If non residents become the tax payer of JP inheritance tax
目次
Filing Inheritance Tax Returns for Non-Residents of Japan After Moving Abroad
Recently, I have been handling a very rare case. I asked with my acquaintances who are tax accountants, and found that there are very few accountants capable of handling such cases, which makes this a valuable service. Therefore, I would like to introduce this case.
Case Overview
This is about a family who moved to the United States over 10 years ago. The family consists of a father and two sons. The father passed away, triggering the inheritance process. The father owned real estate in Tokyo.
How should the inheritance procedures be handled in this case?(Please note that this article is written in May 2024)
Inheritance Tax Payers in Japan
In Japanese inheritance tax law, taxpayers are divided into two categories:
Unlimited taxpayers
Limited taxpayers Please refer to this link for more details. As there is plenty of information available in Japanese, I will introduce the information written in English.
In This Case
The heirs are classified as limited taxpayers. For limited taxpayers, only domestic assets are subject to inheritance tax. Overseas assets do not need to be included in the taxable value. Additionally, deductible debts from the inherited assets are limited to those related to domestic assets. Funeral expenses cannot be deducted.
Other Considerations: Submission Location of the Final Tax Return
If the deceased’s address at the time of death was in Japan, the address of the deceased.
If the deceased’s address at the time of death was outside Japan and the heir resides in Japan, the address of the heir.
If the deceased’s address at the time of death was outside Japan and the heir resides outside Japan, the location specified by the heir. (Article 62 of the Inheritance Tax Law)
Other Considerations: When the Heir Resides Abroad
A tax agent must be appointed.
A seal certificate is required to be attached to the deed of partition. If the heir does not have a resident registration, they must obtain a signature certificate from a Japanese consulate or similar authority.
Consideration of the Japan-US Inheritance Tax Treaty
In this case, the following should be considered: Under Japanese inheritance tax law, limited taxpayers are not eligible for the minor deduction or the disability deduction. However, under the Japan-US Inheritance Tax Treaty, limited taxpayers are eligible for these deductions, although there are certain limitations.
There seems to be an increase in the basic exemption amount for US estate tax. However, please confirm this with a US accounting firm for this case.
Adjustment for double taxation is allowed. In such cases, the amount of the adjustment for double taxation will be the larger of the foreign tax credit amount under the Inheritance Tax Law or the foreign tax credit amount under the Japan-US Inheritance Tax Treaty.
Finally
The most important thing in international inheritance cases is that inheritance tax systems differ significantly between countries. Therefore, it is necessary to accurately understand the latest local tax laws. It is essential to involve and cooperate with local experts to handle each case. Probitas Tax Corporation can handle Japanese-side inheritance cases while collaborating with US accounting firms.
