みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo

みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo, tax tips, accounting, running business

Three tips to reduce Japanese estate tax

time 2016/06/10

There are ways to reduce estate tax, as it is the case for any country. Because estate tax is charged on valuation of various types of assets, your strategy is to choose a good mix of assets.

1) Buy stocks. The valuation of stock is the lowest of the following:

– price at the inheritance,
– average price of the month,
– average price of the previous month,
– overage price of the two months ago.

Because you can use the lowest of the three, there will be definitely more chance to have lower valuation than having estate asset in cash.

2) Buy property (land, building, apartment)

The valuation will be significantly lower than having in cash. Valuation for the tax is designed to be around 60-80% of the market price where you can buy or sell at. It means that by converting your cash to real estate, you are reducing your taxable base by 40-20%.

Some people buy properties by mortgage. You will have more exposure to the market trend, but given the presumption is that the fair value of the property is equal to estimate of future cash flow that it will generates, you are reducing valuation immediately by 60-80% by converting your asset from cash to property.

3) Use your property for your business or live there.

The valuation of the land will be reduced by 80% if you live there.
You can find more detailed information from here, although they are in Japanese. I’m planning to prepare an English version in future.

National Tax Agency web site

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