back home:
1. Only the FG is liable to pay.
2. Tax in Japan is calculated based on the total value of the taxable estate, after which a basic exemption is deducted to arrive at the net taxable amount. The net taxable amount apportioned to each heir (As you see below, FG or not) is then calculated according to a predetermined formula, upon which each heir then pays their individual inheritance tax liability. However, since all the heirs are jointly liable for each of the other's tax debts, the FG is the one who will be expected to pay all of it.
3. In calculating the number of statutory heirs to come up with the discount amount, only statutory heirs under Japanese law are considered: basically, unless none of these exist and we go to the next level, number of spouse and children.
4. Take the amount of the FG's bequest, and subtract the exemption (base rate + amount for each statutory heir)
5. Divide this sum up among the statutory heirs by the fixed proportions under Japanese law: half for the spouse, the other half evenly divided between children. Calculate the Inheritance Tax liability for each of the statutory heirs. This in effect increases the access to the lowest marginal rate.
6. Now for the kicker: the FG is the one who pays the total amount, for all statutory heirs. Admittedly, this amount will be less than if this was based on the whole estate, or possibly even if calculated without regard for the non FG heir's liabilities.

Those who have some concerns will probably be doing some number crunching over the next few days, calculating just how much they are prepared to pay to enjoy continuing to live in Japan.

[Wage Slave]

Those who have some concerns will probably be doing some number crunching over the next few days, calculating just how much they are prepared to pay to enjoy continuing to live in Japan.

On the contrary. If that method is correct - and it's nutty enough to be so - then it's far better not worse than I was speculating. This is because you only pay tax on your share but you can apply the full allowances. Then they share the liability (but only for your share) back out which is again to advantage because it is a progressive tax. Finally, they add it all back together. Great - if true. In the worked example the guy paid about 1% on his share of 100 million.

Please be true!

[wagyl]

Those who have some concerns will probably be doing some number crunching over the next few days, calculating just how much they are prepared to pay to enjoy continuing to live in Japan.

On the contrary. If that method is correct - and it's nutty enough to be so - then it's far better not worse than I was speculating. This is because you only pay tax on your share but you can apply the full allowances. Then they share the liability (but only for your share) back out which is again to advantage because it is a progressive tax. Finally, they add it all back together. Great - if true. In the worked example the guy paid about 1% on his share of 100 million.

Please be true!

Remember that that calculation is based on the previously more generous exemptions, and also remember that owning a house in a major city these days adds up to a large sum: there are a lot of middle class dead people leaving those sort of amounts now.

I agree that it seems more fair than I first thought it would be. I will also say that I did run some numbers. Let's just say that my brother had better not die before my mother does (although my mother has very generously offered to write me out of her will) .