Non-UK domicile

[Stuart]

I have lived in Japan for nearly 40 years. I have made a will in the UK and will shortly do the same here. The will is lodged with a firm in the UK specializing in the affairs of UK citizens resident overseas. I have permanent residence in Japan. The firm has informed me that I have a case to be considered as non-UK domiciled and that this would mean only assets in the UK would be subject to inheritance tax on my death. I am wondering if anyone here has any knowledge of this and would be kind enough to share it. Thank you.

[RetireJapan]

That sounds... normal. I'm not expecting my estate to be subject to UK inheritance tax. I haven't lived there for decades and don't have any assets there other than a couple of thousand pounds in bank accounts.

[ghodlin]

I'm from the UK. PR in Japan. Half my assets are in the UK, half in Japan.

I'm spent some time browing to learn more about what the inheritance tax would be when I die (where the assets would be taxed, whether there's be double taxation, etc.) I know the (Japan) laws have changed a couple times in recent years too.

Is there anywhere I can get clear and accurate information on this online? Or perhaps someone in a simalar situation can explain.

Thanks!

[adamu]

We have a section about double taxation on the wiki (thanks to kuma), but it's only a link to the tax treaty so far.

https://retirewiki.jp/wiki/United_Kingdom#Double_Tax

If you're up for some heavy reading, it looks like inheritance tax is covered from Article 26 of the "Synthesised text of the Multilateral Instrument and the 2006 Japan - UK Double Taxation Convention - in force". I don't know the answer - yet!

[ghodlin]

Thanks @adamu and @kuma - this wiki is useful.

Started to read that treaty (from article 26) and gave up! It's dense and legal (obviously).

It basically looks as though the treaty is set up to help avoid double taxation and that does include inheritance tax. Beyond that though, I still need a simple summary of what country taxes what assets and how double taxation is avoided in practice! And I'd like to understand how it works if I receive an inheritance (from a Brit living in the UK) and ALSO if I die and leave my estate to my wife (Japanese, living in Japan).

If there's no option but to consult a lawyer I can, but I'd like to avoid the fees if possible as I'm not looking for advice, just basic facts.

[kyno-office]

If you have your address in Japan, all of your assets around the world will be included in the taxable assets.
And there are some rulings to avoid double taxation in the tax treaty.

[Stuart]

The HMRC website is really helpful.
https://www.gov.uk/government/publicati ... basis-rdr1

[ghodlin]

Thanks @Stuart and @kyno-office

The HRMC website is a useful resource for sure.

But I still can't find a simple summary of inheritance tax for Brits abroad.

[Tkydon]

Thanks @adamu and @kuma - this wiki is useful.

Started to read that treaty (from article 26) and gave up! It's dense and legal (obviously).

It basically looks as though the treaty is set up to help avoid double taxation and that does include inheritance tax. Beyond that though, I still need a simple summary of what country taxes what assets and how double taxation is avoided in practice! And I'd like to understand how it works if I receive an inheritance (from a Brit living in the UK) and ALSO if I die and leave my estate to my wife (Japanese, living in Japan).

If there's no option but to consult a lawyer I can, but I'd like to avoid the fees if possible as I'm not looking for advice, just basic facts.

The actual calulations are very complicated, and beyond the limits of this space. You would need to consult a qualified accountant.

As a Permanent Resident For Tax Purposes, your Global Income is taxable.

In Japan, Inheritance Tax is levied on the Recipent (the heir) in the proportion of the Amount of Inheritance Received to the Total Value of the Estate after Allowances.

Therefore, you will be liable for tax on the inheritance, whether you repatriate the inheritance to Japan or not.

The good thing about receiving an inheritance from overseas is that the 100% of the allowances can taken against the portion of the inheritance to heirs in Japan, as opposed to against 100% of the total estate to all heirs.

The valuation of Assets is very complicated, and beyond the limits of this space. You would need to consult a qualified accountant.

Basic Allowance

The Basic Allowance
Y30M + (Y6M x No. of Heirs)

In this case, against a non-Japanese foreign inheritance
Y30M + (Y6M x No. of Heirs in Japan)

Then, the value of the Estate (in this case, the value of the portion of the Estate destined for Japan) after deduction of the calculated allowance will be subject to Marginal Inheritance Tax

Up to Y10M --- 10%
Y10M to Y30M --- 15%
Y30M to Y50M --- 20%
Y50M to Y100M --- 30%
Y100M to Y200M --- 40%
Y200M to Y300M --- 45%
Y300M to Y600M --- 50%
Greater than Y600M --- 55%

divided between all heirs in proportion to their shares of the inheritence.

There is a Surtax if the inheritance is not from a blood relative of an additional 20% of the Inheritance Tax amount (complicated...)

Against this, there are several credits:

If an heir receives a gift from the decedent within three years prior to the decedent's death, and pays Gift Tax on the gift, then that gift becomes liable to Inheritance Tax. The heir can take a credit for Gift Tax paid against the Inheritance Tax to be paid.

Spouse Allowance

Ration of

Less of
(the Greater of The Statutory Share of the Aggregate Net Taxable Assets for the Spouse OR Y160M)
OR
The Net Taxable Assets (actual acquired only) of the Spouse

Divided by the Aggregate Net Taxable Assets.



Credit for a Minor
(20 minus Current Age) x Y100k
(one time only per person)

and some other Allowances... too complicated, and beyond the limits of this space. You would need to consult a qualified accountant.


Then you would need to consult the Japan-UK Tax Treaty for provisions to avoid double taxation on inheritance.

https://www.mof.go.jp/english/policy/ta ... st_en.html

[ghodlin]

@Tkydon

Thanks. Very useful summary. Appreciate your time in summarizing the basics.