Hello and thanks for reading! I posted earlier about receiving money from my mother. You can read that thread [HERE](https://www.reddit.com/r/JapanFinance/comments/17owrhh/parent_in_the_us_has_come_into_some_money_and/).
This is going to be in a similar vein but a slightly different topic.
Just to go over my situation, I am an American who has lived in Japan for almost 15 years. I have Permanent Residence, my wife in Japanese and we have two children.
The money that I asked about before that my mom is receiving is inheritance from my grandfather. Thankfully I was not included in his will so I am not subject to inheritance tax (yet). However, included in his will is his house.
My mom has stated that she wants to leave the house to me in case I ever decide to return back to the U.S. When I told her about the extreme inheritance taxes in Japan, she had the idea of having me listed as co-owner on the deed when it is to be drawn up by the executor of his estate in the next few months. The idea is that if I already am listed on the deed, when she passes, I do not technically “inherit” the house. I go from being one of the owners to being the sole owner.
She plans to speak to the lawyer about whether this is viable as far as the U.S. govt is concerned, but I’m also worried about Japanese tax law.
If she were to do this, would I still be taxed under inheritance, a gift, or something else? Does an asset like a house even get taxed? Would I be on the hook for half of the value of the house and then the other half when she passes?
I do not have the money to pay for any tax bill that might happen due to this situation. I will speak with a Japanese tax lawyer soon but I thought I’d ask here to get as much knowledge as possible.
Thanks again!
by Misersoneof
5 comments
>Does an asset like a house even get taxed?
Yes, though there are certain rules that apply if the person who inherits the property already lives there.
You can’t avoid paying the tax in the way you have described.
If an asset is given to you it falls under gift tax, if an asset is inherited it falls under inheritance tax. There are some more complicated situations that could move gifts into being classified as inheritance.
Best to speak to a professional regarding the finer details though if you are uncertain yourself.
> The idea is that if I already am listed on the deed, when she passes, I do not technically “inherit” the house. I go from being one of the owners to being the sole owner.
This idea relies on the concept of “joint ownership”, whereby two people can own the same property simultaneously. Such a concept is not recognized by Japanese tax law. Instead, for Japanese tax purposes, when multiple people share ownership of an asset, they do so by each owning a defined proportion of the asset. This proportion can be anywhere between 0% to 100%.
So if you go from owning 0% of the house to 50% of the house, for example, you will have received a taxable gift equivalent to 50% of the value of the house. And if you own 50% of the house before your mother passes away, then 100% of the house after she passes away, you will have taxably inherited 50% of the value of the house.
> Would I be on the hook for half of the value of the house and then the other half when she passes?
Potentially. But note that it is possible to be listed as a co-owner without actually owning any of the property. As discussed above, your share of the property (as a co-owner) could be anywhere from 0% to 100%, depending on the details of the arrangement between you and your mother.
In other words, it is possible for you and your mother decide that you should acquire 25% of the house now and the remaining 75% when she passes away, or 75% of the house now and the remaining 25% when she passes away, or any other combination of percentages, but the key is that anything you receive while she is alive will be a taxable gift, and anything you receive when she passes away will be a taxable inheritance.
> Does an asset like a house even get taxed?
Changes in the ownership of land and buildings are subject to gift and inheritance tax, yes. There are quite a few valuation discounts applicable to residential properties for inheritance tax purposes, though, providing certain criteria are satisfied. See [this NTA page](https://www.nta.go.jp/taxes/shiraberu/taxanswer/sozoku/4124.htm) for details.
No help to you, but the whole thing with Japan tax is so baffling. Say you inherit a house “worth” ¥100M. After deductions and applying the 30% tax, it looks like the person is on the hook for around ¥20M.
OK. It’s in probate maybe for quite some time. Then it’s tied up in trying to sell it for quite some time. But Japan says you have to pay that ¥20M within 10 months of the person dying…or else.
Or else what? A lot of people in a windfall like that aren’t going to be able to come up with that kind of scratch when they’ve received nothing. I might just decline the inheritance as a fuck you to the tax man. Now you get zero.
Same with income tax. Get a raise and move to a higher bracket…suddenly you’re take home is LESS? It’s like incentivizing people to do worse, where the government will also make less.
Sorry…I’ve been studying on the whole tax thing as of late, and it really has me scratching my head.
So, Japan will tax a non-citizen permanent resident on assets they receive through inheritance in their home country, despite that country possibly already taxing said assets? How does Japan have the authority to tax assets held abroad by a foreign citizen? I get it if those assets were transferred to Japan, or if they were acquired through any means involving assets held in Japan. But inheritance originating and remaining in country of citizenship, and falling under the tax authority of that country seems… excessive. I’m sure I am missing a key point of this somewhere, but as a permanent resident with elderly parents in the US, this post has opened my eyes to really needing to learn more about this.
>Thankfully I was not included in his will so I am not subject to inheritance tax (yet).
I believe you got this wrong (or I might, please correct me otherwise). If your parents are well off, the ideal here would be for your grandfather’s inheritance to go straight to you and for you to pay taxes. If it goes to your parents, then they pay taxes, then when it goes from your parents to you, you’ll pay taxes again.