Japanese Law, tax system and inheritance system shall prevail in this blog.
When proceeding this type of scheme, the case should be dealt with a tax accountant.
1. Inheritance Tax System
In Japan, inheritance tax is applied on the amount by which the value of property after certain exemptions acquired by inheritance exceeds the tax-free amount calculated below.
30,000,000 Japanese Yen + 6,000,000 Japanese Yen x The number of heirs.
Thus, the average family in Japan (of a Husband, Wife and 2 children) where the husband/wife owns net property of more than 48,000,000 Japanese Yen will have to pay inheritance tax.
There are many enquires about how inheritance tax measures are dealt with in Japan.
The calculation is complication and I will provide the information as a separate topic. At this time, I would like to explain how Japanese people use a legal entity as a measure to reduce inheritance tax measures.
2. Scheme Overview
Under this scheme, a private company is used in combination with the purchase of a real property investment, and provides an inheritance measure for wealthy people. The basic scheme is as follows.
A private company is set up by the owner and/or their designated heirs-to-be. Its board members are family members, so it is called ‘A family-only company’. This private company uses its capital or borrows money from Bank for these matters.
1. Investment on new real property
2. Ownership transfer from individually owned real property to the private company**
** The value of the assets in the estate should be assessed before this scheme.
The company profits distributes its profits to the family as dividends while running the property business and, at the time of inheritance, the inheritance tax is calculated based on the company’s share price, which normally less than the value of the physical real property. The gap between the value of the physical real property and the share price will result in an inheritance tax benefit.
By doing the above, it is possible to improve the profitability of assets, advance the time of business succession, and further reduce the tax burden at the time of inheritance.
To be continued..
I hope the information is useful.
I will update every Monday.
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Japanese business start-up consultant